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The first step in a real estate transaction in Norway is usually an offer letter from the bidder setting out the main terms of the transaction. The seller can either countersign the letter or prepare a separate acceptance letter in which it clarifies its position regarding the terms in the offer letter. This update highlights the most important issues to address at the beginning of a transaction.
Most transactions involving the acquisition of commercial real estate in Norway are carried out as an acquisition of shares in property-owning companies, and capital borrowed in connection with the acquisition is usually secured by a mortgage over the property. When financing such transactions, the purchaser must bear in mind the restrictions on financial assistance provided by the Companies Act.
Most lease agreements in Norwegian commercial real estate are limited for a defined term with an option for the tenant to extend the lease. During the lease term the rent will be adjusted annually in accordance with changes in market value. Upon renewal or extension, the rent will usually be adjusted to the market rent at that time. This update examines potential rent adjustment mechanisms.
In many European markets triple-net leases are very common. This is not a precise term in Norway, even though the market has similar lease agreements, often referred to as 'bare house leases'. This update outlines the main regulations applicable to lease agreements for Norwegian commercial real estate.
Investors considering real estate investments in Norway are keen to know what kind of tax and other requirements apply. Among other things, no taxes are imposed when shares in a Norwegian limited liability company are acquired, including shares in property-owning special purpose vehicles or title-holding companies.
As a result of a recent Supreme Court decision, it is now safe to structure sale and purchase transactions by way of a demerger in order to isolate property in a real estate-owning company after the parties have entered into a share purchase agreement. This may have an impact on companies that own more than one property and companies that have assets other than property on their balance sheets.
Shipping & Transport
Owners continue to face uncertainty when charterers fail to pay hire under a time charterparty, particularly in respect of when they can withdraw the vessel or terminate and claim damages for future loss of hire. However, these uncertainties can be managed by including appropriate terms in the charterparty and by a careful and well-advised approach when charterers do fail to pay.
Historically, cruise ships calling at Norwegian ports have not been allowed to be registered in the Norwegian International Ship Register. However, a recent change to the Norwegian International Ship Register Regulations has relaxed the trading limits and now allows such ships to be registered in the register if certain requirements are fulfilled.
A shipowner's bid to avoid the risk of paying twice for bunkers supplied has been thwarted by a recent High Court decision, which held that a contract for the supply of bunkers is not a sale contract falling within the Sale of Goods Act 1979. The decision is important since, as the court recognised, the contract terms in this case are "typical of hundreds or even thousands of such transactions carried out every year".
If a time charterer redelivers a vessel before the end of the agreed charter period, the owner is faced with the choice of either accepting redelivery and claiming damages or maintaining the charterparty and continuing to claim hire. This decision has both commercial and legal implications. The owner's dilemma remains the same under a bareboat charterparty as under a time charterparty.
The general rule regarding set-off under Norwegian law is that a party which disputes a declaration of set-off must initiate legal proceedings in order to establish that there is no basis for set-off and that its claim shall be paid in full. But what happens in a case where the two claims are subject to different limitation periods – such as cargo claims and freight claims?
Amendments to the 1996 Protocol to the Convention on Limitation of Liability for Maritime Claims recently entered into force, significantly increasing the limits of shipowners' liability. The Norwegian Parliament has passed legislation to implement the new limits, so the increased limits now apply in all cases where the limitation of liability is invoked for property claims or claims for loss of life or personal injury before a Norwegian court.
In recent years there has been a decrease in the number of vessels registered in the Norwegian International Ship Register due to strong competition from other registries. The government-appointed Trading Limit Committee has now proposed significant changes in order to make it more attractive for owners to register their vessels in the Norwegian International Ship Register.
In a recent Court of Appeal decision a reference in a bill of lading to an arbitration clause in the underlying voyage charterparty was understood to incorporate the dispute resolution clause in the charterparty which provided for high court jurisdiction. The decision demonstrates that all parties to bill of lading contracts must be conscious of the fact that the words printed on the bill may not provide the whole story.
The government recently proposed that the International Convention on Liability and Compensation for Damage in connection with the Carriage of Hazardous and Noxious Substances by Sea 1996 be ratified and the Maritime Code be amended accordingly. The convention's liability and compensation regime will cover not only pollution damage from hazardous and noxious substances carried by ships, but also the risks of fire and explosion.
In a volatile market, many owners face the difficult challenge of having a vessel redelivered early under a profitable charter. Early redelivery may arise where a charterer is no longer willing or able to perform the charter or where, faced with non-payment of hire, the owner decides that it has no choice but to withdraw the vessel and terminate the charter.
There has been uncertainty in terms of the interpretation of Clause 13 of the Norwegian Saleform and, in particular, as to the extent of amounts recoverable where a buyer has failed to pay the deposit in accordance with Clause 2. In Griffon Shipping LLC v Firodi Shipping Ltd the Court of Appeal provided guidance on this point, holding that Clause 13 does not exclude a seller's right to claim the deposit as a debt.
The Maritime Code states that a maritime lien becomes time barred one year from the date when the secured claim arose, unless the vessel is arrested and the arrest leads to a forced sale. A recent Supreme Court decision shed light on the level of activity that is required from a creditor after an arrest has been secured in order to maintain a maritime lien.
Cargo damage is sometimes caused by the packaging of the cargo being insufficient to prevent damage to the cargo during transportation. Whether the carrier is liable for such damage depends on the nature of the packaging and the care which is reasonably required to be exercised by the carrier.
A non-resident company that participates in business being carried out in, or managed from, Norway will be liable to pay tax. However, an exemption to this rule exists. The exemption results in non-Norwegian shipowners not being liable to tax in Norway on shipping income – even if the shipping business is managed from Norway – provided that certain conditions are met.
A financing bank will usually secure a loan by obtaining a mortgage for a vessel and seek to protect its interests in the mortgaged vessel by way of insurance. The bank has several options to ensure that its interests are protected by insurance, depending on the conditions under which the owner's insurances are placed, the degree of risk that is acceptable and the costs of taking out various insurance covers.
A recent study of case law confirms that courts will place significant weight on evidence arising from or collected in the immediate aftermath of an incident. Parties facing a potential dispute should take care to collect all relevant documentary evidence and be cautious when issuing preliminary reports or other documents until all relevant facts are identified.
Norway has now implemented EU Directive 2009/20/EC, which obliges shipowners to take out liability insurance for all claims covered by the Convention on Limitation of Liability for Maritime Claims 1996. Vessels are required to carry onboard a certificate as proof of insurance. The directive has been implemented in the Norwegian Maritime Code 1994.
In Norway, as in most other jurisdictions, there are separate rules governing the time bar of maritime claims. It is crucial not only to be aware of these rules and the claims to which they apply, but also to keep in mind that the general time-bar rules may supplement the special maritime rules.
The Commercial Court has handed down its judgment in Ocean Victory. The case concerned a safe port warranty and total loss, but it also addressed whether the insurer – as the assignee of the co-assured demise charterer – was entitled to claim indemnity from time charterers for the demise charterer's liability towards the co-assured head owners in respect of their breach of the safe port warranty.
The Borgarting Court of Appeal recently considered the applicable time bar for claims for damages caused by delay of goods carried by sea. The court held that claims for delay are subject to the same limitation period as claims for damage to or loss of the goods, and consequently are time barred one year after the cargo has been or should have been delivered.
In the existing financial climate, there is an emerging trend for yards to provide their buyers with a new form of sellers' credit – by participating with equity in the project companies that are ordering newbuilds. The choice of corporate entity and its jurisdiction can have both favourable and detrimental tax consequences for the different participants.
It is becoming increasingly common for charterers to place their own specific equipment on board the vessels that they charter. For example, in the offshore sector, seismic and pipe-laying equipment is often owned by charterers. As this kind of equipment is valuable, it is important for charterers to protect their legal rights to the equipment.
Life as a shipowner is seldom easy. In addition to the commercial challenges that owners face on a daily basis, time must be given to reading law reports to ensure that benefits are gained and warnings heeded from the misfortunes of those who find themselves embroiled in the legal system - particularly when economic conditions demand strict enforcement of legal rights. Three recent decisions may be of particular interest.
Where a seller grants a buyer the right to defer payment of part of the purchase price, the seller is in effect giving the buyer a credit for the part of the purchase price which is deferred. Seller's credit is commonly used in the sale of goods in shipping and offshore construction contracts. Although versatile and functional, the use of seller's credit may give rise to legal challenges which are best addressed at an early stage.
The Nordic Marine Insurance Plan 2013 recently entered into force. While the plan is largely based on its predecessor, some important changes have been introduced. These amendments will better facilitate use of the plan in other Nordic countries, as well as in the international market. The plan will no doubt provide greater certainty to both insurers and assureds as to the extent of insurance cover.
In 2012 Norway and Poland ratified an amendment protocol to the Polish-Norwegian Tax Treaty 2010, which aimed to restore former tax exemptions for Polish workers on Norwegian ships. The Norwegian shipping market has shown little enthusiasm for the change, as there appears to have been limited take-up of the restored tax exemptions. As the amended protocol will not become effective until 2014, its impact remains to be seen.
In a recent case a Singaporean shipbroker commenced proceedings in Norway against a Norwegian shipowner. Singapore is not a party to the Lugano Convention, which regulates questions of jurisdiction and enforcement in international disputes. The Supreme Court had to decide whether the convention applies where the claimant is domiciled in a non-member state. The outcome is surprising and warrants attention.
Whether the 1993 Norwegian sale form excludes terms as to satisfactory quality and fitness for purpose, which are implied in contracts of sale by the Sale of Goods Act, has always been the subject of speculation. A recent decision has put this debate to rest, holding that such terms are to be implied unless expressly excluded. This ruling has implications for the terms agreed for the sale and purchase of second-hand vessels.
In Norway, a pilot is considered the servant of a shipowner, and the shipowner is held responsible for any loss or damage arising as a result of the pilot's negligence. Notwithstanding this general principle, some grey areas exist where the rationale for holding the shipowner responsible can be called into question. A recent court decision concerning state liability for pilotage failed to provide certainty in this area.
When a party commits a breach of contract entitling the other party to terminate, the innocent party should not delay in exercising its rights. To do so may raise difficult questions as to whether the right has been waived and whether the late exercise of a right to terminate itself amounts to a repudiatory breach. A recent decision in a case involving a shipbuilding contract highlights that time may be an important consideration before the right to terminate arises.
The English courts have delivered a decision on guarantees and the all-important distinction under English law between guarantees and indemnities or on-demand bonds. The courts have repeatedly attempted to explain the distinction between these two forms of security. In a recent decision the Court of Appeal attempted a more simple solution by seeking to cut – or perhaps unravel – this Gordian knot.
In Norsk Tillitsmann ASA v Silvercoin Industries AS the Supreme Court dealt with the distinction between an ordinary guarantee triggered by the principal debtor's default and an on-demand guarantee. The Supreme Court confirmed the long-held view that the guarantor's liability is triggered by the principal debtor's default, unless there is a reasonably clear basis for a different interpretation.
Ensuring that adequate insurance is in place is essential for a vessel under construction as the losses can be substantial if a peril strikes. Shipbuilding contracts will invariably address which of the parties is required to take out insurance cover, and will often specify the standard insurance terms to be used.
The Norwegian tonnage tax regime stands out as one of the most favourable and competitive in the world today. It provides a stable and attractive option for ship owners and operators. Their growing confidence is demonstrated by the fact that the Norwegian tonnage tax regime currently has more vessels registered than any other regime.
Some international ship registries do not require ship mortgages to specify the amount being secured by the underlying obligations. However, in Norway, a ship mortgage is required not only to identify the property to be mortgaged, but also to specify the maximum amount which is secured under the mortgage. Is a foreign-registered mortgage, without a specified amount for security, enforceable under Norwegian law?
The Supreme Court recently rendered a decision that may increase shipowners' liability where claims are made by cargo interests based on the master's nautical errors during the voyage, by limiting owners' right to rely on the nautical faults exception in the Maritime Code.
A guarantee designed to provide security for the performance of the obligations of a debtor sometimes turns out to be far from secure. Where the nature and extent of a guarantee is ambiguous, courts are often called on to determine the scope and validity of the security. What seems simple and straightforward when these guarantees are negotiated can become less so when it comes to enforcement against a resistant guarantor.
The Baltic and International Maritime Council recently issued an updated version of the sale form - the standard contract most commonly used for the sale and purchase of second-hand vessels. The changes include new definitions, a rearranged layout of Clauses 5 and 6, new trigger provisions for payment of a deposit and a new provision permitting delivery against a price reduction when the diver's inspection reveals damage.
To meet the increasing threat from pirates operating in the Gulf of Aden and the Indian Ocean, Norway has adopted new rules applicable to Norwegian registered ships and drilling units. The rules set out when force can be used in self defence, and allow the use of armed guards and firearms on board ships and units when they are operating in certain geographic areas.
The Agder Appeal Court has delivered its final judgment in the criminal case following the grounding of the Full City off Langesund in 2009. The court acquitted the third officer and reduced the master's sentence to six months' suspended imprisonment. The judgment showed a far greater understanding of the maritime industry as compared with the earlier district court judgment.
The Ministry of Trade and Industry has proposed amendments to the Maritime Code regarding casualty investigations. Changes include an increased investigative duty for the Accident Investigation Board, a duty to secure evidence after an accident for anyone involved and a 12-month time limit for issuing casualty reports.
The Supreme Court recently ruled in favour of the buyers of six Korean newbuildings, Rainy Sky SA and five other entities, reversing the Court of Appeal's decision which rejected their claim under refund guarantees. The decision represents a victory for commercial common sense over the strict legal interpretation of the language used in guarantees.
The procedure for enforcement of a ship mortgage under English law is based on a contractual right. Thus, the rights of a mortgagee are derived from specific terms agreed with the mortgagor. Typically, the loan documentation will identify those events of default by the mortgagor which give rise to the right on the part of the mortgagee to take enforcement action.
The general rule under Norwegian law is that a mortgagee seeking to enforce a ship mortgage is not entitled to take over, sell or otherwise dispose of a mortgaged vessel without first commencing proceedings before a Norwegian court. In order to file a petition for enforcement in Norway, a mortgagee must establish the validity of the claim and the basis of enforcement.
In a recent case the charterers argued that a London Maritime Arbitrators Association tribunal had erred as a matter of law in awarding damages to the shipowners despite the fact that they had suffered no loss, and so had ignored a fundamental principle in English law that damages are intended to be compensatory. The decision both simplifies and makes clear the basis on which losses are to be recovered
The 2007 overhaul of the Norwegian tonnage tax regime proved controversial, with lawsuits following the government's decision to tax retrospectively income that was previously tax exempt. A 2010 Supreme Court ruling that this should be reversed has since restored confidence in the regime. All in all, the Norwegian tax package has become very competitive and shipowners are showing increased interest as a result.
Before a closing meeting for the sale and purchase of second-hand vessels takes place, the sequence of steps to be taken for payment of the purchase price and delivery of the seller's documents must be agreed, as well as whether the buyer or the seller should take the first step. Identification of the most suitable solution at an early stage will assist in achieving smooth delivery of the vessel.
The Court of Appeal recently overturned a first instance judgment for owners' liability for cargo damage, in a case regarding the grounding of a general cargo ship off Orkney in January 2007. The appeal court decided in favour of the vessel's owners, judging that they had taken reasonable precautions to ensure the safety of the vessel and its cargo. The cargo interests have appealed the decision.
Recent maritime accidents in Norway have led to the extensive seizure of property and documents by the police and the Accident Investigation Board. Although such seizures may be a necessary part of the investigative process, they are also an interference with property, and may cause delay to vessels and result in other problems, in particular with regard to civil claims.
The Nedre Telemark District Court's sentence for the master and third officer of the tanker Full City, which grounded off Langesund in July 2009, has heightened concern that Norway is following an unfortunate international trend of increased criminalisation of seafarers. The court found both the master and the third officer guilty of violating the Pollution Act due to their failure to take adequate measures to prevent pollution.
In a recent decision by Oslo City Court, a boycott instigated by the Norwegian Maritime Union to raise wage levels on foreign-flagged vessels was held to be illegal. The court held that the interest in protecting Norwegian seafarers' employment onboard vessels operating on the continental shelf did not outweigh the clear need for a shipowner to maintain its competitiveness by employing seafarers from other countries.
The Norwegian Marine Insurance Plan is a comprehensive set of insurance conditions developed by insurers, shipowners and average adjusters. The plan is supplemented by an extensive commentary; both are revised at regular intervals by the Standing Revision Committee. This update provides a review of the most significant changes in the 2010 version.
Maritime accidents which cause damage or injury to people, the environment or property are often followed by a police investigation. The master and crew of a vessel are frequently considered suspects and, as such, have certain procedural rights. As the entire crew is a defined group of persons that may have contributed to the accident, everyone within that group may be considered a suspect in particular circumstances.
The new Harbours and Fairways Act recently entered into force, replacing the earlier Harbour Act. Owners of vessels which operate in Norwegian coastal waters may find themselves more likely to become subject to a wreck removal order as Section 35 of the new act increases the grounds on which the authorities can issue wreck removal orders.
In NH Sunvictor the vessel's machinery stopped working as the cooling water intake became clogged with ice. The vessel grounded and suffered damage. The vessel sustained further damage during the refloating operation. The Supreme Court regarded the sequence of damage as having resulted from the same peril and decided that only one deductible applied.
In 2008 Norway implemented a new investigation system which separated the safety and criminal aspects of accident investigation. Following an international trend, the new rules gave the Accident Investigation Board the authority to investigate accidents to identify the circumstances of importance to improve overall safety at sea. The investigation of the grounding of Full City was the first test for the new system.
Faced with plummeting freight rates and the possibility of more vessels on hand due to early redeliveries from charterers, many owners have already decided to lay up some of their tonnage. Laying up a vessel is a last resort. All other commercial ways of employing the vessel should be explored before taking such a step.
The Ministry of Justice has issued a consultation paper requesting views on whether Norway should sign the Rotterdam Rules at the signature ceremony on September 23 2009. Signing the rules will not oblige Norway to comply with them, since a subsequent ratification will be required. However, a signature will have a symbolic effect, showing that the government supports the adoption of the convention.
In turbulent times it becomes even more necessary to balance properly the liability for design errors between buyers and shipyards. Whether it is time to return to the solution in the 1981 Standard Shipbuilding Contract regarding design liability is something that the industry must decide, but the fact that attention is again being given to the issue of design liability could prompt new regulation on this issue.
Five years after the Rocknes ran aground after hitting an unmarked shoal, the claimants filed a lawsuit against the government claiming compensation for losses incurred. The Norwegian First Instance Court heard the case in February and March 2009. The principal issue was the standard of duty of care that was to be applied with respect to the state's liability.
As a consequence of the challenging times that the shipping industry faces, an increasing number of requests are being made regarding the procedure for arrest and forced sale of vessels. While arrest, or even the threat of arrest, may be a tempting way for a claimant to get the debtor's attention and hopefully receive payment, it may not be equally tempting to embark upon a forced sale procedure to collect the debt.
An arrest is normally obtained to provide security for a claim against the vessel owner, but it is also an effective way to press for a quick settlement of undisputed claims. The fact that vessels constantly change locations and continuously incur debt and liability means that an arrest, or the threat of an arrest, is an important tool for suppliers and other creditors to ensure payment of claims.
The decline of the shipping market has had an unprecedented impact across the full reach of the industry. More than 500 vessels or rigs are on order for Norwegian interests at a time when shipyards and buyers are facing severe financial challenges. This update looks at some of these challenges and discusses, from the buyer's perspective, some strategic considerations which may be of use when renegotiating terms.
A buyer that has entered into a contract with a shipyard for the construction of a vessel often wishes to utilize the value of the shipbuilding contract as part of its financing scheme during the construction period by mortgaging it. This update looks at the questions this raises, as well as the relevant legislation and conflicts which may arise.
The Maritime Logistics Chains and the Environment Project, which commenced in October 2008, is a bold, progressive project focusing on how international sea transport may be optimized to reduce fuel emissions. Heavyweight DNV Maritime is the project owner and major players such as Höegh Autoliners, StatoilHydro and MARINTEK are involved.
The term 'warranties' refers to conditions under which the insurer is discharged from liability in case of non-compliance, irrespective of whether there is fault on the part of the assured or causation between the breach and the loss. However, it is disputable whether such warranties are valid in marine policies governed by law in cases where there is no causation between the breach of the warranty and the loss.
Following an accident involving a bulk carrier in 2007, the government realized that the existing limitation of liability amounts for wreck removal and other clean-up costs related to maritime accidents were insufficient to give full compensation in all imaginable cases. Therefore, it recently submitted a bill to Parliament proposing to double the limitation amounts for liability.
The Ministry of Trade and Industry has proposed amendments to the Maritime Code that would make it possible to register and perfect mortgages in the Norwegian Shipping Registry on hulls that are built abroad and towed to Norwegian yards for completion.
The Supreme Court has extended the protection for shipowners that establish a limitation fund with a European court against enforcement proceedings in Norway, irrespective of whether Norway and the European country in which the fund has been established are parties to the same maritime limitation of liability conventions.
In the event of a marine casualty the shipowner may be ordered to remove the shipwreck or to cover the costs of having the wreck removed. If the shipowner is unwilling or unable to remove the wreck or to cover the wreck removal costs, the question arises as to whether the government may bring a claim for the wreck removal costs directly against the relevant protection and indemnity club.
The phenomenon of pitting corrosion in tanker vessels carrying crude oil products has been recognized for decades, but has significantly increased since the shift to double hull tankers. Pitting can require repairs that disrupt the commercial operation of a vessel, potentially create a risk of pollution and jeopardize the safety of the vessel and crew.
The new system for investigating maritime casualties grants the Norwegian Accident Investigation Board - a professional, independent and permanent body - authority to investigate all maritime casualties that occur within Norwegian jurisdiction and any that occur outside Norwegian jurisdiction but involve Norwegian vessels.
In its ruling on the Rocknes Case, the Supreme Court delivered a rap on the government's knuckles for its over-eagerness to implement the higher limitation amounts on claims set out in the 1996 Protocol to the Convention on Limitation of Liability for Maritime Claims.
One of a shipowner’s greatest fears when ordering a newbuild is cash-flow problems at the shipyard. If such a situation arises, the shipowner can protect its interests in various ways depending on whether its main concern is to have the instalments returned or to have the vessel completed.
Since 1987 EU Block Exemption Regulation 4056/86 has allowed liner conferences to fix prices and regulate capacity under certain conditions. This will cease on October 18 2008, following which the slightest violation of the competition rules may trigger dawn raids, investigations and penalties, including significant fines and criminal liability.
Hull insurance operates with two kinds of compensation: compensation for total loss and compensation for damage. Disagreements between the insured and the insurer call for clear-cut rules in order to avoid disagreement. For hull insurance provided on the basis of the Norwegian Marine Insurance Plan, the line between total loss and damage is drawn by the condemnation rules in Chapter 11.
Norwegian ship managers can reduce the potential risk of having to pay for goods or services ordered for the ship by specifying both that orders are made on behalf of a named owner and that orders are to be governed by Norwegian law and jurisdiction. Procedural conflicts and the uncertainty that often follows may be avoided by having explicit internal instructions regarding contractual procedures.
Existing international liability and compensation regimes covering oil spills do not include bunker oil spills from vessels other than tankers. This significant gap is set to be closed with the entry into force of the Bunkers Convention. Provisions in the Norwegian Maritime Code incorporating the convention will enter into force on the same day that the convention enters into force internationally.
It has been predicted that most Norwegian shipping companies will enter the country’s new tonnage tax regime but will leave at an opportune time. It will require companies to pay deferred taxes, which will cost the industry NKr21 billion ($3.9billion). A number of law firms are already considering challenging the government through the legal system.
Before the final entry into a floating production, storage and offloading vessel lease contract there is a long and often complicated process of preparations and negotiations. Decisions made and positions taken in this pre-contractual phase may have an important impact on the final risk allocation and thereby, directly and indirectly, the net income of the project.
Exhaust from ships is a major contributor to air pollution. The approach of the International Maritime Organization has been to adopt Annex VI to the International Convention for the Prevention of Pollution from Ships, which sets limits for sulphur oxide and nitrogen oxide emissions. However, several interests in the shipping business would like to see Annex VI amended to open up for emissions trading.
Many shipowners around the world have faced action by the International Transport Workers' Federation (ITF) in the form of boycott actions. Several of the Norwegian maritime unions are affiliated with the ITF and regularly undertake action in Norwegian ports on its behalf. This update addresses how Norwegian law provides for boycott actions initiated by the ITF.
Norway has recently acceded to the International Convention for the Control and Management of Ships' Ballast Water and Sediments. The convention was adopted by the International Maritime Organization in 2004 and introduces strict regulations on the control and management of ships' ballast water. Norway was among the first countries to join the convention.
One consequence of the international aspect of shipping and ship financing is that a number of contracts and related documents are drafted in English. This can often lead to confusion between the parties involved, due to differences in interpretation of the terms and expressions used.
The concept of the limitation of shipowners' liability was introduced in Norway by Fredrik II's Maritime Code in 1561. For cargo vessels, two limitation regimes often operate in parallel: the unit and weight limitation and the global limitation. This update reviews some of the pitfalls that shipowners should consider when organizing their activities.
Parliament has enacted new legislation proposed by the Ministry of Trade and Industry enabling Norwegian marine insurance companies to exchange information on sub-standard ships with other insurance companies, classification societies and flag state authorities, among others, without the approval of the insured.
The Norwegian Marine Insurance Plan is revised at regular intervals by the Permanent Revision Committee, which was jointly established by the insurance market and the Norwegian Shipowners' Association. This update reviews some of the novelties introduced by the 2007 version of the plan.
After adopting the Protocol to the Convention on Limitation of Liability for Maritime Claims in 2000, Norway denounced the convention in 2005. Norway made a reservation for claims for removal of wreck and cargo, and incorporated a new limitation regime for such claims. The limitation amounts for passenger claims and damage caused by oil platforms were increased with effect from the same date.
The system for the protection of mortgagee interest under the Marine Insurance Plan has remained largely unchanged since the 1964 edition of the plan. Among other things, the interest of mortgagees is automatically co-assured under the owner's insurances. Notification of the mortgage by the mortgagee to the insurer is not required in order for automatic co-insurance to take effect.
The committee appointed by the government to assess the tonnage tax regime has made two general recommendations: to abolish the tax incentives under the tonnage tax regime and extend the controlled foreign companies (CFC) legislation. However, the countereffect of an extension of the CFC legislation would be limited, as shipping investors could still achieve a beneficial tax position in the European Union.
The Standard Form Norwegian Shipbuilding Contract 2000 is now widely used inside and outside Norway. This update explains the reasons for its success and comments on the benefits of using Norwegian shipbuilding contracts.
Following a three-year insurance battle, a court has held that the engine of the Helene was defective before the casualty and was thus not covered by insurance under the Marine Insurance Plan. The court criticized the shipowner for withholding information on the seriousness of the cracks. The decision shows that the Norwegian courts will not look lightly on attempts to withhold evidence in insurance disputes.
Shipowners seeking additional tonnage are increasingly looking for second-hand vessels to be converted to meet their demands. Moreover, owners must convert their vessels to meet new regulatory requirements (eg, the phasing out of single-hull vessels). Conversion projects give rise to a host of risks for shipowners, yards and financing banks, which must be considered when preparing a conversion contract.
The adoption of the International Convention on Civil Liability for Bunker Oil Pollution Damage is expected to fill a gap in the international regime for compensation of victims of bunker oil spills. The convention imposes strict liability for pollution damage caused by bunker oil onboard or originating from ships. It is expected that Norway will ratify the convention in 2007.
Norway leads the way in the floating production, storage and offloading (FPSO) sector. This update focuses on the legal and practical challenges in a typical FPSO conversion project, and highlights issues that could be useful for risk assessments by owners and banks.
An increasingly common trend among Norwegian shipyards is to build hulls in low-cost countries. The hull is then towed to the Norwegian yard. Financing banks usually require as security a mortgage on the vessel under construction. Problems may arise from the fact that a mortgage registered in the Shipbuilding Register is not effective until the hull is brought to the Norwegian yard's premises.
A Mexican company has unsuccessfully brought a claim in Norway against a Russian shipowner. The Supreme Court held that an insurance agreement with a Norwegian company did not constitute a sufficient connection with Norway. The key issue was whether membership in such a company could be regarded as an asset where the member had no claim against the insurer. However, the court's answer was unclear.
The term 'closing' may be defined as the conclusion of a sale where payment is made, previous mortgages are discharged, new mortgages are secured and the title to the asset is transferred. This update reviews the main reasons why closings go wrong and explains how to ensure that a closing is successfully completed.
Under Norwegian law, shipbrokers must meet certain conditions to be entitled to commission. If the principal changes the existing broker channel, the broker may be prevented from meeting the conditions to earn commission. In Fearncoast the arbitrator held that a principal can stop negotiations through an established broker channel only when it has a substantial and justifiable reason to do so.
By the end of 2007 the Accident Investigation Board will be granted authority to investigate accidents at sea in addition to accidents within the aviation, railway and road sectors. The new legislation on the investigation of accidents at sea focuses on establishing the course of events in order to promote safety at sea; the purpose of the investigations is not to apportion blame and liability.