The Chamber of Shipping Ltd. No 2107383. Reg. in England at above office address.

To: Legal, Insurance and Documentary Committee 26 January 2017 Dear Member, I have pleasure in enclosing agenda and papers for the forthcoming meeting of the Legal, Insurance and Documentary Committee, details of which are as follows; Date: Thursday 2 February 2017 Starting time: 9.30 am Finishing time: 11.30 am Venue: Room 1

UK Chamber of Shipping 30 Park Street London SE1 9EQ

Please let me know as soon as possible if you will be attending the meeting. Members wishing to participate in the meeting using the Chamber’s conference call facility are welcome to do so. Any member who would like to make use to the facility should advise me accordingly in advance of the meeting. Yours sincerely

Tim Springett Policy Director (Employment and Legal)

tspringett@ukchamberofshipping.com 020 7417 2820

Legal, Insurance and Documentary Committee 0930, 2 February 2017 at 30 Park Street, London, SE1 9EQ

Agenda Paper ref.

1. Minutes of last meeting: 1 September 2016 LIDIC/17-02

2. Matters arising

2.1 Policing and Crime Bill: Maritime Enforcement Powers

2.2 HNS Convention and EU Environmental Liability Directive

2.3 Ship Recycling

3. ILO Maritime Labour Convention, 2006 (MLC) 3.1 Implementation of amendments on financial security 3.2 Possible future amendments on payment of wages in piracy

situations

LIDIC/17-03

4. Anti-bribery and corruption initiatives

LIDIC/17-04

5. Brexit – Update on UK Chamber actions

LIDIC/17-05

6. Insurance issues

LIDIC/17-06

7. France – Environmental Damage law

LIDIC/17-07

8. Data protection

LIDIC/17-08

9.

Cyber security on ships LIDIC/17-09

10. Maritime transport of counterfeit goods

LIDIC/17-10

11. Secretary’s report

11.1 Fulfilment House Due Diligence Scheme

11.2 Oceans Governance

11.3 Torrey Canyon disaster – IMO 50th anniversary exhibition

11.4 Documentary Issues

LIDIC/17-11

12. Any other business

13. Date of next meeting

LIDIC/17-02

Legal, Insurance and Documentary Committee Minutes from the meeting held on 1 September 2016 30 Park Street, London, SE1 9EQ

Present Roderick White – BP Shipping – Chairman Nicola Barnes – Shell International Trade and Shipping Co Ltd Michael Bird – Britannia P&I Club Kevin Cooper – Ince & Co LLP Adrian Durkin – North P&I Club (by conference call) Lindsey Keeble – Watson Farley & Williams John Kilby – The Maersk co Ltd Sam Kendall-Marsden – Standard P&I Club Tony Paulson – West of England P&I Club Mark Tooke – Watson Farley & Williams Simon Walters – Carnival UK Ltd UK Chamber staff Tim Springett Katrina Ross Tim Reardon (for Item 4) Apologies Peter Wright – Acromas Shipping Ltd Struan Robertson – Clarksons Platou Ltd The Chairman reminded members that all UK Chamber of Shipping meetings were required to be conducted in accordance with the procedures for complying with UK competition law. 1. Minutes of last meeting: 28 January 2016 (LIDIC/15-10) The minutes of the meeting held on 28 January 2016 were approved and signed by the Chairman. 2. Matters arising 2.1 Ship recycling – EU study on feasibility of a financial instrument It was recalled that the European Commission was investigating the feasibility of an EU wide financial instrument to promote the recycling of ships according to the EU Ship Recycling Regulation (SRR) and to discourage the reflagging of ships prior to sale for recycling in order to avoid compliance with the SRR. External consultants were appointed to carry out a study into possible options for a potential financial instrument. Their suggestion was for a “ship recycling licence” scheme under which all ships calling at EU ports would be required to purchase a licence. The proceeds would be apportioned between the administrative costs of the scheme and a ship recycling fund. The amounts paid into the Fund in respect of each ship would be accumulated and payable to the ultimate shipowner but only if that shipowner could demonstrate that the ship had been recycled in accordance with the EU Regulation.

The shipping industry has expressed its concerns and inability to support the proposal, and has called upon the Commission not to act upon it. The International Chamber of Shipping (ICS) would meet with the Commission’s Directorate-General for Environment (DG ENV) in September. Members noted the report, and agreed that this proposal was flawed conceptually, with many foreseeable legal obstacles and that it was important to continue to vehemently oppose this. 2.2 General Average: Revision of York-Antwerp Rules It was reported that a new set of rules for the adjustment of General Average, to be known as the “York Antwerp Rules 2016” (YAR 2016), had been adopted by Comité Maritime International (CMI) at its New York Conference. The conference had also adopted new “Guidelines to General Average”. The new rules were considered to be satisfactory from the shipowners’ perspective in that they preserved the fundamental principles of the present well-functioning YAR 1994 system while introducing some practical improvements, which addressed the concerns of insurers. As of May 2016, all new and revised BIMCO charter parties, bills of lading and waybills would refer to General Average being adjusted in accordance with the YAR 2016. Members noted the favourable outcome, and it was confirmed that the revised YAR clauses were being recommended by the P&I Clubs. 2.3 Limitation of Liability for Maritime Claims: UK implementation of revised limits It was reported that the Chamber had responded to the Department for Transport (DfT) consultation on implementation of new LLMC limits and some other proposals in February. Most of the proposals were supported but both the Chamber and the International Group of P&I Clubs (IG) had opposed the proposal to remove the right of a shipowner to limit liability in respect of passenger claims in accordance with LLMC. As a result DfT had withdrawn this proposal. Regulations were likely to be signed off imminently and expected to take effect in September. It was explained that this oversight by DfT was a result of trying to improve the protections for passengers without understanding the implications for vessels not subject to the Athens Convention/EU Passenger Liability Regulation. Members noted the favourable outcome.

3. Outcome of UK Referendum on EU membership (LIDIC/16-11) It was stated that, since the UK’s vote to leave the EU, the chamber continued to participate in the European Community Shipowners' Associations (ECSA) and to follow proposed EU legislative measures. It was also preparing a plan for the post-Brexit era, setting out matters on which it would call for Government action. Not all of the matters in question were related to the UK’s membership of the EU. It was highlighted that those operators in the direct UK to EU trade would be most affected in needing to facilitate customs and movement of passengers, but otherwise, bar the employment of foreign personnel onshore and the continued stability of the tonnage tax regime, leaving the EU would have little direct impact on shipping. Members noted the UK Chamber’s approach in championing free movement of people and trade. It was observed, however, that there may need to be a plan B because of the current political climate and the decreasing likelihood of preserving complete freedom of movement of people in the EU. It was explained that the UK Chamber was liaising with the DfT and Home Office to deal with the current immigration difficulties for non-EEA applicants wanting to work in onshore maritime roles in the UK, and that this work would be key in mitigating the impact of free movement on UK shipping from an employment perspective. It was also observed that, if the Commission were to lose oversight of the UK’s state aid regime, there could be room for making small changes to the tonnage tax regime more easily to better attract more investment, to mitigate the impact of leaving the EU.

It was also important to support the maritime services sector, especially where the impact on immigration restrictions and providing insurance services overseas maybe keenly felt – so as an example, P&I Clubs need an “EEA regulatory passport” in order to insure ships flying the flag of certain EU States, such as Spain and Italy, due to local insurance regulations. Another aspect where shipping could be affected relates to the recognition of foreign judgments. Service of litigation proceedings started through the English courts in EU member states could become more difficult if no reciprocal service agreement replaces the Brussels Regulation – and similarly, enforcement of English court judgments in the EU could become more difficult as well. 4. Policing and Crime Bill: Maritime Enforcement Powers (LIDIC/16-12) It was reported that the Government’s Policing and Crime Bill included proposals to allow law enforcement agencies to stop, board, divert, detain and search merchant vessels for the purpose of preventing, detecting, investigating or prosecuting any offence triable in England, Wales and Scotland. The powers were exercisable on any UK-registered or Red Ensign Group-registered ship, wherever it is in the world, along with any overseas-registered or stateless vessel in UK territorial waters or international waters – including whilst the vessel in question was at sea. It was further reported that the chamber would hold an event on 19 October at the offices of Hill Dickinson LLP, focusing on both the maritime enforcement powers and what should happen to evidence of the commission of a crime on board a ship that had been preserved, when that ship arrives in port. It was observed that, while these provisions could be abused where the ship and its operators were viewed with suspicion despite the risk of diplomatic disputes, this legislation was a useful development for crimes which occasionally occur on board against a passenger, crew or the ship – so that a responsible ship operator would be able to follow through its investigations and preservation of evidence to hand over to the UK authorities. 5. Bribery Act 2010 (LIDIC/16-13) It was reported that the Maritime Anti-Corruption Network (MACN) had been undertaking missions in Suez and Argentina and claiming success in its campaigns to tackle demands for unwarranted gifts and payments from ships in these areas. Meanwhile the UK Government had staged an anti-corruption summit in May, after the Anti-Corruption All-Party Parliamentary Group launched a call for evidence earlier this year, to which the chamber had responded. The chamber had also called for the industry’s efforts to tackle maritime corruption to be considered by the Consultative Shipping Group, continuing a discussion that had begun the previous year. It was observed that the efforts to resist collectively over the years had proved to reduce demands dramatically in some major routes and ports, though some other areas continued to prove difficult to instigate change. It was highlighted that the UK Chamber’s guidance for the shipping industry had gained traction over the year in increasing awareness of international operators, and that the guidance did reflect major ship operators’ anti-bribery and corruption compliance programmes. It was noted that there was increasing acceptance by financiers of the need for a more practical approach when dealing with the shipping industry, rather than an absolute zero tolerance programme which was more likely to be flouted and not lead to remedial action. 6. Possible amendments to ILO Maritime Labour Convention, 2006 on payment of wages

to seafarers held captive (LIDIC/16-14) It was reported that the ILO committee established under Article XV of the Maritime Labour Convention, 2006 (MLC) to keep the convention under review had held its second meeting in February 2016. It had been asked to consider a proposal to require shipowners to ensure that seafarers unlawfully held captive during a voyage (e.g. by pirates) continued to be paid full wages. This had not been supported and a working group had been formed consider whether any

amendment to the MLC to cover this point would be appropriate. The group would also aim to agree parameters for future proposals for amendments to the MLC Code. Members noted that while good, reputable operators would continue to pay their seafarers in captive situations while trying to deal with their release, bad players in the market would continue to ignore their existing and any new obligations under the MLC. This would then result in the vast majority of operators who, in complying with their MLC obligations, were paying for such insurance unnecessarily. 7. Pollution (LIDIC/16-15) 7.1 France - Environmental Damage It was reported that the French Parliament was likely to introduce a law introducing unlimited liability for pure environmental damage or ecological damage and it would apply to shipping. Concern had been expressed by Amateur de France (French Shipowners’ Association) that insurance cover for the liabilities might not be available. Members were concerned that the imposition of a national regime for the compensation of environmental damage at variance with the international regime may have implications for the future functioning of the international system and for the balance of responsibilities that currently exists between shipowners and oil receivers. It was observed that, as this resulted from the fallout of the Erika in trying to pursue multiple claims from a variety of potential defendants (such as the ship owner, charterer, classification society etc), it was likely that the legislation would try to cover as many parties as possible – though it was worth clarifying this with Amateurs de France. 7.2 CMI Polar Shipping Working Group It was reported that the CMI International Working Group on Polar Shipping had produced a report on the Legal Framework for Civil Liability for Vessel Source Oil Spills in Polar Regions. The report had claimed that the unique and remote nature of parts of the Arctic region might mean that the compensation regime for ship source oil pollution damage may not be sufficient. However the ICS and the International Group considered that, in terms of the ability to respond to a pollution incident, the Arctic was no different from other remote areas or less-prepared regions. It was observed that there could possibly be higher recovery and clean-up costs in harsher environments – though in many of the harsher regions had overlapping or adjacent liability regimes which did not appear inadequate, such as the US OPA 1990 or other adjacent countries under the international liability regime. 7.3 IOPC Funds

(i) Prestige - Spanish Supreme Court judgment

It was reported that the Spanish Supreme Court had ruled that the Master of the oil tanker mv Prestige, Captain Apostolis Mangouras, was guilty of reckless damage to the environment in the incident off Cadiz in 2002. This had overturned the ruling of the Spanish Appeal Court and additionally meant that neither he nor the shipowner were entitled to limit their liability under the civil Liability Convention. It was also reported that the IG submitted a paper to the next IOPC Funds meeting in October to express the wider industry’s concerns about this judgment. Members expressed their concerns that the ruling, like the legislative developments on pollution in France discussed under item 7.1, could have implications for the international compensation regime for ship-source pollution, and would contribute to the trend of criminalising seafarers. The submission from the IG to the IOPC funds meeting was supported.

(ii) Interim Payments

It was reported that the IOPC Funds governing bodies and the IG were engaged in discussions aimed at clarifying the basis on which interim payments could be made and to establish a Memorandum of Understanding (MoU) between the IG and the IOPC Funds. It was explained that the IG had submitted a proposal to the next IOPC Funds meeting which reflected an acceptable compromise. In essence, the proposal outlined a regime whereby interim payments could be approved subject to reviewing the particular incident in question, and that it would require the IOPC Funds to convene on an emergency basis to approve such payments –and convening such a meeting could typically take 6-8 weeks. Members noted that, although this would incur some delay for the ship owner, insurers and claimants, the compromise was made to enable the IOPC Fund to review the circumstances before endorsing such payments.

(iii) Review of STOPIA and TOPIA

It was reported that the Small Tanker Oil Pollution Indemnification Agreement 2006 (STOPIA) and the Tanker Oil Pollution Indemnification Agreement 2006 (TOPIA), which were schemes for the payment by shipowners of additional contributions to compensation funds in certain circumstances, were due for review this year. The review would seek to determine the approximate proportions in which the overall costs of pollution damage claims in the preceding ten years had been borne by the shipping industry and the oil industry and whether any measures should be taken to maintain an approximately equal apportionment. It was also reported that to date, there has been one STOPIA case and no TOPIA cases. It was confirmed that the International Group’s position would be to do nothing to adjust the financial burden, but to make some changes to the Agreements to include a sanctions clause and changes to the review mechanism to ensure that future reviews are every ten years and that they take account of the total aggregate of claims from the start of the Agreements rather than just from the review period concerned. It had been explained that, although the ten year review revealed that the P&I Clubs had paid 86% of claims and the 1992 CLC Fund 14%, once the 2007 Hebei Spirit incident was taken into account in the next review period, the percentages were likely to become more balanced. Members agreed with this conclusion and confirmed there was much merit in not reopening the Conventions at this stage.

(iv) Guidelines on Environmental Damage Claims

It was reported that the IOPC Funds Secretariat had developed draft guidelines intended to assist claimants with the submission of claims for environmental damage within the framework of the existing 1992 CLC and Fund Convention. Members noted the need to better inform the European Commission on how such claims were dealt with by the IOPC Funds. 8. HNS Convention and EU Environmental Liability Directive (LIDIC/16-16) It was reported that the European Commission had published a report on the implementation of the Environmental Liability Directive (ELD). Fortunately for the maritime industry, the report had recommended that the exceptions in the directive for environmental damage from shipping incidents that were covered by the IMO liability and compensation conventions should be retained. However, the report had expressed concern at the non-entry into force of the HNS Convention, which was listed in the annex to the directive. It was reported further that discussion between the UK Chamber and the DfT had made it clear that the UK had no intention of ratifying the HNS Convention at the present time. Whilst the UK Chamber continued to support the joint ICS/CMI campaign for the ratification by states of a number of international conventions, including HNS, it felt that the industry should consider carefully the impact on shipowners in the event of any future recommendation that the HNS Convention be removed from the annex to the directive. It was noted that the ability of shipowners to limit their liability under the International Convention on the Limitation of Liability for Maritime Claims (LLMC)

in the event of an incident causing environmental damage provided an exclusion for shipping from the directive. 9. UK Chamber Policy Committees – Possible Restructuring (LIDIC/16-17) It was reported that the chamber was in the process of updating its strategic plan and reviewing how it might engage with members more effectively. One suggestion had been that the current broad policy activity areas could be broken down into more discrete subject areas and – if members considered it appropriate – the chamber’s committees would be abolished. If members of a particular committee wished it to continue, it would be renamed as a forum and might hold more single-issue meetings and seminars. Members confirmed that they wished to meet in the same manner, in light of the need to provide the UK Chamber with a mandate on the particular policy items up for discussion at the International Chamber of Shipping’s Maritime Law Committee meetings. It was agreed that the Committee would be renamed as the Legal, Insurance and Documentary Forum. 10. Secretary’s report (LIDIC/16-18) 10.1 Insurance Act 2015 10.2 Oceans Governance 10.3 Salvage – Developments on Lloyd’s Salvage Group and Lloyd’s Open Form 10.4 Documentary Issues Reports on these items were received and noted. 11. Any other business

There was none.

12. Date of next meeting It was noted that it was expected that the ICS Maritime Law Committee would meet in early February 2017. Hence the next meeting (if there is one) would likely be arranged for w/b 23 or 30 January 2017, after receiving confirmation of the ICS meeting date.

LIDIC/17-03

ILO Maritime Labour Convention, 2006 (MLC)

3.1 Implementation of amendments on financial security 1. In November last year the Maritime and Coastguard Agency (MCA) published draft

regulations to implement the amendments to the ILO Maritime Labour Convention, 2006 (MLC) detailing the requirement on shipowners to provide financial security in the event of abandonment, death or long-term injury of seafarers. Members of the LIDIC and the Employment Committee were invited to comment via a circular dated 7 November 2016.

2. The chamber’s circular drew attention to numerous incidences of proposed provisions that,

in its view, went considerably beyond what was necessary for the UK to meet its obligations as a signatory to the MLC. Among these were:

A definition of abandonment that differed from the one agreed in tripartite discussions at the ILO

Time limits on the making of payments to abandoned seafarers and injured or bereaved parties

Fines for failing to meet the obligations set out in the Regulations. 3. Comments from members indicated support for the chamber’s position and accordingly a

response was submitted to the MCA. The response drew attention to the following points:

Liability for claims in respect of death and personal injury: MLC Standard A4.2.1 paragraph 8 referred to contractual claims but the draft regulations widened the scope to include any compensation claim, including those arising from a claim in tort. This was beyond the scope of the MLC and would be likely to require considerably higher insurance costs

The regulations required financial security providers to determine amounts to be paid to seafarers and to settle claim in respect of death or personal injury within seven days. Claims in respect of an abandonment-related claim would need to be paid “promptly”. If this were not complied with, the payment will be subject to 20% interest. None of this was required by the MLC. The compensation payable would normally be set out in a Seafarer’ Employment Agreement.

The regulations required shipowners to give notice in writing to all seafarers working on a ship when financial security was to be terminated. This went beyond the MLC requirement. Also it was not made clear whether this notification was necessary whenever a shipowner changed provider.

Abandonment; MCA’s definition would make it considerably easier for a seafarer to claim to have been abandoned – for example when a shipowner failed to provide “necessary medical care.” The chamber pointed out that what medical care was deemed to be necessary might be a subjective matter and dependent on a specialist medical examination.

MCA had also added to the list of items that the financial security should cover that had been agreed at ILO, potentially loading additional costs onto shipowners

Whilst one regulation stated that a financial security provider should decide whether a claim in respect of an alleged abandonment was valid, another required a payment to be

made before a decision as to the validity of the claim had been taken. This was not required by the MLC and would be entirely inconsistent with standard practice for insurers.

4. The chamber also stated that the Government’s proposal that shipowners, financial security

providers and ships’ Masters should face criminal liabilities for breaches of the proposed Regulations was unnecessary, disproportionate and could result in unwarranted criminalisation of seafarers, shipowners and insurers. The chamber was not aware whether fines could be imposed on UK ships calling at ports overseas. Another point raised by the chamber was that the “shipowner” named on certificates of financial security might well not be the same entity as the MLC “shipowner” as named on the Maritime Labour Certificate.

5. The chamber also held discussions with the International Group of P&I Clubs (IG) which had

raised similar concerns to those of the chamber. Both parties have requested a meeting with the MCA and the Department for Transport (DfT) to discuss why the Government is seeking to gold-plate the convention and call for the UK regulations to stick closely to the agreed MLC text.

3.2 Possible future amendments on payment of wages in piracy situations

6. Following the second meeting of the ILO Special Tripartite Committee in February 2016, the

ILO established an ad hoc tripartite working group to undertake two tasks:

To agree a mechanism for the submission of future proposals for amendments to the MLC, in order to allow governments sufficient opportunity to consider their acceptability; and

To examine issues related to the protection of seafarers’ wages when the seafarer is held captive on or off the ship as a result of acts such as piracy or armed robbery and to prepare proposals, including an amendment to the code of the MLC to address these issues.

7. The reference to the “code of the MLC” meant either or both of the mandatory Part A or the

non-mandatory Part B of the Code. The working group is currently working by correspondence but will meet in Geneva in April and hopefully reach agreement on proposals for consideration by the Special Tripartite Committee at its next scheduled meeting in February 2018.

8. ILO initially issued a document setting out its views on the two issues. On piracy, the

document included a list of incidences of crews of ships being held by pirates having their wages stopped during the period of captivity. However, the International Chamber of Shipping (ICS) pointed out that none of the ships in question were subject to the MLC – they were either fishing vessels or ships of traditional build such as dhows and junks. ICS therefore requested the ILO to re-issue its document, which it did shortly before the end of 2016.

9. The ILO document indicates that there is a large measure of convergence among the

members of the working group on the following matters:

Seafarers who are held captive on or off their ship as a result of an act of piracy or armed robbery should continue to receive full wages in accordance with their employment agreements

The “period of captivity” can be deemed to have ended when a seafarer has been released and repatriated or has died

“Wages” for this purpose should mean contractual wages as set out in the employment agreement

There should be a provision that the employment agreement cannot be terminated during the period of captivity

10. However, there is a divergence of views on the following matters:

Whether other situations in addition to piracy and armed robbery should be taken into account

Whether the MLC should be amended to include a definition of piracy (a definition already appears in the United Nations Convention on the Law of the Sea (UNCLOS))

Whether the obligation to pay wages should be subject to a maximum period

Whether shipowners should be under an obligation to provide financial security to ensure the payment of wages to seafarers held captive as a result of piracy or armed robbery

Whether a reference should be made to maritime liens for the purpose of protecting seafarers’ wages

11. It is also noted that there is no consensus over whether the group should propose an

amendment to the MLC itself, or take the form of accompanying guidance. The ICS is keen to avoid an obligation to include a positive statement in seafarer’s employment agreements that wages will continue to be paid in the even that a seafarer is held captive by pirates or armed robbers.

Comment 12. The fact that the ILO has failed to identify cases in which seafarers whose ships have been

captured by pirates or armed robbers and the seafarers on board have not continued to be paid full wages must cast doubt on the value of making an amendment to the MLC to mandate such payment. This is the line that the shipowners are likely to take. However, unless the owners are supported in this by a sufficient number of governments, an amendment to the MLC may be inevitable.

13. A further concern relates to the consequences of making further amendments to an

international instrument so soon after its entry into force (August 2013) on a matter on which there is currently no consensus. Whilst it was always the intention to keep the MLC up to date and allow amendments to be made via a simplified (and relatively rapid) process, there must also be an argument for maintaining the stability of the MLC in order to enable governments to apply and enforce it effectively. This is one of the key drivers behind the work to formulate new procedures for proposing amendments to the MLC in the future.

14. In addition, if any new provision relating to the payment of wages to seafarers held captive

by pirates is included, it will be most important to guard against any unintended consequences of this. If there is a specific mention of captivity resulting from piracy or armed robbery, it could imply that wages need not continue to be paid in other circumstances where a seafarer is held captive. This may or may not be appropriate.

For consideration 15. Members will be invited to comment on the points raised in paragraphs 3, 9 and 10.

LIDIC/17-04

Bribery Act 2010

Background 1. The UK Chamber has continued to be active in its efforts to tackle demands for unwarranted

gifts and corruption in ports and canal entrances following the publication of “The Bribery act 2010: Practical Guidance for the UK Shipping Industry” in September 2015.

2. Following the pilot programme with Maritime Anti-Corruption Network (MACN) members on

the Suez Canal between late 2015 and early 2016, it was decided in April 2016 to widen the collective action initiative to encourage all ship operators passing through the Suez Canal to resist requests for cigarettes and the like. MACN approached other international shipping trade associations, including INTERTANKO and the International Chamber of Shipping International Chamber of Shipping (ICS) to widen industry knowledge of this initiative, though it did not seek for publicity at this stage. In addition, it is understood that efforts by MACN in Argentina to tackle demands for unwarranted gifts and payments from ships had achieved a measure of success.

3. In December 2015, the All-Party Parliamentary Group (APPG) on Anti-Corruption launched a

call for evidence as part of a new inquiry entitled “Reaching Export 2020 with integrity: How can UK businesses be better supported to manage corruption risks in high-growth markets?” The aim of the inquiry was to enable the APPG to learn more about the perceived shortcomings in the support provided by government agencies and to gather creative and cost-effective ideas for how government departments could better support businesses to deal with the risks of bribery and corruption in high-growth markets. The UK Chamber submitted a response to that inquiry in 2016, pointing out that it was not clear whether the support offered by the Government was available to UK nationals serving on ships registered outside the UK, or indeed overseas nationals on ships that might be owned, operated and registered in the UK.

4. Much fanfare had been made of the UK’s Anti-Corruption Summit 2016 event that the then

Prime Minister David Cameron had spoken at in May 2016. A Global Declaration Against Corruption was published, where one of the recommendations was that it should be made easier for people to report corruption without fear of reprisal. It had also been declared that an International Anti-Corruption Co-ordination Centre would be set up to enable police and prosecutors to work together. Following the June 2016 result of the UK’s referendum on the EU, the UK Government underwent a significant reshuffle.

Present position MACN collective action and other initiatives 5. Members may be aware that in 2016, Maersk Line introduced a new data-driven anti-

corruption strategy. Since then the company has seen the making of facilitation payments from its ships in ports around the world plummet by 84% and their captains in the Africa fleet experiencing the benefits. It has reported much success in establishing an internal anti-corruption network – and with MACN, has also collaborated with the Nigerian government. In June 2016 the Nigerian government introduces a set of Standard Operating Procedures to

clarify the roles and responsibilities. More details on their success and graphs can be accessed here.

Report by the All-Parliamentary Party Group (APPG) on Anti-Corruption 6. The APPG on Anti-Corruption released the results of its inquiry on 9 December 2016, which

is attached as Annex A. From the responses it received, it concluded that

all UK businesses looking to export to markets where there is a high risk of bribery and corruption would benefit from the improved coordination and publication of existing government guidance.

the current guidance could also be better framed, tailored specifically to match exporters’ needs, more strategically coherent and better integrated to provide a single comprehensive body of guidance.

small and medium-sized enterprises (SMEs) could benefit from due diligence support.

networks of anti-corruption expertise and formal information sharing should be created through Collective Action between businesses, especially SMEs, NGOs, the UK government and other governments in various export markets.

7. It also raised issues with funding for law enforcement, a register of companies debarred from

public procurement and increased transparency on beneficial ownership. Post-Brexit developments 8. As reported previously, Eric Pickles MP was appointed as the UK’s Anti-Corruption

Champion, following the UK government’s reshuffle last summer. He has since made speeches to confirm the government’s stance in continuing the commitments previously made at the UK’s Anti-Corruption Summit event in May 2016. It was announced in October 2016 that the National Crime Agency was working towards hosting the new International Anti-Corruption Coordination Centre, with help from other jurisdictions, in order to tackle multi-jurisdictional corruption cases, tracing stolen assets and bring prosecutions.

9. Also announced via the Criminal Finances Bill are various measures to:

introduce the offence of the “corporate failure to prevent tax evasion”: where a person acting for or on behalf of a relevant company, acting in that capacity, criminally facilitates a tax evasion offence by another person, the relevant company would be guilty of the corporate failure to prevent the facilitation of tax evasion offence, unless the relevant body can show that it had in place reasonable prevention procedures (or that it was not reasonable to expect such procedures).

increase the powers of the Serious Fraud Office to allow them to investigate for Proceeds of Crimes Act 2002 offences;

increase capabilities for information sharing between “regulated firms” (e.g. banks) to encourage better information sharing between such firms and the public sector;

introduce Unexplained Wealth Orders (UWOs) that require a person who is suspected of involvement in or association with serious criminality to explain the origin of assets that appear to be disproportionate to their known income. A failure to provide a response would give rise to a presumption that the property was recoverable, in order to assist any subsequent civil recovery action. A person could also be convicted of a criminal offence, if they make false or misleading statements in response to a UWO.

10. The Bill is due to have its third reading at the House of Commons. The UK is also

introducing a public register of company beneficial ownership information for foreign companies who own or buy property in the UK, or who bid on government contracts.

11. On 24 January the chamber participated in a panel discussion at the IHS Markit Maritime

Risk Forum entitled Low-level corruption: a heightened risk for shipping companies.” The chamber took the opportunity to highlight the work it has undertaken on its Practical Guidance publication and its role in shaping the BIMCO anti-corruption clause for charter parties. Also on the panel was a former Master Mariner with more than 40 years’ seagoing service, who gave details of numerous incidents that he had encountered during his career, with demands for unwarranted gifts frequently accompanied by threats of delays, detention and fines. He stated that, although his instincts were to resist, he did not always feel that he could depend on his employers for support. The chamber pointed out that top-level support within companies for their crews is of paramount importance.

For consideration 12. Members will be invited: - to provide details of any anti-corruption initiatives they may be undertaking in their

companies - to indicate whether they are using the BIMCO anti-corruption clause, or are aware of it

being used - to indicate whether there are any signs of demands for gifts or payments reducing.

LIDIC/17-05

Brexit – Update on UK Chamber actions

Present position 1. Since the UK voted to leave the European Union (EU) in June last year, the UK Chamber

has been seeking the advice of members on matters for which it should lobby, in preparation for the development of new relationships with the EU and with other countries. The chamber has also engaged extensively with Government and met various Ministers and senior officials, both in Westminster and in Scotland. It is also reaching out to a number of other industry bodies to share ideas and potentially to bring about greater leverage as well as responding to a number of consultations, both government and industry-led.

2. Within the chamber, the Ferry and Cruise Panel and the Employment Committee have been

the most vocal in expressing their concerns about what Brexit is likely to mean for their businesses. Operators of ferries, be they passenger or cargo vessels, wish to preserve the benefits and ease of existing trade between the UK and its European neighbours – with continuing unimpeded access to the European single market and membership of the EU customs union. The UK’s ferry ports have been extensively re-modelled since the completion of the single market at the end of 1992 and no longer possess the necessary infrastructure for customs controls on goods moving between the UK and the continent. Were non-tariff barriers to be re-imposed, it would be hugely disruptive and cause long delays to both freight and passengers.

3. For its part the Employment Committee has called for free movement of workers to be

retained, in order to ensure that companies remain able to access the crew members they need with as few impediments as possible. Allied to this is a call for the continuation of current arrangements under which the standards of competency underpinning officers’ Certificates of Competency (CoCs) are mutually recognised throughout the EU. These arrangements facilitate the employment of UK officers on ships flying the flags of other Member States, as well as allowing officers qualified in other Member States to be employed on UK ships. This is particularly of benefit to companies operating mixed-flag fleets.

4. Members have also highlighted opportunities that might open up as a result of the UK’s

departure from the EU. These might include:

Greater flexibility in the UK’s Tonnage Tax

Greater support for training and employment of UK seafarers, without the need to comply with EU state aid guidelines

A more independent voice for the UK in the International Maritime Organisation (IMO)

The re-introduction of “duty-free” goods for passengers 5. The chamber’s central position statement it its Blueprint for growth, which was published late

last year. 6. On 24 January the chamber hosted an event at which Lord Lamont, former Conservative

Chancellor of the Exchequer and noted treaty negotiation expert, spoke. This was very well attended and the debate lively; timing was also perfect as that morning the Supreme Court

had given its ruling that the Government could not give notice to the EU of its intention to leave without an Act of Parliament.

7. The chamber has also responded to a Treasury Select Committee enquiry into transitional

arrangements, in which it has again called for any changes to be gradual, in order to give shipping companies and ports time to adjust. A meeting between the chamber secretariat and CEOs of UK ferry companies will take place on 7 February, whilst a meeting is also being arranged with the Channel Group which is an independent trade and investment think tank that has produced thought leadership papers on a variety of topics, including trade tariffs and UK infrastructure investment.

8. Meanwhile internal discussions continue regarding the formation of a UK Chamber Brexit

Forum that will allow interested members to become more closely involved in future strategy in terms of shaping the outcome to best suit the needs of the shipping industry. Specifically, it will promote two way communications between members and the chamber and between members themselves on this important issue. It is intended that the first meeting should be held in early March at the latest.

For consideration 9. Members’ views will be invited on the chamber’s actions so far and whether there are

other matters for which it should call, particularly in the light of probable debates in Parliament.

LIDIC/17-06

Insurance issues 6.1. Salvage - Developments in Lloyd’s Salvage Group and Lloyd’s Open Form Background 1. Lloyd’s Open Form (LOF) provides a regime for determining the amount of remuneration to

be awarded to salvors for their services in saving property at sea and minimising or preventing damage to the environment. It reflects the assessment of remuneration requirements under the 1989 Salvage Convention (with changes reflected in the SCOPIC clause). The form is administered by Lloyd's Salvage Arbitration Branch, which provides a framework within which the LOF arbitration process can operate.

2. SCOPIC is the Special Compensation P&I Clause which is present in LOFs. It is a method of

assessing special compensation which overrides the default method under Article 14 of the 1989 Salvage Convention; essentially this means that it is no longer necessary for salvors to prove that there was an environmental threat or to overcome any geographical restriction defence, and remuneration for salvors is based on pre-agreed tariff rates.

3. The Lloyd’s Salvage Group is made up of relevant stakeholders including representatives

from the International Salvage Union, the International Group of P&I Clubs (IG), shipowners and property interests.

Present position 4. Meetings of the SCOPIC Committee and the Lloyd’s Salvage Group (LSG) were held on 4

October 2016. The International Chamber of Shipping (ICS) was represented, and the SCOPIC Committee discussed the on-going review of the SCOPIC agreement and the use of hybrid Article 13 agreements appended to the LOF. On the SCOPIC agreement, it was agreed that the SCOPIC termination clause and the wording of the salvage security in form ISU 5 would be reviewed by a small subgroup of the SCOPIC Committee.

5. On hybrid Article 13 agreements, the IG raised a concern arising from a case involving LOF

SCOPIC where an ad-hoc agreement had replaced Article 13 of the LOF with fixed costs based on the SCOPIC rates plus a pre-agreed uplift. The agreement also provided for an invocation of SCOPIC which, when applicable, was deemed to have taken place on the first day of the services. The IG had drawn attention in the past to similar arrangements and the Clubs had been assured that where LOF Article 13 is fixed by agreement then the provisions of the SCOPIC clause can no longer apply. This was in order to protect the Clubs from the consequences of reduced Article 13 awards resulting in potentially increased exposure under the SCOPIC clause.

6. The IG informed the meeting that it had advised its shipowner members that club cover

would not respond to this hybrid SCOPIC arrangement. The IG asked that both the SCOPIC Committee and the LSG actively discourage the use of such agreements. It is notable that the IG raised this issue initially at the SCOPIC Committee and LSG meetings in March 2016 and emphasised the concerns again at the meetings in October after receiving reports of

further incidents of such hybrid Article 13 agreements. It was agreed that the use of such agreements is to be discouraged. The issue could also be addressed in the revised wording of the ISU 5 security form.

7. The LSG also established a subgroup to review proposals for revision of some aspects of

the LOF and the supplementary clauses supporting the LOF (largely concerning LOF arbitration procedures). The next meetings of the SCOPIC Committee and the LSG are scheduled for 20 March 2017.

6.2. The International Oil Pollution Compensation (IOPC) Funds – October 2016 session Background 8. The International Oil Pollution Compensation Funds (IOPC Funds) provide financial

compensation for oil pollution damage that occurs in Member States, resulting from spills of persistent oil from tankers. It administers the compensation which is payable as a result of the Civil Liability Convention (CLC), which governs the liability of shipowners for oil pollution damage. The last session of the IOPC Funds was held in October 2016.

9. In January 2016, the Spanish Supreme Court overturned the judgment of the trial court in

the Prestige, and held that the master was guilty of the crime of reckless damage to the environment and that as a result the master and shipowner were not entitled to limit their liability under the CLC. The shipowner’s insurer was also held directly liable above the CLC limit under other Spanish domestic legislation for up to US$1 billion.

10. On the definition of “ship” for the purposes of the CLC, in October 2015, the

recommendations of the 7th Intersessional Working Group on the definition of ‘ship’ and the application of the conventions to floating, storage and offloading units (FSOs) and floating storage units (FSUs) were accepted. A non-exhaustive, indicative list illustrating examples of vessels which clearly fall within or outside the definition of “ship” under Article I(1) of the 1992 CLC was agreed. Where it was not clear whether a vessel fell within the definition of ‘ship’, the 1992 Fund Administrative Council would use the concept of the ‘maritime transport chain’, as an interpretive tool, and agreed that those situations should be decided on a case-by-case basis. To reflect the Administrative Council’s decision, the IOPC Fund Secretariat produced a publication entitled “Guidance for Member States: Consideration of the definition of ‘ship’”, which was adopted at the April 2016 session and is available on the Funds’ website.

11. Meanwhile, the IOPC Funds Secretariat is developing draft guidelines to assist claimants

with the submission of claims for environmental damage. 12. Negotiations on the funding of interim payments between the P&I Clubs and the IOPC

Funds had been on-going for some time. The purpose of interim payments is to make compensation available to the victims of pollution damage as promptly as possible, whilst ensuring that the total amount paid is ultimately borne by the Club/shipowner and the IOPC Funds in the proportions envisaged by the 1992 Civil Liability Convention (1992 CLC), 1992 Fund Convention and the Supplementary Fund Protocol, if applicable.

Present position 13. The controversial judgment of the Spanish Supreme Court in the Prestige case was the

subject of further discussion at the meetings of the IOPC Funds in October 2016. The IG submitted a paper to the October session in response to a statement made by the Spanish delegation at the previous session. The paper also commented on the liability of the master. Both the Spanish and French delegations made lengthy interventions disagreeing with the

position taken in the IG paper and repeating the criticism (made by Spain at the previous session) of the London P&I Club’s decision not to be represented in the Spanish courts. Both government delegations also stated that the substance of decisions made by competent national courts should not be further discussed at the IOPC Funds.

14. Several other governments, including Japan, Denmark, Canada, Greece and Norway made

measured interventions which, while declining to criticise the legal system in a particular country or decisions of national courts, indicated that they shared some of the concerns expressed in the IG paper. These delegations also expressed concern regarding the proper implementation of the 1992 CLC and the future consequences of the judgment for the shipping and insurance industries. The delegation of Italy, agreed with Spain and France that the governing bodies should not reproduce a debate dealt with in the appropriate judicial forum, but suggested that the IOPC Fund could perhaps become more involved in cases in national courts, not only to defend the Fund’s interests, but also to propagate knowledge on the working of the Conventions.

15. It is understood that there could be some government support for the submission of a paper

to the April 2017 session of the IOPC Funds on the wider implications of the Spanish Supreme Court judgement, and other national court decisions that are inconsistent with the Conventions. Further consideration is also being given to raising the issue with the IMO.

16. The draft guidelines prepared by the IOPC Fund Secretariat to assist claimants with the

submission of claims for environmental damage were further discussed at the October 2016 session of the IOPC Funds governing bodies. The latest version received general support and the Fund Secretariat was instructed to continue to develop the text with the aim of presenting the document for final approval at the April 2017 session.

17. Separately, the 1992 Fund Assembly considered a proposal from the observer delegation

CPMR (which represents European coastal regions) for the development of a supplementary voluntary fund for Environmental Damage claims. Governments rejected the proposal on the grounds that such claims are covered by the international regime and the creation of an additional fund would be a complicated and unnecessary duplication. As several governments also commented that the proposal fell outside of the mandate of the IOPC Funds, which is to administer the 1992 and Supplementary Funds, it is possible that CPMR will submit its proposal to the next session of the IMO Legal Committee (LEG 104, April 2017).

18. On the definition of “ship” for the purposes of the CLC, the International Group of P&I

Clubs (IG) has reviewed the issuance of 1992 CLC blue cards to entered ships to ensure that they are only issued to ships that fall within the Fund’s policy on the definition of ‘ship’. The IG has recently reminded Group clubs that Floating Production, Storage and Offloading Units (FPSOs) involved in the production or processing of oil do not require CLC blue cards / state certificates.

19. The Agreement on standard terms relating to interim payments was approved by the

IOPC Funds governing bodies at the October 2016 session. This brought to a conclusion the long-running and difficult discussions between the IOPC Funds and the International Group of P&I Clubs (IG) regarding interim payments. It should be noted that the Agreement includes an appendix containing a template of terms and conditions which would apply on a case-by-case basis and have to be approved by the 1992 Fund Executive Committee. The IG has made it clear that IG Clubs would be unlikely to sign any agreements on interim payments in future cases in circumstances where the Executive Committee decided not to include the template jurisdiction provision waiving the Funds’ immunity from suit.

6.3 Review of STOPIA and TOPIA

Background 20. The shipowner agreements STOPIA and TOPIA were reviewed last year in accordance with

the review clauses in the two agreements. The purpose of the review was to determine the approximate proportions in which the overall costs of pollution damage claims in the past 10 years had been borne by the shipping industry and the oil industry and whether any measures should be taken to maintain an approximately equal apportionment, as intended in the agreements.

21. In September 2016, the IG had reported the outcome of the review of the claims data for

1992 CLC and Fund cases for the ten year period from 20.02.06 to 20.02.16 (the “review period”). The percentage proportions paid respectively by shipowners/Clubs and oil receivers/the Fund were 86% and 14%, respectively. However, it was noted that it was unlikely that this claims data would affect the roughly equal sharing of claims paid by shipowners/Clubs and oil receivers/the Fund since the Conventions first entered into force. It had been concluded that nothing should be done to adjust the financial burden at that time. At the ICS Maritime Law Committee meeting in September 2016, it was agreed that it should be made clear at the discussion in the 1992 Fund Assembly that this decision should not set a precedent or prejudice the outcome of future reviews.

Present position 22. At the October 2016 session of the IOPC Funds governing bodies, the 1992 Fund Assembly

took note of the papers submitted by the IG and the Director reporting on the review of STOPIA and TOPIA. In addition, the IG amendments to the two agreements were endorsed by the Funds Director and noted by the Assembly. The amendments provide for subsequent reviews to be conducted at 10 year intervals (not 5 year intervals as presently provided); that claims data from all review periods will be taken into account in future reviews (not only claims data from the particular review period); and the inclusion of a sanction default protection clause (to protect IG Clubs in the event that future sanctions legislation prevents them from being able to reimburse the 1992 Fund/Supplementary Fund).

6.3 Delegation of authority to issue insurance certificates under CLC and HNSC Background 24. At the last session of the IMO Legal Committee in June 2016, a correspondence group (CG)

was established to prepare an Assembly Resolution to formally recognise that Contracting States to the CLC and the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea (HNSC) were allowed to delegate their authority to issue insurance certificates to a third party. This work was instigated by France, which had noted at a previous session that the Bunkers, Athens, and Wreck Removal Conventions contained explicit provisions to this effect whereas CLC and HNSC did not, giving rise to uncertainty therefore as to whether certificates issued under a State Party’s delegated authority was permissible.

Present position 25. The IMO Legal Committee agreed broadly that it was possible for a State Party to delegate

this authority to a recognised/authorised third party even without the express provision but that any uncertainty or ambiguity on the matter should be clarified through an Assembly Resolution. The CG is preparing the draft Assembly Resolution for consideration by the Legal Committee at its next session (LEG 104, April 2017). The International Chamber of Shipping (ICS) is participating in the work, and follows the ICS intervention at LEG 103 to

ensure that States’ delegation of authority to issue insurance certificates is clear and that all directly concerned and affected parties are informed, especially Port State Control authorities to avoid any confusion that might lead to disruption to ships and their commercial operations.

For consideration 26. Members will be invited to - comment on the developments at Lloyd’s Savage Group and the Lloyd’s Open Form; - confirm support for ICS to work with other governments on the possible submission

of a paper to the April 2017 session of the IOPC Funds highlighting the precedent that could be set by the Spanish Supreme Court in the Prestige case;

- note that the draft guidelines prepared by the IOPC Fund Secretariat to assist claimants with the submission of claims for environmental damage are likely to be approved in the April 2017 session;

- support opposition to the CPMR’s proposal at the next session of the IMO Legal Committee (LEG 104, April 2017) on development of a supplementary voluntary fund for Environmental Damage claims;

- note the developments and outcome of - the definition of “ship” for the purposes of the CLC - agreement on standard terms relating to interim payments - the review of STOPIA and TOPIA

- support the ICS in ensuring that the States’ delegation of authority to issue insurance certificates is made clear for the liability Conventions which do not have an express provision for delegation of authority.

LIDIC/17-07

France – Environmental Damage Law

Background 1. At the last meeting, it was reported that a draft bill to introduce liability for environmental

damage into the French Civil Code, following the French Supreme Court’s decision in the Erika case, had been adopted by the French Parliament (on 8 August). The French shipowners’ association Armateurs de France (AdF), has provided an English translation of the new law, which is attached at Appendix A.

2. The new law is broadly framed; “Any person liable for an environmental damage must

compensate (repair) it.” It does not provide for any exemption for the shipping industry or for any limitation of liability. Nor does it give a clear indication of what will be considered to be environmental damage for the purposes of the new law.

Present position 3. Last December, AdF arranged a conference to discuss with French Government officials the

implications of the new law for the shipping industry given that liability and compensation for environmental damage from shipping incidents is covered by the international maritime conventions to which France has subscribed.

4. At the conference, AdF, the International Chamber of Shipping (ICS) and the International

Group of P&I Clubs (IG) highlighted the benefits of the international regime for all interests and the importance of maintaining its primacy. French MP, Mr Arnaud Leroy, explained that the new law was intended to supplement both the EU Environmental Liability Directive and the international regime but that the international maritime conventions would take precedence over the new law. However, he noted that the new law would not be amended to make this clear and there would not be an implementing Decree.

5. In response to the industry’s plea for certainty, Mr Leroy indicated that he would be prepared

to write to the Ministry of Justice to request confirmation that the international maritime conventions would prevail in the event of a shipping incident. The ICS Secretariat is in the process of following this up with Mr Leroy in consultation with AdF.

6. Nevertheless, as pointed out by other speakers, the definition of pure environmental damage

in the legislation appears to be quite wide, covering all non-negligible damage to the environment. The legal implications of this will need to be tested in the courts and there are concerns that the criminal courts may interpret the law quite widely. Another concern is that the law does not make clear whether liability is channelled to the shipowner, as with the international conventions. This could mean that a ship’s Master, as well as its charterer, could be held liable and might need to obtain insurance. Insurers for persons other than the shipowner may be difficult to identify (P&I clubs would not cover them) and they may seek to rely on policy defences in order to avoid paying.

For consideration 7. Members will be invited to comment on the points raised in paragraph 6.

Appendix A LIDIC/17-07

Article 4 de la loi pour la biodiversité https://www.legifrance.gouv.fr/eli/loi/2016/8/8/2016-1087/jo/texte The compensating of environmental damage and consequential losses Art. 1246. – Any person liable for an environmental damage must compensate (repair) it. Art. 1247. – Is deemed open to compensation under the present section any damage or loss to the

environment consisting in a significant damage to the elements composing an ecosystem, and/or to the purposes this ecosystem serves and/or to the collective benefits that are being drawn by men from this ecosystem.

Art. 1248. – Is entitled to seek compensation for environmental damage or consequential loss

before a court any party with an interest and capacity in taking such legal action, such as the State, the French Agency for Biodiversity, territorial authorities, public institutions, officially sanctioned non-profit environmental associations, and unsanctioned non-profit associations which purpose is to protect nature and the environment and having been founded at least five years prior to the date of the beginning of the proceedings.

Art. 1249. – Priority shall be given to compensation of environmental damage in kind. Should a

compensation in kind be rendered impossible de jure or de facto, or should the measures taken to repair a damage appear insufficient, the judge will be entitled to condemn the liable party to pay a plaintiff damages to be attributed to the repair of the damage. Should the plaintiff be unable to repair the damage himself, the judge may choose alternatively to allocate the said damages to the State. The evaluation made of the loss shall take into account any measure already taken in order to repair the damage to the environment, especially those put in place within the frame set by Title VI of Book I of the French Environmental Code.

Art. 1250. – In case of a penalty, the Judge will decide when such shall be liquidated in favor of the

plaintiff, who will then use it for the repair of the damage to the environment. Should the plaintiff be unable to repair the damage himself, the judge may choose alternatively to allocate the penalty to the Sate to serve the same purpose. The liquidation of the penalty is left to the sole discretion of the Judge.

Art. 1251. – Any expense incurred in the prevention of an imminent damage, in avoiding its

aggravation or to mitigate its impact is deemed eligible for compensation. Art. 1252. – Aside from the compensation of the environmental damage / losses, the Court may,

upon demand from one of the entitled parties listed in above art. 1248, order reasonable measures to prevent or stop the damage.

Art. 2226-1. – The applicable time bar for legal action against a party liable for environmental

damage such as the one described under Chapter III of Section II of Tittle III of the present book shall be of 10 (ten) years from the date the party seeking compensation became aware of the fact that or should have known that an environmental damage was happening. (…)

Art. 2226-2. – (…) The above measures shall apply to the compensation of all losses which causal

event took place prior to 01.10.2016. They however will not apply to losses having given way to legal actions before a court initiated prior to that date.

The above provisions shall apply in Wallis and Futuna as well as French austral and Antarctic territories.

LIDIC/17-08

Data protection

Background 1. Regulation (EU) 2016/679 of the European Parliament and of the Council on the protection

of natural persons with regard to the processing of personal data and on the free movement of such data, otherwise known as the General Data Protection Regulation (GDPR), was adopted on 27 April 2016. It entered into force on 24 May 2016 and will become directly applicable in all Member States (including the UK) on 25 May 2018 after a two year transition period. It replaces and repeals Directive 95/46/EC on the same subject.

Present position 2. While the general data protection concepts are largely unchanged, the extent of the

Supervisory Authority powers will be changed significantly. In respect of penalties for breaches, the GDPR provides new and increased caps on the level of fines that Supervisory Authorities are permitted to impose against both data controllers and also data processors. This will be the first time that the ability to impose fines, as well as the levels of those fines, have been harmonised across Member States. In many jurisdictions, this will represent a significant increase from the fines currently available.

3. It introduces an antitrust-type sanction regime with fines of up to 4% of an undertaking’s

annual worldwide turnover or €20m, whichever is the greater for breaches of many of the provisions of the Regulation, including failure to comply with the six general principles or breach in respect of lawful processing of personal data, consent, data subject rights, transfers outside the EEA and compliance with enforcement orders by the Supervisory Authority or the Court. A limited number of breaches fall into a lower tier and so are subject to fines of up to 2% of annual worldwide turnover or €10m, whichever is the greater – including failure to notify a personal data breach or put in place an adequate contract with a processor fall into this lower tier.

4. When deciding whether to impose a fine and the level of the fine, supervisory authorities are

required to consider a wide range of factors, including:

the gravity of the breach

whether the breach was intentional or negligent

any steps taken to mitigate the breach

the financial benefit derived from the breach and

the degree of co-operation with the supervisory authority. 5. Moreover, supervisory authorities will have a wide range of other powers and sanctions at

their disposal. These include investigative powers, such as the ability to demand information from controllers and processors and to carry out audits. They will also have corrective powers enabling them to issue warning or reprimands, to enforce an individual’s rights and also to issue a temporary permanent ban on processing.

6. Other features of the GDPR include:

Direct liability of data processors: For the first time the GDPR places specific obligations on data processors with the consequence that Supervisory Authorities will be able to take enforcement action and issue fines, where a processor does not abide by these new statutory obligations.

Extended territorial scope: The GDPR significantly extends the territorial reach of EU data protection law to a global jurisdiction. This means that, for example, organisations that are neither “established” in the EEA nor situating equipment there may nevertheless be caught if they monitor EU subjects/process data of EU citizens, or target their offering of goods or services towards them. Whilst a business based in the EEA and acting as a data controller will already have obligations under Directive 95/46/EC and relevant local laws, the GDPR potentially greatly increases those risks. The potential fines that could be incurred across Europe will be tied to worldwide turnover, whilst individuals will have greater scope to make claims

Individual claims: Data processors can be held liable for breach of the GDPR directly, where its provisions are applicable to them or they have acted contrary to the controller’s instructions. Data controllers and processors can each be held liable individually or jointly for the entire damage caused and the individual may have the option of choosing the ‘deeper pocket’. Both controllers and processors may be exempt from liability if they can prove that they were in no way responsible for the processing that caused the ‘material or immaterial’ breach/damage. There is also a recovery mechanism built into the GDPR to facilitate recover by an “innocent” party from the party responsible for the breach that triggered the claim.

Burden of proof and information: Businesses must introduce effective data security guidelines and train their employees to comply with these. An effective data security management system, including risk assessment, structures, protocols, monitoring and change management, will become a necessity. Moreover, employers will have to inform employees about their data processing in a more detailed and time-sensitive manner. A breach of such will result in considerable fines.

Data Security Impact Assessment: This is another new obligation. If a business introduces new technology, software or data processing systems, it needs to assess and evaluate any arising risks for individuals affected by the changes. This shall prevent any violation of fundamental rights due to conflicting interests and roles of all parties involved. Thus a company has to carry out and document a detailed preliminary review and potentially coordinate the assessment with the data protection authority, if data processing is highly likely to result in an infringement of the personal rights and freedom of affected persons.

7. The Regulation will impact how organisations collect and process personal information and

therefore, some businesses may need to make substantial changes to their current practices, protocols and general culture in relation to privacy which may take a long time to implement.

8. If a business is either a data processor based in the EEA or is a controller or processor

based outside the EEA, it currently has no obligations under the Directive (nor under many local EU data protection laws), but, following implementation of the GDPR, will have to comply with a whole set of privacy obligations and face the very real possibility of the sanctions or claims. Therefore, service providers of all fields and sectors who currently are protected from the majority of statutory risk by virtue of simply being a data processor or being established outside the EEA, will need to ensure their practices for all of their clients are compliant with the relevant GDPR obligations.

9. The chamber has suggested to the European Community Shipowners' Associations (ECSA)

that it produce some guidance for shipping companies on the GDPR, its likely impact on the

shipping sector and what new factors will need to be taken into account. ECSA, for its part, has requested information on how companies are preparing for the new Regulation.

For consideration 10. Members’ responses to the request set out in paragraph 9 above will be invited.

LIDIC/17-09

Cyber security on ships

Background 1. The key industry associations have been seeking to raise awareness of the threats to the

shipping industry arising from cyber-attacks. The industry has become increasingly reliant on internet-based links to shore-side providers for its systems for cargo management, digital navigation, machinery and propulsion and communication. A cyber-attack would have at best disruptive and at worst highly dangerous consequences for ship operations.

2. Measures to protect against cyber-attack should already be included in a company Safety

Management System, drawn up in accordance with the International Management Code for the Safe Operation of Ships and for Pollution Prevention (ISM Code). The subject of mitigation of the cyber threat has been taken up as a topic for action by IMO, with submissions by Canada and the USA concerning the threat of marine cyber-attack. Work has also been initiated by the European Commission.

Present position 3. Early last year the International Chamber of Shipping (ICS), BIMCO, the Cruise Lines'

International Association (CLIA), INTERTANKO and INTERCARGO published Guidelines on Cyber Security onboard ships, with the aim of demonstrating that the shipping industry is being proactive in response to cyber concerns and avoid potentially onerous regulation. The guidelines cover the topics of understanding the cyber threat, assessing and reducing risks and developing contingency plans. They can be downloaded freely from the websites of the sponsoring organisations.

4. The industry Guidelines were submitted to the IMO Facilitation Committee meeting in April

last year and the Maritime Safety Committee meeting (MSC 96) in May. The outcome of MSC 96 was the development, in one session, of Interim guidelines on maritime cyber risk management (MSC.1/Circ.1526). These Guidelines are based on the same approach as the industry Guidelines and therefore support the industry approach. Consequently shipping companies that have embarked on cyber risk management work based on the industry Guidelines will not have to review or change their approach.

5. The Guidelines should assist in further allaying underwriters’ concerns about cyber-risk

exposure. It will be recalled that studies conducted by both the London marine insurance market and the International Group of P&I Clubs considered that the risk of loss or damage caused to or by a ship as a result of deliberate cyber-attack was currently very low and there was no identified systemic risk. The International Union of Marine Insurance (IUMI) was an active participant in the development of the Guidelines and presentations were made on the subject at the IUMI conference in September when it was generally agreed that application of the Guidelines would assist in risk assessment and mitigation.

6. Meanwhile, it has become apparent that nearly 90% of Hull and Machinery insurance

contracts insured in the London market now contained the clause, CL380 – which excludes the insurer’s liability for any claims in respect of damage resulting from a cyber-attack. This matter has been raised by ICS with the Chairman of the Lloyd’s of London Joint Hull

Committee (JHC) in November last year. The JHC commissioned an independent report into the matter in order to satisfy the Lloyd’s authorities that they had considered their exposure to cyber risks in detail. The report had concluded that the risk of loss or damage caused to or by a ship as a result of deliberate cyber-crime was currently very low and recommended some cyber risk assessment guidance for underwriters to share with shipowners to help manage the risk.

7. The JHC Chairman considered it appropriate for the London market to move cover for

deliberate attack from Marine to War Risks policies and had clarified that cover should be readily available under the insured’s War Risk insurance on request. In addition, losses that were a result of more routine computer malfunctions were confirmed not to be excluded and would be covered as a matter of course by Marine Hull and Machinery insurance.

8. ICS recommends that shipowners resist the inclusion of any clause excluding liability for

cyber risks in their insurance contracts wherever possible. It would be helpful if members could provide information on any recent discussions that they may have had with insurers regarding exclusions for cyber risks.

9. One ICS member association has requested legal advice whether cyber extortion risk –

which it considers a more serious threat than cyber-attack – could be covered as a sue and labour expense. The “intent to cause harm” was a very specific exclusion term – the attack had to be aimed at a particular ship or company for it to apply. If a ship were to suffer collateral damage as the result of a cyber-attack on another ship or company, the shipowner’s policy should still pay.

10. Some specialist cyber-risks insurance products have appeared on the market but that the

premiums associated appear too large for any company to consider buying them. 11. Meanwhile, the International Group of P&I Clubs (IG) has undertaken a non-technical review

of cyber risks and concluded that there was a low risk of these impacting on Maritime operations and navigation (in contrast to the risks to shore side installations and facilities). Neither club rules nor the IG pooling arrangements contain cyber risks exclusions, although liabilities might be excluded by the application of other exclusions such as war or terrorism. There is however a cyber-exclusion (CL380) contained in the annually purchased IG excess war P&I cover which provides US$500 million of cover in excess of the shipowners underlying primary war risks P&I cover.

Comment 12. In spite of the industry’s recommendation that owners should not accept the exclusion of

liability for cyber risks in their insurance contracts, it appears that many contracts still contain such exclusions.

13. In addition, there appears to be a difficulty in establishing the boundaries of what constitutes

a cyber-attack and a more operational cyber risk such as computer failure – the latter being covered under Hull policies. There are some grey areas and confusion as to what is covered under which forms of insurance. ICS has suggested producing a document clarifying these questions, although this would require contributions from national shipowner associations, such as the UK Chamber. It would also consider policies in markets other than London.

For consideration 14. Members will be invited

- to comment on the industry guidelines - to report on any discussions they may have had with insurers concerning cyber-

attack exclusions - to comment on the suggestion in paragraph 13.

LIDIC/17-10

Maritime transport of counterfeit goods

Present position 1. The International Chamber of Commerce (ICC) has issued a declaration of intent aimed at

tackling the maritime shipping of counterfeit goods. The declaration was signed in November 2016 by numerous shipping companies, transport service providers and brand owners, including Maersk, CMA-CGM and Mediterranean Shipping Company.

2. The UK Chamber understands that the declaration was prepared in response to concerns

from brand owners that transport operators were being exploited by criminal networks to transport counterfeit goods, as summarised by a report from Business Action to Stop Counterfeiting and Piracy (BASCAP) (established by the ICC) entitled "Role and Responsibilities of Intermediaries: Fighting Counterfeiting and Piracy in the Supply Chain", which was published in 2015.

3. The signatories to the declaration acknowledge the destructive impact of the international

trade in counterfeiting on economic growth, employment, security and the health and safety of consumers. They have pledged to not knowingly facilitate or tolerate the carriage of counterfeit products. They have also indicated willingness to collaborate to develop a detailed series of voluntary measures or best practices to promote the Declaration across the maritime transport and shipping sector and to encourage all others in the sector to sign the declaration.

4. The declaration also establishes principles of zero-tolerance regarding counterfeiting, supply

chain controls, risk profiling, raising awareness and conducting training, sharing information and co-operation with law enforcement authorities. The declaration can be accessed here.

For consideration 5. Affected members will be invited to comment.

LIDIC/17-11

Secretary’s Report 11.1 Fulfilment House Due Diligence Scheme 1. In March 2016, HM Revenue & Customs (HMRC) published a proposal to the effect that

carriers should be forbidden to deliver goods to a “fulfilment house” unless that business was listed on a public register of HMRC-approved fulfilment houses. The Government had announced in the 2016 Budget its intention to introduce a new online scheme for UK fulfilment houses from 2018, setting out standards of due diligence and record-keeping and introducing penalties for non-compliance.

2. The UK Chamber responded to the consultation. It objected on the grounds that a carrier

would have no way of knowing whether any particular delivery address was a fulfilment house at all (and thus whether it should be on the register or not) and that, in any event, a carrier could not disregard its contractual obligations to deliver goods to particular premises once HMRC had cleared them to free circulation.

3. HMRC published its response last month. Pleasingly, HMRC has expressly abandoned this

proposal, stating that it agrees with respondents (the chamber) that this aspect of the proposal would lead to practical difficulties, in particular how the sector would determine whether a consignment was destined for – of being collected from – a fulfilment house within the scope of the scheme. In addition, it recognises that, at this stage, it would not be practical to expect delivery businesses to check an online register for each consignment address.

4. HMRC also accepts that the proposal would present difficulties in establishing a policy

around what should happen to the goods if a business refuses to handle/deliver them. What it has cited as the most compelling argument – that, once goods have been released to free circulation, a carrier does not have any right to detain them or withhold them from their owner, provided that all charges under the contract of carriage have been paid – had been part of the chamber’s submission. Members will be invited to note the report.

11.2 Oceans Governance i Developments on an UNCLOS Implementing Agreement on conservation of marine

life in areas beyond national jurisdiction 1. The United Nations has started high level negotiations on a new UNCLOS implementing

agreement concerning conservation of biodiversity in areas beyond national jurisdiction (BBNJ). While the shipping industry is not the main focus of this initiative, as it is already well regulated, the work is likely to lead to the UN establishing Marine Protected Areas (MPAs) on the high seas, which could affect shipping. ICS is therefore monitoring developments with the aim of ensuring that IMO remains the primary regulator for international shipping.

2. The International Chamber of Shipping attended part of the first two sessions of the UN Preparatory Committee that took place in April and August 2016 and participated in side events organised by World Ocean Council (WOC) and the International Maritime Organization (IMO), respectively. The negotiations are still at an early stage and it is as yet unclear exactly where UN Member States wish to take the concept of High Seas MPAs. For the moment it seems that most of the key governments appreciate that new measures that could affect shipping should not be taken forward without the full involvement of IMO and its Member States. However, it is possible that once the new instrument is agreed ocean issues (such as the designation of High Seas MPAs, for example) could be determined by regular Conferences of Parties of the new agreement, administered by the UN Division of Ocean Affairs. It is hoped that the detail and appropriateness of measures that might apply in such MPAs would still be determined by the relevant specialist agency (i.e. IMO) but at this point there is no guarantee and it will be important to monitor developments as they occur.

3. The next UN Preparatory Committee meeting is expected to take place in the coming months. A Diplomatic Conference is scheduled to adopt the final text of an implementing agreement during 2018.

ii EC Public Consultation on International Ocean Governance 1. The subject of international ocean governance is under consideration both at global level by

the United Nations and by the European Commission. In December last year, the Commission and the EU’s High Representative for Foreign Affairs and Security Policy issued a joint communication entitled "International ocean governance: an agenda for the future of our oceans." This followed a public consultation and sets out EU goals and actions on a number of ocean-related areas. It is described by the Commission as a key part of the EU’s response to the implementation of the UN 2030 Agenda for Sustainable Development, in particular Sustainable Development Goal 14 "to conserve and sustainably use the oceans, seas and marine resources." Many of the actions and objectives are high-level and for governments or directed at other ocean sectors such as fishing.

2. Other proposed actions may eventually have a direct impact on shipowners. These include

commitments to:

reduce and eliminate maritime security threats

revise the Port Reception Facilities Directive to tackle plastics

implement the COP21 Agreement and mitigate climate change

The Commission expresses its commitment to supporting the international process for the ratification and implementation of the UNCLOS implementing agreement concerning conservation of Biodiversity in areas Beyond National Jurisdiction (BBNJ). The position taken by the EU governments in those negotiations may also be affected by the fact that in the Communication the Commission has committed to contributing to the expansion of Marine Protected Areas (MPAs) worldwide, including MPAs on the high seas. Also, the Commission has committed to technical cooperation with IMO aimed at bolstering implementation and enforcement of IMO instruments, as well as to promoting the ratification and effective implementation of other key global ocean governance instruments.

4. The Commission has indicated that it will set up an EU stakeholder forum dedicated to oceans and seas worldwide which is intended to promote a regular dialogue. A first meeting of this forum will be held in 2017. Members will be invited to note the report.

11.3 Torrey Canyon Disaster – IMO 50th anniversary exhibition 1. IMO is hosting an exhibition to mark 50 years of co-operation between governments and the

shipping industry since the grounding of the tanker Torrey Canyon. On 18 March 1967, the 120,000 ton capacity supertanker ran aground on rocks between Land’s End and the Isles of Scilly. Between 94-164million litres of crude oil were discharged into the sea, polluting hundreds of miles of coastline in the UK, the Channel Islands, France and Spain.

2. The grounding focused the world's attention on the risks and environmental impact of major

marine oil spills. Although this was by no means the first oil spill from a ship, it was the largest at the time. The Torrey Canyon was one of a new breed of supertankers – and the first to be involved in a major oil spill. The incident revealed how dangerous such cargoes could be and how little was known at the time about how to prevent such disasters from happening and how to respond to them when they did.

3. Galvanised by this incident, during the years that followed, IMO introduced a series of

important measures designed to prevent tanker accidents and to minimize their consequences. It tackled the environmental threat caused by routine operations such as the cleaning of oil cargo tanks and the disposal of engine room wastes – in tonnage terms a bigger menace than accidental pollution. The incident was also the catalyst for work on liability and compensation, prompting a number of the world's tanker owners to establish the International Tanker Owners' Pollution Federation (ITOPF) to administer a voluntary compensation scheme.

4. This co-operation between governments and ship operators has achieved a dramatic and

sustained reduction in major oil spills from ships, effective systems for oil spill preparedness and response and a comprehensive mechanism for providing compensation to victims. There is also a robust mechanism in place to respond effectively to oil spills and deal with their financial consequences.

5. The exhibition, which will run from 16 January to 7 July 2017, tells the story of the progress

made in the last fifty years. Members will be invited to note the report.

11.4 Documentary Issues 1. The BIMCO Documentary Committee met in Copenhagen on Thursday 17 November 2016.

The Documentary Committee approved the following documents for publication:

Hydrocharter voyage charter party – adopted subject to the deletion of clause 35 on arrests, as well as some few minor amendments.

FONASBA Agency Appointment agreement – adopted with minor changes suggested by FONASBA (referring to their newly launched certification of agents and removing the reference to “and any subsequent changes” to the 2016 BIMCO dispute resolution clause.

Meanwhile the Standard ship financing term sheet was approved subject to a review of proposals submitted by the Greek delegation, reducing the significance of the jurisdiction and law clause and making it clearer that it is not legally binding.The term sheet may be adopted using BIMCO’s “fast track” process.

The proposed redelivery clause was not adopted. It will be re-submitted for adoption at the next meeting, which will take place in June 2017.

2. Discussions took place on the following documents and clauses:

Oil Spill Response Contracts

GENCON 1994

Terminal Conditions of Use

WORLDFOOD 99 Voyage Charter

FONASBA General Agency Agreement

Escrow agreements

Offshore structure dismantling contract

BARECON 2001

SUPPLYTIME 2005

Standard term sheet for syndicated loans 3. There was also a discussion on the Standard Bunker clause. The Committee felt that

BIMCO should issue guidance rather than redraft the clause. The committee felt that it would be difficult to find a different contractual method to overcome the difficulty raised by the Res Cogitans case. The bunker non-lien clause is likely to be taken up again.

4. The next meeting of the Documentary Committee will be held on Tuesday 6 June 2017 in

Rome. Members will be invited to note the report.