DCN September Edition 2019

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MARITIME LAW The voyage to a green ocean The Poseidon Principles will likely drive the growth of sustainable practices across the shipping industry, write Stephen Thompson and Ranjani Sundar ON JUNE 18, 11 MAJOR GLOBAL banks signed the Poseidon Principles, being the world’s first sector-specific and sustainability-focused climate agreement amongst financial institutions. The Poseidon Principles are intended to integrate climate change considerations into financial lending decisions of signatories and seek to fulfil the IMO’s long-term goal of slashing the shipping industry’s total greenhouse emissions by at least 50% from 2008 levels by 2050. It is hoped the Poseidon Principles will change the conversation between shipping companies and banks, play a crucial part in bringing sustainable practices to the forefront of the shipping industry and encouraging responsible ship financing by the world’s major banks. THE PRINCIPLES The global framework led by Citibank, DNB, Société Générale, ABN Amro, Amsterdam Trade Bank, Crédit Agricole CIB, Danish Ship Finance, Danske Bank, DVB, ING and Nordea - who together represent 20% of the global ship-finance portfolio (equating approximately $100bn - will be applicable to lenders, relevant lessors, financial guarantors, and export credit agencies. The Poseidon Principles Association will calculate and publish the target carbon intensity for specific ship types and size classes each year. Under the Poseidon Principles, the signatories are required to publish in their annual institutional reports, by no later than November 30 each year, their overall climate alignment, being the degree to which the greenhouse gas emissions of each institution’s shipping portfolio accord with the trajectory of the IMO’s 2050 climate target. Signatories to the Poseidon Principles will use this data to review and determine whether they will provide, or continue to provide, finance to individual shipping companies. Accordingly, shipping companies that fail to align themselves with the IMO’s targets may be refused financial lending by the signatories. The objective is for the Poseidon Principles to establish a baseline for financial institutions to assess and disclose the climate alignment of shipping companies and, by signing the climate agreement, all signatories undertake to apply the Poseidon Principles in the credit products they offer and to any vessel required to have an IMO number (i.e. the majority of vessels). IMPACTS OF THE PRINCIPLES The impacts of these Poseidon Principles are expected to be felt in the coming months, as shipping companies re-adjust their focus on sustainability and compliance with international environmental goals, in order to secure finance from the signatories. In that process, these companies are likely to incur increased up-front costs in identifying ways by which to control greenhouse gas emissions and improve sustainability practices across their business. In the short–term, in addition to implementing measures to ensure compliance with the IMO 2020, this may include upgrading older models of engines to be run at lower speeds and new propellers to run more efficiently. In the long–term, shipping companies may also look to embrace the use of lowcarbon fuels for bunkers, such as LNG, biofuels, hydrogen and ammonia to offset a vessel’s carbon emissions. No doubt these shipping companies will seek to pass these increased costs to related industries within the supply chain, such as logistics and commodities. FINAL THOUGHTS Globally, leading shipping companies have recognised that in order to fulfil the IMO’s goals (and considering that a vessel can have a typical lifespan of around 25-30 years), it will be necessary to introduce commercially-viable vessels on our oceans by 2030 that, at a minimum, meet current international standards. This is an ambitious goal, towards which the Poseidon Principles are a major step but consideration may also need to be given to what further green initiatives can be established. Ranjani Sundar, senior associate, HFW Stephen Thompson, partner, HFW HFW 52 September 2019 thedcn.com.au
MARITIME LAW A strong shot of coffee Hazel Brasington, Ian Harris, Jonathan Lim and Kyriakos Tsoukalas from law firm Ashurst examine a landmark case in the UK Supreme Court that goes to the heart of the Hague Rules SOME COFFEE BEANS HAVE BREWED WHY IS THIS AT THE HEART OF THE is for the carrier to show that the relevant up a landmark case in the UK Supreme HAGUE RULES? damage occurred without fault in the Court. Volcafé Ltd v Cia Sud Americana de Cargo interests habitually rely on the general various respects set out in Article III.2, or Vapores SA [2018] UKSC 61 awoke an issue duty of cargo care for all carriers (Hague that an exception in Article IV.2 applies. that lies at the heart of the Hague Rules. Rules Article III.2). But there is an apparent The International Convention for the circularity within the Hague Rules. How can SO WHEN WILL THE ARTICLE IV.2(M) Unification of Certain Rules of Law relating a carrier rely on the inherent vice defence INHERENT VICE DEFENCE APPLY? to Bills of Lading 1924 is fast approaching of Article IV.2 where there is evidence that For a carrier to be able to rely on the Article its centenary. With the Visby Protocol, it carrier is in breach of its obligation in Article IV.2(m), the carrier must show either: is one of the most successful international III.2 to take proper care? - that the carrier took reasonable care commercial treaties ever signed. Yet how can the consignee succeed on of the cargo, thereby not breaching its The Hague Rules framework helps the basis of a carrier’s failure to take obligations under Article III.2, but the insurers of cargo or carriers’ care if there is evidence that the damage occurred nonetheless; or liability to allocate and damage to the cargo would - that whatever reasonable steps might price the risk of loss and have occurred anyway? have been taken to protect the cargo from damage to seaborne cargo. The whole damage would have failed in the face of the The result is a predictable carefully constructed inherent characteristics of the cargo. insurance environment architecture of risk If the carrier could and should have favourable to expanding apportionment becomes a taken precautions that would have world trade. conundrum requiring a “circuit prevented some inherent characteristic of The decision in the Volcafé breaker”. That circuit breaker is the the cargo from resulting in damage, that case may impact cargo claims large or legal burden of proof. characteristic is not an inherent vice. small, and not just where disputes are Did the Hague Rules change the legal governed by English law. burden of proof as it has always existed by WILL THIS DECISION AFFECT Relevant to Australia, Volcafé has called common law? AUSTRALIAN LAW? into question a well known decision of the No, said the Supreme Court in Volcafé. We think so. McHugh J in the Bunga Seroja High Court in Great China Metal v MISC The Hague Rules are silent on the issue of suggested that the Rules alter the burden (the “Bunga Seroja”) [1992] 1 LR 592. who bears the legal burden of proving that of proof established at common law. In there has been a breach of the carrier’s duty Volcafé, Lord Sumption said that is an WHAT HAPPENED? to take proper care under Article III.2, and “unexplained departure from the basic The coffee beans arrived damaged by whether the Article IV.2 exceptions (such principles governing the burden of proof condensation, although they were as the “inherent vice” exception) apply. borne by a bailee for carriage at sea”. originally shipped in good condition. The practical approach taken by International conventions ought to be The carrier’s defence was that the goods the common law of bailment provides construed, insofar as is possible, uniformly. were unable to withstand the ordinary the answer to where the burden lies. For this to be achieved, clarification is needed incidents of the voyage from warmer Remarkably, four centuries of cargo claim of the tension between Article III.2 and to cooler latitudes, so the carrier was cases have not (until now) reached a Article IV.2 in Australian law. The Bunga protected by one of the Hague Rules Article definitive answer on where the burden of Seroja concerned a different defence available IV.2 exceptions to carrier’s liability known proof lies. Volcafé determines that The to carriers under Article IV.2(c), the “perils of as the “inherent vice” exception. Hague Rules did not change common law. the sea” defence, possibly the defence that is By contrast the consignee’s claim was most often invoked in cargo claims. that the carrier had failed in its basic WHAT DOES COMMON LAW SAY? It will not be long before the next claim obligation by Hague Rules Article III.2 to The carrier is a bailee, and bailees have presents in an Australian court in which a keep and care for the goods properly. long been held to account by common law jolt of Volcafé coffee will be applied. Our Anucha Tiemsom As there was no clear or accepted commercial practice on what is adequate container lining when bagged coffee beans are carried in unventilated containers, this became a difficult case to adjudicate. for the simple and practical reason that it may be difficult or impossible for anyone else to explain what has occurred when the bailee is in possession of goods that suffer damage. So common law would say that it trusted framework for international trade deserves it. Always take legal advice before applying the general information provided in this story. thedcn.com.au September 2019 53
Page 1 and 2: First published in 1891 September 2
Page 3 and 4: Viva Viva Energy's Energy's Marine
Page 5 and 6: CARGO INSURANCE FROM DOOR TO DOOR I
Page 7 and 8: Hamburg Süd - what we say, we do.
Page 9 and 10: WORD FROM THE TRADE MINISTER Shippi
Page 11 and 12: Autonomous shipping discussed at UK
Page 14 and 15: NEWS IN BRIEF Port of Melbourne con
Page 16 and 17: NEWS IN BRIEF INTEGRATED NATIONAL F
Page 18 and 19: INDUSTRY OPINION Getting more out o
Page 20 and 21: WOMEN IN MARITIME A chance to celeb
Page 22 and 23: GLOBAL TRADE & MARKETS Update on in
Page 24 and 25: LINER TRADES TO EUROPE And then the
Page 26 and 27: LINER TRADES TO EUROPE We must have
Page 28 and 29: LINER TRADES TO EUROPE almost all o
Page 30 and 31: LINER TRADES TO EUROPE Shipping and
Page 32 and 33: CUSTOMS BROKING & FREIGHT FORWARDIN
Page 38 and 39: WESTERN AUSTRALIA Taking the long A
Page 40 and 41: WESTERN AUSTRALIA Port Hedland is t
Page 42 and 43: WESTERN AUSTRALIA Geraldton Port Op
Page 44 and 45: WESTERN AUSTRALIA BIGGER SLICE OF C
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Page 54 and 55: TRADE LAW Improving trade through c
Page 56 and 57: INDUSTRY OPINION Innovation key to
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Page 62 and 63: OUT & ABOUT International Maritime
Page 64 and 65: INDUSTRY OPINION Youth empowerment
Page 66 and 67: The grill Port Authority of New Sou
Page 68: There’s a fresh new link in trans

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