Search terms: Shipping & Transport, Norway
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.
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 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.
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.
The Ministry of Commerce has recently proposed new legislation on the duty of confidentiality for marine insurance companies. Pursuant to the new legislation, marine insurance companies will be allowed to exchange certain information on vessel safety and to forward this information to the relevant public authorities and classification societies without the prior consent of their clients.
The debate over whether classification societies should be liable for negligence has raged for many years. In Norway, the trend is in favour of increased liability for government bodies dealing with tasks of a typically 'service nature'. Classification societies are unlikely to escape the same fate in the long run.
The International Convention for the Safety of Life at Sea requires that certain vessels on international voyages be fitted with voyage data recorders. Voice recordings conducted with voyage data recorders fall within the scope of the Norwegian legislation protecting the processing of personal data. Shipowners must thus notify the Data Inspectorate of any voyage data recorders onboard.
The new Ship Safety Act, which was proposed by the committee for the revision of the Seaworthiness Act last year, establishes the responsibilities of the shipowner and master with regards to the vessel's safety management system. The new act also revises the supervision of the safety management system and introduces new penalties in case of infringement of the rules.
The new Ship Safety Act, which replaces the Seaworthiness Act, is expected to enter into force before the end of the year. The purpose of the new act is to safeguard life, health, property and the environment by, among other things, promoting a high level of ship safety and creating regulations in line with international and EU regulations on vessel safety management.
To minimize the risk of waiting costs at busy ports, many vessel owners add one or more of the 'four Ws' to standard form charterparties so that notices of readiness may be tendered. Adding one or more of the four Ws will generally shift more risk from owners to charterers with regards to the tendering of effective notices of readiness.
The York-Antwerp Rules represent the primary legal source for general average rules. The 1994 rules were revised by the International Maritime Committee in 2004, making them less favourable to shipowners. There is currently a debate in Norway as to whether the York-Antwerp Rules 2004 should be incorporated into the Norwegian Maritime Code.
After adopting the 1996 Protocol to the 1976 London Convention on Limitations of Liability for Maritime Claims, Norway proposed increasing the limits on shipowners' liability for clean-up operations after groundings or collisions at sea, and for passenger injuries. Under the proposal, the most substantial increase will be for vessels between 3,000 and 20,000 metric tonnes.
The Norwegian government has approved a resolution proposing that Parliament denounce the 1976 London Convention on Limitations of Liability for Maritime Claims. If Parliament agrees, Norwegian shipowners will no longer be able to invoke the limits of liability under the 1976 convention against parties resident in states that have ratified the 1976 convention without the 1996 protocol to the convention.
Changes in the class status of vessels can have serious consequences for insurance coverage. Shipowners and banks should consider Section 3(14) of the Marine Insurance Plan 1996 in light of the fact that the International Association of Class Societies and its members have tightened their rules on suspension of class in recent years.
Ship sale and leaseback transactions have been very popular over the past few years. However, buyers must be aware of the risks involved in these transactions. If the bareboat charter is characterized as a financial lease for tax purposes, the buyer's right to claim capital allowances and tax exemption will be lost.
Parliament has recently adopted amendments to the tonnage tax regime based on the revised State Aid Guidelines on maritime transport adopted by the European Free Trade Association Surveillance Authority. Two elements of the revised guidelines cause problems for the Norwegian tonnage tax regime: the flag requirement and the definition of 'maritime transport'.
The United Nations Commission on International Trade Law is preparing a new convention for the carriage of goods by sea. It is assumed that the working group entrusted with preparing the convention will complete its task during 2006. The aim of the new convention is to replace existing conventions on the carriage of goods by sea currently in force with a new liability regime.
A recent report by the Permanent Law Commission for Maritime Matters recommends that Norway ratify the Hazardous and Noxious Substances Convention. The convention will strengthen the legal position of injured parties with regard to sea accidents involving certain types of dangerous goods.
Norway is to replace its maritime inquiry system with a professional, independent and permanent Commission of Inquiry. In comparison to the current system, investigators will have a higher degree of relevant expertise, accidents will be investigated more thoroughly and general competence will be developed for the prevention of accidents at sea.
Norway has become one of the first states to ratify the 2003 Protocol to the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage 1992. The protocol establishes a supplementary fund for international oil pollution compensation and offers an additional tier of compensation.
In a case where the trailers of two truck/trailer combination vehicles were irrevocably damaged during shipping, the Supreme Court ruled that the amount for which the carrier was liable should be calculated on the weight of the trailers alone, as these were held to be independent units even though they had been attached to the trucks when the damage occurred.
Norway operates a dual system with regard to maritime liability claims, whereby the 1976 London Convention on the Limitation of Liability for Maritime Claims applies with respect to those states that have adopted it, but not the 1996 protocol to the convention. The Ministry of Justice has now suggested that Norway withdraw from the 1976 convention, but apply the 1996 protocol without exception.
For many shipments under the Norwegian Maritime Code it is advantageous for all parties to use a seaway bill rather than a bill of lading. However, certain uses of the document require special attention, such as where letters of credit are used in connection with seaway bills subject to the code.
Ship brokers are being advised to familiarize themselves with maritime competition law, as new legislative and enforcement initiatives aim to make the regime stricter. Under competition law, brokers not only must avoid engaging in cartel practices themselves, but must also ensure they do not act as middlemen in cartel agreements between ship owners.
Freight forwarders are sometimes instructed by foreign shipowners not to turn goods over to Norwegian buyers because the seller has not yet paid the freight due, even though a bill of lading indicates that the freight has been prepaid. This leaves the freight forwarder in an awkward position: although it understands the buyer’s predicament, it is powerless to effect delivery.
The Maritime Directorate has proposed to Parliament that the Increased Port State Control Directive be implemented by amending both the Law of Seaworthiness and the Norwegian Regulation on Port State Control. Under the directive, port authorities must refuse certain ships access to a port due to their poor condition, flag and/or history, unless special considerations apply.
Few voyage charterparties expressly define the consequences if a carrier temporarily shifts the vessel while laytime is running under one charterparty to perform loading/discharging under a second charterparty. The question thus arises of whether laytime can run simultaneously under two different charterparties. The answers under Norwegian and English law appear to differ slightly.
The Norwegian authorities are in a better position than most to reach a quick and accurate decision on whether to grant refuge to a vessel in distress. Norway has already undertaken a survey of its coastline, implemented most of the measures under consideration by an International Maritime Organization safety subcommittee and assigned the power to handle such situations to one authority.
The arrest of a vessel based on a claim against a demise charterer is excluded under Norwegian law unless the claim is also secured by a maritime lien. However, an arrest may be granted if it can be proven that the debtor is likely to be the real owner of the asset. One increasingly common situation in which this may be the case is under financial lease contracts.
The Norwegian Parliament is considering legislation to extend the Norwegian territorial sea. The proposal is a response to increasing fears of major oil spills as Russia's oil export industry continues to grow. Importantly, the proposal would enable Norway to establish traffic separation zones, thus keeping laden oil tankers further away from its coast.
A committee has proposed amendments to the Norwegian Maritime Code, which implements the provisions on limitation of liability included in a 1996 international protocol. It suggests that claims for the costs of cleaning up after accidents be exempted from the general limitation rules. Instead, a separate regime based on the vessel’s gross tonnage is proposed.
The Norwegian Supreme Court recently handed down a decision in a case where an injured third party, the Norwegian government, filed a direct action against the tortfeasor's protection and indemnity (P&I) club. The case establishes that direct action can be taken against the club in the event of the assured's insolvency.
Pursuant to the Norwegian Insurance Contract 69 of June 16 1989 insurance companies are free to decide which risks they insure and under what policies. 'War risk' is specifically defined in marine insurance. However, following the attacks of September 11 2001 on the United States the line between war and terrorism has become indistinct.
The Norwegian Alien Regulation has recently been amended. Now it not only takes into account Norway’s international obligations, but also distinguishes between a stowaway and a refugee seeking asylum.
Including: Nationality and Registration of Vessels; Limited Liability
The Supreme Court has ruled that the domestic courts only have a limited jurisdiction to decide cases arising in the Norwegian Economic Zone.