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03 February 2021
The regulatory framework that exists within the shipping and offshore industries is long established. While the existing framework effectively extends to the offshore floating wind sector in Norway, the same cannot be said for deep-water fish farms.
The general principle is that maritime assets above a certain size must be registered in a national ship registry. By virtue of being registered, the relevant asset must comply with a host of national, regional and international rules and regulations which aim to ensure that certain minimum standards are adhered to and maintained. These standards relate to:
Registration of a vessel or asset in a recognised and respected flag state may therefore be regarded as a form of quality assurance.
In Norway, such government regulation is managed by the Norwegian Maritime Authority, which has approximately 12,000 vessels (both commercial and non-commercial) on its books, flagged under both the Norwegian Ordinary Ship Register and the Norwegian International Ship Register. Any vessel operating in Norwegian waters exceeding 15m in length, as well as oil platforms and other mobile offshore units (eg, drilling rigs), must be registered, unless already registered under a foreign flag.
In addition to helping ensure that shipping and offshore activities are carried out in a safe, secure and regulated manner, vessel registration in a flag state plays an important role in the financing of maritime and offshore assets. This is because it enables lenders to obtain security for loans into these sectors in the form of a registerable and enforceable encumbrance over the relevant asset in the form of a vessel mortgage, giving the holder of such mortgage priority over unsecured creditors.
Given the depth of the waters around Norway, fixing offshore turbines to the seabed is not as easy as it is in more southerly parts of the North Sea.
For that reason, in its push to develop an offshore wind industry, Norway has focused on using floating turbines. Following years of development, the construction of the first floating offshore wind farm (Hywind Tampen) was commenced at Kvaerner Stord in 2020.
The regulatory framework applied to such floating turbines is the same as that applied to other shipping and offshore assets, with floating turbines being registerable as "other floating units" in the Norwegian Ordinary Ship Register, in accordance with the Regulation on Registration of Other Floating Units published by the Ministry of Industry and Ministry of Fisheries in 1994.
In acknowledgment of the similarities between such floating turbines and other mobile offshore units and installations, overall supervisory responsibility for their regulation was given to the PSA in a 17 August 2020 government decision. The PSA has confirmed that it will be looking to develop more bespoke regulations for the offshore floating wind turbine sector in early 2021. While the regulations are yet to be developed and presented, the provisions will likely broadly follow the principles which apply to mobile offshore units.
Such a development is to be welcomed and, once enacted, will mean that all interested parties, whether owners, operators, lenders or insurers, will have a degree of predictability and certainty as to the rules and regulations to be applied. The certainty over title and the ability to create a registerable mortgage over such floating turbines will also enable their owners to obtain project financing more easily.
In contrast, the regulatory framework for the construction and operation of offshore fish farms is not as developed. It is not yet clear which government entity will be given overall control over the development of such regulations and the authority to police their application. Also, offshore fish farms cannot be registered under the Norwegian flag. From a financing point of view, this presents a huge obstacle to owners or potential owners of such assets, with potential lenders having to rely on pledges over shares, equipment and assignments of revenue streams rather than a registerable in rem right over the unit itself in the form of a mortgage. Further clarification from the government is awaited to determine whether offshore fish farms will be subject to similar regulation as the shipping, offshore oil and gas and offshore wind sectors, or whether a new bespoke regulatory regime will be applied.
For further information on this topic please contact Morten Valen Eide or Lise Voraa at Wikborg Rein by telephone (+47 55 21 52 00) or email (email@example.com or firstname.lastname@example.org). The Wikborg Rein website can be accessed at www.wr.no.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
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