The evolving landscape of international sanctions, particularly influenced by Russia's conflict in Ukraine, poses significant challenges for businesses globally.
The maritime sector, in particular, is grappling with complex legal regulations imposed across various jurisdictions. This has resulted in increased demand for legal expertise, notably at global law firm Wikborg Rein, which has expanded its sanctions and compliance team significantly to cater to these needs.
With US, EU, UK, and other national sanctions in play, businesses face a myriad of legal intricacies. Herman Steen, Wikborg Rein’s Shipping Partner, states that these developments lead to complicated scenarios where compliance with rapidly evolving sanctions is crucial.
According to Oddbjørn Slinning, another partner at Wikborg Rein, their firm’s diverse team, skilled in handling major sanctions regimes, offers an edge in addressing these issues. "Our unique setup includes lawyers specialising in EU, UK, and US sanctions. It’s essential to cover all these bases to avoid potential pitfalls," notes Slinning.
Businesses must adapt to stringent rules affecting maritime operations. Steen highlights the development and reversal of regulations affecting agreements and contracts.
Clients often have to reassess their operations to maintain compliance and explore options such as suspending contract performance when necessary. The ongoing conflict also impacts insurance agreements and raises complex questions about war risk coverage and total loss claims for vessels stranded in Ukraine.
The quest for efficient and sustainable maritime operations has intensified interest in autonomous shipping technologies.
The Norwegian maritime sector is at the forefront, with advancements in autonomous shipping promising cost-effectiveness and reduced environmental impact. "We have been involved in several of the autonomous projects," Steen reveals, pointing to projects like 'Yara Birkeland', the world's first battery-driven and autonomous container ship.
Autonomous shipping is driven by safety and emissions reduction goals. Steen elaborates, "Autonomous ships are much more accurate doing small adjustments, significantly reducing fuel consumption during operations such as docking."
The transition to autonomous systems is expected to reduce human error but requires new competencies, especially as these systems integrate with alternative fuel technologies.
The development of international regulations for autonomous shipping presents challenges. The International Maritime Organization (IMO) is working on frameworks, but there are complexities when crossing multiple jurisdictions. This topic will be discussed at the 4th International Ship Autonomy and Sustainability Summit during Nor-Shipping, an essential forum for the maritime industry.
Wikborg Rein's century-long presence in the sector, along with its involvement in cutting-edge maritime solutions, continues to support the evolving needs of its clients in the shipping and insurance industries, as they navigate the ever-changing landscape of international regulations.
“It is a constantly changing picture, which is extremely challenging for a lot of our clients. Basically, there has been a huge increase in the volume of cases when it comes to sanctions-related issues.”
How does one navigate their way through a plethora of new and constantly changing rules that can affect large parts of their business, some of which one may not even be aware of until the very last minute?
Combine that with those rules being made by several different jurisdictions across the world, some with differing agendas, and one has a recipe for trouble.
Russia’s invasion of Ukraine
Russia’s invasion of Ukraine has had knock-on effects across many sectors of business
Russia’s invasion of Ukraine has had knock-on effects across many sectors of business, and the shipping industry has been particularly affected. Hence the dramatic increase in workload at major international law firm Wikborg Rein and a more than doubling of its sanctions and compliance team.
“We now have by far the biggest compliance group in a Norwegian firm dealing with sanctions-related issues, both in Norway and internationally,” says Wikborg Shipping Partner Herman Steen, who is also head of the Shipping and Offshore Dispute Practice at the Oslo office.
“Our clients have suddenly found themselves in very complex legal situations with sanctions having a potential impact on their business. It has meant navigating especially US, EU, UK, and national sanctions, so there is a lot of different jurisdictions to understand,” adds Steen. “On top of that, sanctions keep changing, some are reversed, and reversed again.”
Covering all the bases
Wikborg Partner Oddbjørn Slinning, who is part of the firm’s Shipping Offshore group, points out that there are not exactly a lot of unemployed sanctions specialists just waiting for moments like these, so the firm has especially benefitted from already having such a strong compliance team based in its Oslo and London offices.
“We are in a unique position having lawyers who cover the main sanctions regimes that apply, including the EU, which Norwegian law closely models after EU sanctions are implemented, plus we have English lawyers covering the UK sanctions regime, and US lawyers covering US sanctions,” says Slinning.
“You need to be able to advise on all of these areas, to avoid anything falling through the cracks.”
Combining expertise
“On these very complicated issues we often put together teams of sanctions lawyers and shipping lawyers, so we are able to combine expertise – it makes a big difference,” says Slinning.
“Wikborg Rein has a lot of different specialists under many areas of law, including English law, which is highly relevant for charter parties and insurance contract assessments.”
Evolving rules
“These rules are being developed quickly and they do not always fit well for all types of business,” warns Steen. “One thing is compliance, to what extent are the clients allowed to continue their business or to do new business,” he adds.
“And secondly, what are the possibilities to suspend performance – to get out of contracts? We have seen some clients being very cautious when it comes to business involving Russia.”
Impact on insurance agreements
The ongoing war has also had an impact on insurance agreements and a lot of different cases
The ongoing war has also had an impact on insurance agreements and a lot of different cases that maybe at first sight have little connection to Russia but can still have a big impact, with one or more of the contract parties or cargo included having some link in the chain feeding back to Russia.
There are also issues surrounding war risk cover. “A question at the top of everyone’s mind in the insurance world is what about the total loss claims for vessels stuck in the Ukraine,” says Steen.
“There are about 80 vessels at the moment. Some vessels have a total loss time limit of six months, some 12, some have Nordic conditions, some English or other conditions, or a mix, so there has been a lot of advice in that respect."
Rescuing vessels
In today’s market, some of the ships are worth more than the insured values, so a lot of owners are hoping to get the vessels out through the grain corridor or some other way rather than claiming for a total loss.
In addition, there are disputes related to claims for loss or hire under the relevant insurances, as well as charterparty disputes concerning payment of continued war risks cover, unsafe port claims and many other issues.
Experience at the helm
One reason for Wikborg Rein having all these tools to hand is its enduring presence in the shipping sector
One reason for Wikborg Rein having all these tools to hand is its enduring presence in the shipping sector as it will be celebrating its 100th year in 2023.
The firm began life as a shipping and marine insurance practice before evolving into a full commercial law practice with a presence across the globe.
Some of these celebrations will be held at the 2023 edition of Nor-Shipping on 6-9 June in Oslo and Lillestrøm as Wikborg Rein will be participating as a main partner in the Blue Talks programme – hour-long collaborative sessions that address the most important issues defining the future of the sustainable ocean economy.
Self-propelled prophecy
There have been many changes to the shipping industry over the course of Wikborg Rein’s 100 years, but none have matched the pace now required to meet the challenges of new regulations and the need to cut emissions.
Advances in technology are opening new routes to cost-effective efficiencies and improved sustainability. Autonomous shipping is one innovation that has recently started this journey, but what direction will it take?
The Norwegian maritime cluster is at the forefront of the autonomous shipping field, and Wikborg Rein has seen this new trend develop up close through its headquarters in Oslo.
Autonomous shipping
“We have been involved in several of the autonomous projects,” says Steen. “I think over time you will see a skyrocketing when it comes to autonomous technology. We have many clients who are doing a lot of work in this area, on the cargo side, the vessel and operations side, and among insurers, who are going fully fledged into this area.”
The push towards autonomous shipping is moving quickly, partly to reduce costs and manpower, but it is also driven by a desire to improve safety at sea and the need to cut emissions by reducing fuel consumption.
“Autonomous ships are much more accurate doing small adjustments. For example, ferries burn less fuel when docking autonomously. If you add that up, with several dockings a day over time, that becomes a big difference in fuel consumption,” Steen explains.
Removing the human error
“You will see ships that can sail more and more autonomously. You will still have some crew on board, at least in the near future, but you will probably have a reduced amount of crew. Most accidents are caused by human error, so by removing the human error, the idea is that autonomous support will remove a lot of the risks causing accidents. But of course, you introduce new risks.”
“Maybe you will have a need for a different type of competency, especially when you combine autonomous ships with other fuel technologies, such as batteries for the short sea traffic, but you will definitely see more autonomous systems as decision support for the crew,” Steen adds.
Linking up the chain
Businesses with cargo interests have been quick to see the benefits of adopting these new technologies
Some businesses with cargo interests have been quick to see the benefits of adopting these new technologies on shorter routes with multiple berthings per day and Wikborg Rein has seen a very evident and growing change in the ownership chain as a result.
“We see from cargo interests that there is a developing trend – and I think a big driver,” says Steen. “Cargo interests are to a large degree taking ownership of the entire logistical chain and an example of that is ‘Yara Birkeland’, the world’s first battery driven and autonomous container ship, and the ASKO vessels in Norway that will sail across Oslo fjord between Horten and Moss.”
“Cargo interests are doing the transportation at both ends, to and from their own facilities, but they are now also looking at doing the maritime sea transport in-between. These projects are based on sustainability as well, to take trucks off the roads and move the cargo to vessels. The ‘Yara Birkeland’ alone is estimated to be taking 40,000 truck journeys a year off the road,” Steen adds.
Short and sweet
These types of short journeys in domestic waters will certainly lead the way for the development and growth of autonomous shipping.
“I think you will see some ferries and a lot of short sea traffic. That is not very difficult to do regulatory-wise, because you are operating in one sea territory,” explains Steen.
The IMO launched a project several years ago to try to develop international rules to either amend existing conventions or draft new overarching conventions for autonomous shipping.
International Ship Autonomy and Sustainability Summit
“But that is going to take many, many years,” says Steen. “It may be possible to do international trade between two or more countries, but it is much more complicated than doing autonomous shipping within one country’s sea territory. It will be quite some time, if at all, before we will see pure deep sea autonomous ships.”
These issues will chime with the 4th International Ship Autonomy and Sustainability Summit also at Nor-Shipping on 8 June in Oslo, where there will be presentations and panel discussions on the future for autonomous ships by a range of experts from all areas of the shipping industry.
“Nor-Shipping is one of the few arenas that includes the entire industry,” adds Slinning. “Everyone from ship owners, shipyards, insurers, banks, investor groups, down to the manufacturer of a pump and a pipe. It is a fantastic arena to take part in.”
