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Welcome readers. In this supplement to the 9th Edition of Obiter Dicta, you are invited to indulge in articles written by students and alumni that are of particular legal interest. The articles do not cover subjects that are taught on the BLC courses but they are relevant and interesting for all readers and graduates of the BLC course. Within these pages we give you articles on EU emissions laws, shipping mortgages and renewable energy in Bulgaria. We trust you will enjoy reading these pieces and if you are interested in contributing to the next edition, do not hesitate to email the editorial team!

APRIL 2014

9th EDITION

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O B I T E R D I C T A B I S

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Legal aspects of low-emission shipping in the light of provisions of “sulphur directive” adopted by the

European Union

Beata Madejska

Gdaosk BLC alumnus

Background

The main sources of air pollution are transport, power generation, industry, agriculture and

heating. Each of these sectors emits a variety of air pollutants – sulphur dioxide, nitrogen oxides,

carbon dioxide and particulate matter (also known as particle pollution or PM, particulate matter

is a complex mixture of extremely small particles and liquid droplets. Particle pollution is made up

of a number of components, including acids (such as nitrates and sulfates), organic chemicals,

metals, and soil or dust particles). Shipping is a large and growing source of various kinds of

atmospheric emissions. Air pollutant emissions from maritime transport can be transported over

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long distances and thus increasingly

contribute to air quality problems in

the European Union. Sulphur

emissions are harmful to our health

and to the wider environment and

need to be reduced. Ship emissions

contribute to acid rain, air pollution,

smog, and marine eutrophication in

the European Union.

International legislation (IMO Convention)

The issue of controlling air pollution from ships, in particular noxious gases from ships’ exhausts, was

discussed in the lead up to the adoption of the 1973 MARPOL Convention. However, it was decided

not to include regulations

concerning air pollution at the

time, given the lack of studies

which could confirm the

hypothesis that air pollutants

could travel several thousand

kilometres before deposition and

causing damage. This damage

includes effects on crops and

forests.

Meanwhile, air pollution was

being discussed in other arenas. The 1972 United Nations Conference on the Human Environment in

Stockholm marked the start of active international cooperation in combating acidification, or acid rain.

In 1979, a ministerial meeting on the protection of the environment in Geneva resulted in the signing

of the Convention on Long-range Trans-boundary Air Pollution by 34 governments and the European

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Community. This was the first international legally binding instrument addressing problems of air

pollution on a broad regional basis (source: IMO website).

The MARPOL Convention is the main international convention covering prevention of pollution of the

marine environment by ships either due to operational or accidental causes. It is a combination of two

treaties adopted in 1973 and 1978 and also includes a Protocol of 1997 (Annex VI). It has been

updated by amendments through the years such as Annex VI Prevention of Air Pollution from Ships

which entered into force on 19th May 2005. The revision of Annex VI was adopted in October 2008 and

entered into force on 1st July 2010.

The regulations in this Annex set limits on sulphur dioxide and nitrogen oxide, emissions from ship

exhausts and particulate matter. Annex VI contains provisions allowing for the creation of special

Sulphur Emission Control Areas (SECAs) with more stringent controls on sulphur emissions. In these

areas, the sulphur content of fuel oil used onboard ships must not exceed 1.5% by mass.

The Baltic Sea Area is designated as a Sulphur Emission Control Area in the Protocol. The North Sea

was adopted as Sulphur Emission Control Area in July 2005.

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European legal provisions reducing ship emissions

At the European Union level, there have been subsequent steps over the last two decades to regulate

sulphur content in liquid fuels and thereby reduce emissions into the atmosphere.

Historically, the sulphur content of certain liquid fuels was regulated by Directive 93/12/EC, adopted in

1993 (Council Directive 93/12/EEC of 23rd April 1993 relating to the sulphur content of certain liquid

fuels), which placed restrictions on the marketing of diesel fuels used in road vehicles and gas oil used

for off-road transport (but excluding aviation).

In subsequent it was deemed important to lay down limits for the sulphur content of other liquid fuels,

in particular heavy fuel oil, marine gas oils and non-marine gas oils, on the basis of cost effectiveness

studies and also in view of the regulation in Annex VI on sulphur content of marine fuel in the IMO’s

MARPOL Protocol of 1997. The result was the Sulphur Content of Liquid Fuels Directive No 32 adopted

on 26th April 1999 (Council Directive 1999/32/EC of 26th April 1999 relating to a reduction in the sulphur

content of certain liquid fuels and amending Directive 93/12/EEC).

It established limits for sulphur content in heavy fuel oil (1.0% after 1st January 2003) and gas oil,

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including marine gas oil (0.2% after 1st January 2000 and 0.1% after 1st January 2008). The Directive

also included a recommendation to continue the initiative to designate the North Sea, including the

English Channel, as a sulphur emission control area (ECA).

Member States were obliged to transpose the Directive into national legislation before 1st June 2000.

Following the entry into force of MARPOL Annex VI in May

2005 a new Directive 2005/33/EC (Directive 2005/33/EC of

the European Parliament and of the Council of 6th July 2005

amending Directive 1999/32/EC), was promulgated in July

2005, amending Directive No 32 adopted in 1999

(hereinafter referred to as the Sulphur Directive).

Directive 2005/33/EC of the European Parliament and of the

Council of 6th July 2005, amending the Sulphur Directive, introduced, inter alia, the IMO concept of

Sulphur Emission Control Areas (SECAs) and associated stricter fuel standards. The maximum sulphur

content of marine fuels was limited to a maximum of 1.5% for ships operating in the Baltic Sea from

2006 and in the North Sea and the English Channel from 2007. Member States were obliged to

transpose the Directive into national legislation by 11th August 2006.

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The latest significant revision of the Sulphur Directive arises from the amendments to MARPOL Annex

VI done in 2008, which included more stringent limits on the sulphur content of fuels to be used in

Emission Control Areas. The EU rendered mandatory IMO rules on marine fuels through Directive no

12, effective as of 17th December 2012, amending Sulphur Directive No 32 adopted in 1999 (Directive

2012/33/EU of the European Parliament and of the Council of 21st November 2012 amending Council

Directive 1999/32/EC as regards the sulphur content of marine fuels).

By 18th June 2014 at the latest, Member States will have to amend their existing legislation on the

quality of marine fuels to align it with the new Directive.

From 2015 onwards, Member States must ensure that ships use fuels with a sulphur content of not

more than 0.10% in the Baltic Sea and the North Sea including English Channel. Equivalent compliance

methods, such as exhaust cleaning systems, are permissible.

From 2020 onwards, ships operating in all other European Sea areas will have to use fuels with sulphur

content of 0.50% or less. Directive 2012/33/EU has been implemented by Luxembourg and Slovakia.

Conclusions

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Emissions from shipping due to the combustion of marine fuels having a high sulphur content

contribute to air pollution in the form of sulphur dioxide and particulate matter, which harm human

health and the environment and contribute to acid deposition. Without the measures set out in this

Directive, emissions from shipping would soon have been higher than emissions from all land-based

sources.

Compliance with the regulations of sulphur in marine fuels will lead to a remarkable increase in fuel

costs for ships sailing inside SECA. Studies show that for 90-95% of the fleet, the fuel switch to middle

distillates represents the most cost efficient method of ensuring compliance with the rules. Fuel price

differences between the currently used heavy fuel oils and middle distillates in 2015 will create an

additional cost to be faced by SECA maritime transporters. The additional fuel costs will amount to

approximately 4.7 billion US dollars in 2015.

The shipping market in the Baltic Sea is expected to go through a period of disruptive change in recent

years, especially when the fuel prices increase considerably on 1st January 2015, as a result of the

lowering of fuel sulphur content limits from 1.0% to 0.1%. The freight rates for maritime transport are

expected to increase by 20–40%, burdening both exporting and importing industries. Modal shifts

from sea to road can be expected. Actions need to be taken by authorities, shipowners, ports, and

freight owners, as well as by other components of the logistics chains, because of their significance for

recognized ecological, socio-economic, economical attributes for marine sector.

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The European Arrest Warrant was the first concrete measure in the field of criminal law implementing

the principle of mutual recognition which the European Council referred to as the 'cornerstone' of

judicial cooperation. The amount of Polish citizens extradited from the United Kingdom has

desperately grown every year. The frequency of flights has been increased from every fortnight in

2009 to once a week in 2011, with two flights a week and still growing.

The suspects wanted for crimes in Poland are extradited from the UK under the European Arrest

Warrant (EAW), a Council Framework Decision on European arrest warrant and the surrender

procedures which ruled EU member states must hand over people wanted in other countries with a

"minimum of formalities". All European countries which are members of the European Union can issue

the EAW. The purpose of the EU was removing the complexity and potential for delay inherent in the

previous extradition procedures.

The EAW can be issued where a person is accused of an offence or where he or she has been convicted

of an offence but has not served the sentence yet, for the purposes of conducting a criminal

prosecution or executing a custodial sentence or detention order. The EAW may only be issued for

'Con Air': does it make any sense? Anna Jankowiak

BLC Student Poznan

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offences of a certain level of seriousness, based on a custodial sentence or a detention order for a

maximum period of at least 12 months or, where a sentence has been passed or a detention order has

been made, for sentences of at least four months. Moreover, the acts for which the European arrest

warrant has been issued have to constitute an offence under the law of the executing Member State.

A Polish act which has implemented the Council Decision has to state and actually states the same

order of the day as has been mentioned above. It is the article 607b of the Code of Criminal Procedure

Act of 6 June 1997.

The problem alarming by British services is the fact that some of the Polish suspects are wanted for

serious offences, though many of them are extradited for motoring offences and minor crimes without

success such as spraying graffiti or even stealing grocery's products. Unfortunately, it is dictated by the

provisions of a Polish Criminal Code. Seriousness which was mentioned by the Council Decision has

been circled 'at least 12 months' or 'at least four months'. According to the article 178a (drunk driving)

of the Polish Criminal Code anyone who, while in a state of insobriety or under the influence of an

intoxicant, drives a motor vehicle on land, water or in the air, is liable to a fine, the restriction of

liberty or imprisonment for up to two years. If the offender has previously been finally sentenced for

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driving a motor vehicle in a state of insobriety or under the influence of an intoxicant is liable to

imprisonment from three months to five years. The offence of spraying graffiti is govern by the article

288 (property damage) of the Polish Criminal Code, which states in paragraph first 'anyone who

destroys, damages or renders

unfit for use an object

belonging to another person is

liable to imprisonment for

between three months and five

years'. It is primarily dependent

on the amount of damage

(more than 1/4 of the minimum

remuneration), but as we might

see can be the basis to issue the

EAW as well as drunk driving

and theft. According to article 278 of the Polish Criminal Code anyone who intentionally steals someone

else's movable property is liable to imprisonment for between three months and five years.

This argument shows that something has to change because cost of extradition is incredibly aggravating

for Polish taxpayers and British as well. Interpreters, transport and the man hours processing them for

the flight, then the cost of the flights, the administration expenses and much more. Someone has to pay

for that and these people are citizens of our countries! The another alarming problem is the fact that

very often the Polish authorities hesitate for a long time with activities that would lead to prosecute

offenders. As a result, these people go abroad and there

trying to start a new life. This is the case in the UK,

where Polish people live and work for a few years and

have families there. Suddenly after a long time the

Polish court decides to prosecute based on the EAW.

The best example in a discussion about the need for the

reform of the rules governing the EAW is the case of 'Arkadiusz C.'. It is one of the most popular case of

Polish citizen who had to come back Poland based on the EAW. He has lived in the UK since 2009. He

has spent two months in a London jail waiting for extradition, after the British police had arrested him

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under the EAW issued by the Polish authorities. The crime was - drunk driving by bike, which took

place seven years ago...

Naturally, I cannot criticize courts for applying applicable law though something does not work here in

a proper way. There is something which is called the principle of proportionality. If the Polish court

action would be proportionate to the result I would not have any doubts and I would not see anything

wrong in the prosecution of such a large number of people. However, if we implead every single

person for minor offences is undoubtedly the question arises whether it is proportionate. As well,

practice has shown many people after sentencing have returned to the UK within days of being dealt

with by Polish courts. Repeatedly Polish courts sentenced only a fine.

What is also important to say the Council Decision does not establish the obligation to prosecute all

the European order, and the issue of such an order is the prerogative of each Member. The Decision in

the second article says 'European arrest warrant may be issued', with an emphasis on the word 'may'

rather than 'have an obligation' or 'must'. The government should have more attention on this

problem. As we might read British officials have asked the Polish authorities to cut down on the

number of people wanted for minor offences, unfortunately without success. Someone has to rise an

alarm to change the situation and resolve the problem which becomes more and more complicated

and topical.

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The granting of mortgages to facilitate ship purchases is common in many legal systems. Equally, given

the huge costs of building ships, money-lending arrangements similar to modern ship mortgages have

existed for centuries. In the 19th century, such mortgages started to be the subject of international

legislation initiated by the Comite Maritime International, whose 1992 convention created

international standards regarding this matter. Poland and Great Britain both ratified this convention

and there are many similarities in the construction of ship mortgage between both legal systems.

In both Polish and English law, ship mortgages are a privileged form of mortgage, protecting the

mortgagee from later creditors of the mortgagor. Furthermore, in both legal systems such mortgages

must be registered in order to enjoy such benefits. In Poland, vessels must be registered in the 'rejestr

okrętowy' which is maintained by a special organ ('izba morska') which also deals with maritime law

disputes. In England, ship mortgages are registered in the Registry General of Shipping and Seamen in

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Shipping Mortgages in Polish and English law

Gabriela Stoyanova

BLC Student Sofia

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Cardiff. Is it important to note that, in Poland, all registered vessels are capable of being the object of a

shipping mortgage, whereas in England vessels which are registered in Part 3 of the Registry (Small

Ships), are incapable of being the

object of a ship mortgage.

However, in both Polish and English

law it is possible for more than one

mortgage to be registered against a

single vessel.

The priority given to ship mortgages

over other claims is, however,

subject to certain exceptions. In

Polish law, certain payments have

priority over the repayment of a

ship mortgage: wages of the ship’s master and crew, claims under maritime contracts for repairs,

supplies and other necessities which are essential to continue a journey, claims arising from salvage

operations and claims for maritime torts, including personal injury and death.

In English law, the scope of claims having priority over a ship mortgage is wider than in Poland. In

addition to the aforementioned Polish law exceptions, priority is also given to claims for the breach of

a charter-party, claims by the carrier of cargo for unpaid freight and demurrage.

Another significant difference exists between the

systems lies in the rights available to mortgagees. In

English law, a mortgagee has the right to re-possess

and sell the ship if his liability is not satisfied in a

timely manner. The Polish Maritime Code does not

automatically endow a mortgagee with equivalent

rights. In the event of default in payment, a rigid

legal procedure must be followed by either a notary

or a bailiff. It takes more time for a mortgagee to satisfy his liability and, furthermore, if multiple

mortgages exist over the same ship, the additional costs of the notary or a bailiff could render it

impossible to fully satisfy the liability of other mortgagees.

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However, Article 84 of the Maritime Code states that if the parties (mortgagee and mortgagor) arrange

thus in the mortgage contract, a mortgagee can repossess and sell the ship. Such mortgage contracts

must be concluded in writing, with the signatures of the parties certified by notary, and must also be

registered in the 'rejestr okrętowy'. Since the regulation of Polish ship mortgages appears to be

creeping in the same direction as English law, Polish legal writings sometimes refer to mortgages

arranged in accordance with Article 84 as a 'polski morgecz', this being the phonetic form of the

English word mortgage, as opposed to the traditional Polish equivalent 'hipoteka morska'.

In conclusion, the international nature of maritime law means that the regulation of mortgages in both

systems is quite similar. It is difficult to unambiguously assess which of the systems best regulates this

matter but, in this author’s opinion, the Polish legal system is more friendly towards those investing in

the maritime economy, since it recognises a narrower scope of claims having priority over ship

mortgages, there are no exceptions to the possibility of creating ship mortgages over registered

vessels, and it is possible to create more convenient modes for the execution of any unpaid debt.

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A 20% fee on income from the production of electricity by wind and photovoltaic (“PV”) power plants

was approved on 5th December 2013 by the Bulgarian Parliament. Amendments to Bulgaria’s Energy

from Renewable Sources Act were introduced within the Closing Provisions of the State Budget Act for

2014. The State Budget Act was published in the State Gazette on 20th December 2013 and entered

into force on 1st January 2014, i.e. the fee became payable on as of 1st January 2014.

Characteristics of the fee

The newly introduced fee has the characteristics of a tax. The difference between a fee and a tax is

that a fee is paid for specific goods or services, whereas a tax has no connection to the benefits

received by an individual. A tax is a financial charge or other levy imposed upon a taxpayer, with failure

to pay being punishable by law.

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Vanya Georgieva

BLC Sofia Alumnus

A New Fee on the Income from Production of Electricity

Derived from Wind and Photovoltaic Power Plants in Bulgaria

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Even though the term “fee” is used in

the legislation, the law does not

provide for any services to be

provided in consideration of such a

fee. The relevant provision reads as

follows:

Bulgarian Energy from Renewable

Sources Act

“Art. 35a (1) A fee shall be collected

for the production of electricity from wind and solar energy.

(2) The amount of the fee under par. 1 shall be calculated with the following formula:

ТПЕЕ = ПЦ х КПЕЕ х 20%

where,

ТПЕЕ is the fee for the production of electricity;

ПЦ is the preferential price under art. 31, par. 1 excluding VAT (FiT);

КИЕЕ is the quantity of electricity purchased by the Public provider and end supplier under art. 31, par.

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(3) The producers of electricity from wind and solar energy are required to pay the fee under par. 1”

Furthermore, the law provides that the due fee is non-refundable and will be deposited in the state

budget. If unpaid, the fee is subject to enforcement proceedings.

From the above, it may be inferred that the 20% fee in fact constitutes a discriminatory tax levied on

the income of the production of electricity by wind and PV plants. Both Bulgarian and European tax

legislation, as well as international acts ratified by Bulgaria, contain many requirements for the

imposition of taxes, which are not observed in this case, since the tax purports to be a fee.

Procedure

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The procedure for adopting a bill was not observed during the process for adopting the fee. The bill

containing the amendments to the Bulgarian Energy from Renewable Sources Act contained no

statement of motives and was not subject to any discussions in Parliament. This was in direct

contravention to provisions of Bulgarian Law. The amendments were passed within the Closing

Provisions of the State Budget Act for 2014, which is not a usual practice of the Parliament. The

purpose for this might be to avoid suspension of the adoption of the Act by the President. The State

Budget Act is subject to mandatory approval procedures by the end of the year, thereby effectively

leaving the President without a veto against it.

A Similar fee has already been revoked by the court

In 2012 the Bulgarian energy regulator imposed an access fee upon producers of energy from

renewable sources. The fee varied between 2% to 40 %, depending upon the source of the renewable

energy. Following a wave of litigation against this access fee, the court revoked the decision which led

to its adoption. The court inferred that the regulator had failed to observe the correct procedure for

adopting the fee. According to the court, no evidence for the necessity of the access fee was provided.

Also, there were insufficient data for the manner of calculating the fee, which contravened the

provisions of the Bulgarian Energy Act. The latter requires that fees must be determined on the basis

of non-discriminatory and transparent criteria.

In essence, the newly adopted fee is similar in design to the access fee already revoked by the court.

Thus it is expected that the new fee will led to a new flood of litigation.

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What follows?

The President announced that he intends to challenge the amendments before the Constitutional

Court of Bulgaria, given the absence of public discussion and analysis on the impact of the adopted

measure. According to the President, it is also unclear what the potential income from the

implementation of the fee will be used for. However, the mere fact of proceedings before the

Constitutional Court does not lead to the interim suspension of the law. This means that the fee shall

be due until the moment it is cancelled by virtue of a court decision.

Conclusion

The 20% fee introduced at the end of last year was not adopted in accordance with the applicable

Bulgarian law. The procedure for its adoption was not observed. It also has the characteristics of a tax,

however it is not imposed in accordance with the relevant tax legislation of Bulgaria and the European

Union. The fee discriminates against producers of energy from wind and PV Plants in comparison with

producers of energy conventional sources, who are not charged such a fee. This is in violation of

Directive 2009/28/EC of the European Parliament and of the Council of 23rd April 2009 on the

promotion of the use of energy from renewable sources. The latter establishes a common framework

for the promotion of energy from renewable sources and sets the mandatory national target of 16 %

for the overall share of energy from renewable sources in gross final consumption of energy.

Given these defects in the procedure and the nature of the fee, as well as the impediment of the 16%

national target, it is expected that the fee will be contested before the competent Bulgarian and

European authorities in the near future.

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