Class Society Liability. The New Norwegian Ship Safety Act

1. Wikborg Rein’s Shipping Offshore:
Update
The new Norwegian
SHIPPING LAW UPDATE FROM WIKBORG REIN
Ship Safety Act
- The seaworthiness concept to be replaced
by safety management system
UPDATE 1 / 2006
Managing offshore project risk | The new Competition Act in Singapore
How to make sure your closing goes right | Right to lien on cargo under
Chinese law | Classification society liability

2. UPDATE 1/2006
Contents
An exciting time to be a shipping lawyer 3
Top ten reasons closings go wrong – and how to make sure yours goes right 4
The new Norwegian Ship Safety Act 6
Norwegian Accident Investigation Board to investigate accidents at sea 8
Classification society liability 9
Safety at sea and marine insurers’ duty of confidentiality 10
The shipboker’s right to commission - change of broker channel 11
Managing offshore project risk 12
Right to lien on cargo under Chinese law 14
International conventions ratified by China 16
Voice recording using voyage data recorders 17
Notice of readiness under voyage charters 18
The impact of the new Competition Act in Singapore on international shipping 20
Wikborg Rein’s Shipping Competition Law Team 22
EU Commission moving forward on the repeal of exemption for the shipping industry 23
The Maritime Trainee Programme 24
Personnel news 25
Wikborg Rein’s Shipping Offshore Group in Bergen 26
PUBLISHER: Wikborg Rein EDITORIAL STAFF: Gaute Gjelsten, Herman Steen, Stephen N. Lamb DESIGN: Lise Røed PRINT: HBO

3. AN ExCITING TIME TO BE A ShIPPING LAWyER
It is an exciting time to be a shipping lawyer at Wikborg Rein. 2005 was one of our busiest years ever in
the firm’s Shipping Offshore department and 2006 holds great promise to be equally challenging.
I have always believed that being a good lawyer was as much about preventing problems as it was about
resolving them after they occur. The article on page 4 is a good example of that principle. Every day --
somewhere in the world -- a Wikborg Rein lawyer is working to make sure that an upcoming closing for a
ship sale and purchase or lease-back goes smoothly. It is a mainstay of our work and the article draws on
our collective experience to outline the most common snags and shoals and how best to avoid them.
While recent years have seen the shipping industry benefit from good economic times, this success has
also, and not surprisingly, more keenly focused the attention of regulators and others on the business. This
issue contains two articles on the competition law efforts of regulators in Asia and Europe. The article on
page 23 examines the EU’s new regulations impacting the shipping industry, and the article on page 20
looks at the effects of the new Competition Act in Singapore on international firms doing business there.
Long the financial capital of Southeast Asia, Singapore has established itself in recent years as the home
to many of the world’s top building yards for offshore rigs. Wikborg Rein partner Finn Bjørnstad, who recently returned
from three years in our Singapore office, writes with partner Kelly Malone, on page 12 about this firm’s body of experience
and expertise with the offshore industry.
Though the economic times may be good, our lawyers are not content to simply accept traditional assumptions about the
liability of those whose negligence causes harm to shipowners and their insurers. This issue contains a thought-provoking
article about the liability of classification societies on page 9. Long assumed to be effectively beyond the reach of tort
and contract liability by many legal observers, our lawyers have been involved in challenging this notion. Negligence by
a classification society, or even a government agency, is no longer something that shipowners must necessarily accept
without recourse.
As our practice has continued to grow, so too has our staff. In addition to six new associates, Anders W. Færden joined
our Oslo office in September as partner. As the article on page 25 explains in more detail, Anders is highly regarded in
maritime law circles, admitted to practice before the Norwegian Supreme Court, and a lawyer who genuinely enjoys
tackling the most difficult and complex of legal questions. We are extremely pleased with his decision to join our firm.
We hope you enjoy this issue of the Update along with our very best wishes for a happy and successful 2006!
Yours truly,
WIKBORG REIN
Trond Eilertsen
Leader of Wikborg Rein’s
Shipping and Offshore group
WIKBORG REIN JANUARY 2006 3

4. SUBJECT
Closings
WHy CLOSINGS GO WRONG
- AND HOW TO MAKE SURE yOURS GOES RIGHT
Imagine sitting in the London conference room of one of the How to make sure yours goes right
world’s largest ship registries. The room is crowded with The good news is that an overwhelming majority of closings are com-
representatives from the buyer and seller of the vessel that is pleted without any major problems. And those problems most com-
about to change hands, and the nervous small talk has run out monly encountered can almost always be avoided through proper
as everyone waits for confirmation that the funds have arrived preparation and communication. Specifically, this means having deter-
in the seller’s bank account. The phone rings, but it is not the mined all of the buyer’s and seller’s main obligations and then nego-
bank. Instead it’s the buyer’s representatives on board the ves- tiating and finalizing a tailored memorandum of agreement (“MoA”),
sel calling to remind the meeting that the vessel is due to be de- closing memo and document checklist.
livered under a charterparty in less than 30 minutes. No funds
– no delivery. The importance of being well prepared and how to prepare
In a perfect world, a closing would not take place until all details are
It turns out the bank has the wrong account number on the SWIFT thoroughly planned. But in reality, not all closings take place with the
interbank payment message. The correct account number is quickly for- luxury of a schedule that allows for such thorough preparation. The
warded to the bank and everyone around the table laughs nervously in usual schedule requires all participants to prioritize by distinguishing
relief. Then the registrar enters the room and asks: “Which one of you those matters of importance that must absolutely be dealt with before
has the original bill of sale....?” No one answers. the closing and those less important, which can be dealt with later.
When a new sale and purchase transaction arises it can be helpful to
Most such scenarios end happily with a last-minute solution and only draw up a chart and check-list showing: (1) buyer’s and seller’s name,
a minor delay. But on rare occasions, a once-willing buyer or seller has corporate status and jurisdiction; (2) vessel name, type, flag state and
become decidedly reluctant and practical difficulties with the closing any encumbrances (to be discharged or registered); (3) any change of
are exploited to cancel the transaction altogether. flag information; and (4) whether the parties have agreed upon a pay-
ment procedure. As the check-list is filled in with information, the next
Common reasons why closings go wrong steps are easily put in their proper order for the day of closing (e.g.
What is a “closing”? MoA, mortgage discharge, vessel deletion, vessel registration and
“Closing” is a shorthand term for the completion of a transaction. mortgage registration).
The term closing can be defined as the conclusion of an object’s sale,
whereby: (1) payment is made; (2) any previous mortgages discharged; Tailor the MoA for a smooth closing
(3) the title to the asset is transferred; and (4) any new mortgages se- The best way to avoid last minute discussions is to ensure that the
cured. discussions are closed at an early stage with a tightly worded MoA
between the seller and the buyer in which they agree upon all material
The list aspects of the deal.
The below list – although not complete – identifies the most common
reasons why closings go wrong: A large number of sales are based on MoAs on the “Norwegian Sale-
form” which in its original form does not include many guidelines as
1 Failure to agree in advance on closing and payment to how the closing should be completed. It merely lists a suggested
procedures set of documents to be delivered to the buyer “in exchange for the
2 Documents not prepared in advance or not present at purchase price” pursuant to clause 8. Failing to discuss or agree on
closing the closing procedure and the documents to be presented may lead
3 Failure to agree on delivery documents to unpleasant surprises later. Consequently; the parties should ideally
4 Vessel not physically ready prepare an addendum to the agreement listing the main documents
5 Documents lost or delayed to be delivered by both parties. Just as important – at least for seller
6 Documents contain mistakes and / or are not properly – is to clearly state that the free and clear certificate of ownership and
notarised or legalised encumbrances will not be presented to buyer until after the purchase
7 Payment is inadequate or delayed price (and payment for bunkers and lubes) are well received in order for
8 Registries / banks not open or unwilling to open early or stay the mortgage, if any, to be discharged.
late
9 Registry does not produce the documents when expected Prepare and finalise a closing memo and a document list
10 Buyer trying to renegotiate at the last minute or new issues The next step after finalising the MoA should be to start drafting a
arising at closing closing memo and a document checklist (if not included in the MoA as
4 WIKBORG REIN JANUARY 2006

5. SUBJECT
Closings
mentioned above). While most closings will involve the buyer also hav- tion from the registry that all is ready for discharge of the existing
ing to comply with a condition precedent (“CP”) list related to a loan mortgage and deletion of the vessel (if relevant). If the vessel is bare-
agreement, this article does not deal with that particular aspect. The boat registered, make sure that deletion is facilitated and documented
main purposes of a closing memo is to outline the closing procedure pursuant to the requirements of the main register as they may refuse
and to complete the list of documents and serves the important pur- the delete otherwise.
pose of identifying any obstacles to the closing procedure as all parties - Ensure that the current mortgagee has facilitated the mortgage dis-
will consider whether they will be able to comply with the obligations charge and agree on the trigger for the actual discharge. Be prepared
listed. A good closing memo will: that the mortgagee will not normally discharge the mortgage until they
(i) include names and contact details for everyone involved, including have received the funds outstanding under the relevant loan(s). Make
the ship registries. If a time difference is involved then each party’s sure the buyer understand the same.
local time should be specified.
Buyer’s obligations
(ii) reflect on an accurate payment and closing procedure. Particular From a strict closing perspective, a buyer’s task is normally easy: de-
attention should be paid to ensuring agreement on these steps, as they liver a few corporate documents, sign the deposit release, accept the
involve the cooperation of players other than the seller and buyer. 90 delivery documents and the vessel and pay the purchase price, bunkers
% of the world’s fleet is mortgaged, and one should bear in mind that and lubes and any extras. Nonetheless, the buyers should ensure the
in the event of a mortgage registered against the vessel, the mortga- following:
gee will not normally discharge the mortgage until repayment of the
loan is made. The wording of the standard clause 8 of the MoA how- - Prepare the corporate documents in due course, have them pre-ap-
ever, states that delivery of the delivery documents shall take place proved by the seller, both as drafts and in completed form (notarised
“in exchange for payment”, stating that the payment and delivery ob- and legalised/apostilled). Bring originals as agreed.
ligations should be performed simultaneously. In practice, this is not - Agree on the deposit release letter and make sure to bring a power of
possible and it is normally assumed as an obligation of both parties attorney (pre-approved) or proof of identity empowering a representa-
to ensure that the risks involved are minimized. One procedure used, tive of the buyer to sign the release letter.
which also ensures a high level of simultaneous performance, is to - Request to pre sight all seller delivery documents if possible in draft
table all delivery documents and for the buyer (through buyer’s bank) and completed form.
to present an unconditional and irrevocable payment letter. Delivering - Agree on the payment procedure also for the balance and bunkers
the payment letter to the seller or seller’s bank (mortgagee) will be and lubes. Ensure that the financing bank agrees to the payment proce-
regarded as equivalent to payment, and the mortgagee will discharge dure between the seller and buyer as early as possible. Double check
the mortgage without having to wait for the funds to actually arrive at the payment details.
sellers account prior to proceeding with the discharge of mortgage and
the release of the other delivery documents. If however a procedure Even if this is a matter for the buyer; the vessel will either be chang-
is agreed where the buyers will pay the funds to seller (seller’s banks) ing ownership within the same registry or change flag. In both cir-
account, the mortgagee is often asked to issue an undertaking stat- cumstances buyer should ensure as early as possible if any of these
ing that they will discharge the mortgage upon receipt of the funds at procedures requires documents from the seller (in addition to the origi-
the relevant account, also often accompanied by a statement from the nal/copy of a bill of sale). If so, these documents should be identified
sellers that at the same time the bill of sale will be released and the and pre-cleared by the registry as early as possible, and if not included
protocol of delivery and acceptance signed. This procedure ensure that in the document checklist, the buyer will have to rely on the seller’s
both seller and buyer can feel confident they will receive payment and discretion as to whether they will assist.
a free and clear vessel, respectively.
In the likely event that a new mortgage is being registered against the
Seller’s obligations vessel, this should also be pre-cleared with the registry in advance.
Seller have the most extensive obligations in the closing. In addition When a second mortgage is to be recorded in favour of a mortgagee
to physically preparing the vessel for delivery, all delivery documents other than the first priority mortgage, a letter of consent from the first
including the ones representing title to the vessel must be prepared mortgagee must be presented.
and brought to closing, as well as making the necessary arrangements
with the vessel’s current ship registry. The heading could also have Final preparations and on the closing day
included “seller’s bank or current mortgagee” as the mortgagee and If possible, a final check should be made the day before closing; and if
bank are playing important roles in the closing. The main focus of the possible a final message should be distributed to all parties confirming
seller should be the following: relevant details for the closing. All that is left is to ensure that cell
phone batteries are charged, original bill of sales are in hand, and of
- Prepare the delivery documents pursuant to the MoA and request that course the correct account number on the SWIFT message.
the same are pre-cleared by the buyer in advance both as drafts and
in completed form.
- Make arrangements with the current ship registry and have all docu- FOR MORE INFORMATION, CONTACT:
ments required for deletion of the vessel pre-cleared. Obtain confirma- Linn Hertwig Eidsheim (lhe@wr.no) or
Bernhard Haukali (bha@wr.no)
WIKBORG REIN JANUARY 2006 5

6. SUBJECT
Ship Safety Act
THE NEW NORWEGIAN SHIP SAFETy ACT
PURPOSE, SCOPE AND SAFETy MANAGEMENT
The existing Norwegian Seaworthiness Act was originally The concept of “safety management” is well known from the ISM
issued in 1903. While it has been amended frequently since Code. The committee states that for those already complying with
that time in an attempt to reflect the enormous technical, the ISM Code, the new Act’s strong emphasis on safety management
environmental, political, national, international and legal will not necessarily mean any substantial changes. However, it is
changes regarding ship safety it is today considered important to note that unlike the ISM Code, the new Act introduces
unsatisfactory in many respects. Consequently, on its 100th safety management requirements not only for vessel operations, but
anniversary, a committee was appointed to revise the existing also vessel engineering and building.
Act. The committee submitted its unanimous report on 29 June
2005 (NOU 2005:14) proposing a new Act – the Ship Safety Act. The new Act prescribes a general duty for the shipowners (in
The report was sent out for comments until 21 November 2005. Norwegian: “reder”) to provide for, ensure and develop the
Based on the few objections received during the comment establishment of a sufficient safety management system that can
period, it is expected that the proposal will most likely be be verified and documented in order to survey and control the risk
adopted in its present form. The new Act is expected to enter as well as to assure that applicable rules are followed. The master
into force prior to 2007. and the crew on board the vessel have certain duties to contribute to
the establishment of the vessel’s safety management. The concept
Mandate and purpose of safety management is generally flexible and comprises the vessel,
The mandate of the committee focused on drafting of a set of her management and the qualifications of the crew. Whereas the
rules which would be in line with international and EU regulations new Act sets out the concept in more general terms, its details will
regarding vessel safety management. The committee was charged be contained in regulations laid down pursuant to the new Act and
with developing a more uniform regulation and the reduction of the shall i.a. take into account the particular need of the shipowners and
level of details in the existing Act by i.a. delegation to the competent the activity and business they run.
Ministries. As part of this process the committee evaluated
modernizing supervision and control, available sanctions against
infringements of the rules, and the incorporation of other Norwegian
Acts.
The purpose of the new Act is to safeguard life, health, property and
the environment by promoting a high level of ship safety, ensuring
a safe working environment, preventing pollution from vessels,
incorporating requirements and responsibilities for vessel’s safety
management system, establishing and developing appropriate
supervision and control and arranging for the development of
regulations in compliance with international law, in particular IMO
(e.g. SOLAS, MARPOL, the ISM and ISPS Code), ILO and EU rules.
Material and geographic scope
The new Act will apply to Norwegian and foreign vessels, except for
non-commercial vessels with an overall length of less than 24 meters.
The new Act will apply to Norwegian flagged vessels throughout the
world while foreign vessels will only be subject to the new Act while
in Norwegian waters . The government may decide whether and to
what extent the new Act and regulations laid down pursuant to its
provisions shall apply to other units and/or vessels like e.g. offshore
drilling units.
“Safety Management” versus “Seaworthiness”
Under the existing Act, safety at sea is linked to the concept of
“seaworthiness”, which has also been adopted in the Norwegian
Maritime Code and the Norwegian Marine Insurance Plan. In the new
Act, this concept is phased out and replaced by the new concept of
“internal control methodology” which is defined in the new Act as
“safety management” (in Norwegian: “sikkerhetsstyring”).
6 WIKBORG REIN JANUARY 2006

7. SUBJECT
Ship Safety Act
RESPONSIBILITIES, SUPERVISION AND LEGAL CONSEQUENCES
Part of the mandate of the committee for the revision of the accordance with the latest EU developments as expressed in the
existing Norwegian Seaworthiness Act was to stipulate the third Maritime Safety Package.
shipowner’s and master’s responsibilities for the vessel’s
safety management system. Moreover, the committee had Legal consequences
to evaluate a modernization of the scope and extent of the The only administrative sanction for infringement provided for in
vessel’s safety management control and legal consequences the current Seaworthiness Act (except for infringement of rules on
of an infringement of stipulated rules. The existing Act is today pollution prevention) is detention of the vessel. Detention is only
seen as too inflexible and ineffective in these respects. allowed if the vessel is not seaworthy or the certificates are invalid.
Less serious infringements of the rules are only subject to criminal
Responsibilities liability, if any. The new Act de-emphasizes criminal liability as legal
Following the grounding and subsequent loss of the high speed consequences for infringement and instead introduces alternative
passenger catamaran “SLEIPNER” in 1999, it was concluded that measures: (1) administrative acts (in Norwegian: “forvaltningstiltak”);
the Norwegian Maritime Directorate was not subject to liability and (2) administrative sanctions (in Norwegian: “administrative
under the existing Act. The new Act clarifies that the operation of sanksjoner”). Administrative acts are – in ascending order according
the vessel does not lie within the responsibilities of the Directorate to the degree of seriousness – requests to carry out certain measures,
but is primarily the responsibility of the shipowner and that the fines and withdrawal of statutory certificates. Administrative
latter is liable in case of an infringement of applicable rules. The sanctions are administrative fines that are implemented in case of
master is liable in connection with the operation of the vessel, such an infringement of applicable rules. The current possibility for the
as navigation and watchkeeping; and the crew may be liable where vessel’s detention has been upheld in the new Act. Administrative
they have distinct duties. acts and sanctions apply to Norwegian and foreign vessels; and
foreign vessels may also be denied future access to Norwegian
Supervision waters.
Pursuant to the existing Act, vessels of 50 gross ton or more
are subject to supervision by the Norwegian Maritime Since administrative fines may be implemented fast and without
Directorate, which has authorized five classifications the involvement of the prosecuting authorities and courts, they are
societies (GL, DNV, ABS, LR, BV) to carry out parts of the an immediate reaction to an infringement of the vessel’s safety
necessary surveys. The committee finds this cooperation management. Administrative fines may amount to approximately
fit and suitable and it is therefore maintained in the new the same amounts as criminal penalties under the current system.
Act. Further, the new Act opens for an authorization of It is therefore the committee’s view that administrative fines may,
approved undertakings and authorities, be they private, in particular in relation to foreign vessels, be more efficient than
foreign (e.g. according to the Paris MOU) or international criminal penalties and consequently replace the latter in many
(such as e.g. the European Maritime Safety Agency cases.
(EMSA)).
Provisions on criminal liability previously set out in the Norwegian
The committee emphasises that even though the focus Criminal Act have been incorporated into the new Act, giving
on the shipowner’s responsibilities has increased over statutory basis for penalties and imprisonment of up to six months
the years, e.g. as a result of the ISM Code, it has thus in case of substantial infringements of certain rules – under
far not been sufficient to avoid major discrepancies from aggravating circumstances up to two years. Criminal liability applies
applicable rules. Therefore, safety management without to the shipowners personally, the shipowning company, the master
supervision is not considered satisfactory, and the new and the crew.
Act is based on a “double-track” system: (1) primary
supervision of the safety management system, i.e.
primarily an inspection and verification of the shipowner’s FOR MORE INFORMATION, CONTACT:
written documentation and implementation of necessary Simone Trondal (sit@wr.no),
measures, along with interviews and evaluations with the Gry Bratvold (gba@wr.no) or
shipowner’s management and personnel; and (2) direct Gaute Gjelsten (ggj@wr.no)
control by way of inspection of the vessel. The new Act
leaves open the possibility that primary supervision may
in the future gradually replace direct control. Even though
the latter possibility is in accordance with the purpose
of the ISM Code, it is questionable whether it is also in
PHOTO: © Scanpix
WIKBORG REIN JANUARY 2006

8. SUBJECT
Accident investigation
NORWEGIAN ACCIDENT INVESTIGATION BOARD TO
INVESTIGATE ACCIDENTS AT SEA
During 2006/2007 the Norwegian Confidentiality
Accident Investigation Board will The Investigation Board has an extensive duty of confidentiality in
conducting its business, with some important exceptions. The duty
be granted authority to investigate of confidentiality is outweighed by “weighty public interest” or “if
accidents at sea in addition to necessary to properly explain the cause of the accident”.
accidents within the aviation, railway New prohibition against removal of wreckage
and road sectors. Under the new rules removal of wreckage or other material without
the prior consent of the Investigation Board or police authorities is
The new legislation to govern these investigations of accidents at sea prohibited. The only exception from this prohibition is if the object will
has already been passed although they have not yet entered into force. be lost unless removed immediately.
The new rules focuses on the establishment of the course of events in
order to promote the safety at sea and the purpose of the investigations About the Investigation Board
carried out shall not be to apportion blame and liability. Included in The Investigation Board is an independent investigation body with the
the new rules are generally duties to inform the proper authorities of authority to hand over entire or parts of investigations to foreign states
any accidents at sea, extensive duties to offer testimony or deliver authorities, to co-operate with foreign authorities, to allow participation
documents to the Investigation Board combined with restrictions on the of foreign authorities in investigations and further the Investigation
Investigation Board not to use such information for unrelated purposes. Board can request assistance from local police, courts of justice and
This article will summarize some of the more important of these new other authorities as well as external expertise necessary to carry out an
rules. investigation.
Duty to notify
The new legislation introduces a general duty for “anyone”
who witnesses an accident at sea, wreckage or other
conditions that gives reason to believe an accident at sea
has occurred, to notify the authorities. There rests a heavier
burden on the master of ships and ship-owners to fulfil such
a duty of notification.
Testimony and other evidence
The new rules further impose an extensive general duty to
offer testimony and share documents with the authorities.
“Anyone” has a duty to contribute with all relevant
information, “regardless of duties of confidentiality”. A
party offering such information is entitled to be represented
by an attorney or other representative through the course of PHOTO: © Scanpix
the proceedings.
Limited use of testimonies Report
The Investigation Board can only use testimonies in order to promote An investigation shall conclude with a report that outlines the course of
the safety at sea. Testimonies offered can thus not be used as evidence events, causal relations, recommendations related to improved safety
in a possible criminal case against the person offering the testimony. at sea. A draft report will be prepared and sent for consultation to
Testimonies can however be used as evidence in criminal cases against
interested parties before a final report is prepared and published.
other individuals than the one offering the testimony. A testimony given
by an officer can therefore not be used in a possible criminal case
against that officer, but can be used as evidence in a possible criminal FOR MORE INFORMATION, CONTACT:
case against the captain. Siri Birgitte Bang (sbb@wr.no) or
Geir Ove Røberg (gor@wr.no)
8 WIKBORG REIN JANUARY 2006

9. SUBJECT
Class societies
CLASS SOCIETy LIABILITy
As important as they are at times controversial, classification
societies occupy a unique place in the field of maritime law In Norway, the authorities have delegated certain control functions
and commerce. through the Agreement of 1 July 198 with annexes between the
Ministry of Trade and Det Norske Veritas (“DNV”). This delegation
Class enforce statutory requirements on behalf of flag and port has lead to some questions regarding the role DNV holds. The tasks
states yet the societies are not government agencies themselves. DnV performs on behalf of the authorities are considered to be more
Classification societies have the power to impose sanctions yet they of a service than business nature. Activities of a service nature have
also compete for the business of those who come under their scrutiny. traditionally held a protected position in Norwegian tort law, and
Class make and enforce the rules but also offer consulting services on there might be reason to ask if this protection has influenced the
how best to comply. Classification societies require the shipowners discussion on classification societies’ liability for those tasks that are
they scrutinise to have systems of accountability, yet the societies not performed on behalf of the authorities.
themselves remain largely a stranger to the concept of legal liability
[ ]
for their own negligence. Classification societies derive nearly all of The claim that classification societies are public spirited service
their maritime revenue – directly or indirectly institutions deserving of
– from shipowners yet resist liability when an special treatment with
owner is wronged through class negligence. In today’s world, class regards to liability dates back
Increasingly, this mix of roles and attitudes is hardly unique among many years. Today, it must
has struck many observers as problematic in be examined in light of the
the context of the discussion over whether
professionals who charge fact that hospitals, health
classification societies should be legally liable relatively small amounts for professionals, accounting
for their negligence. their services, yet still risk firms, and even government
agencies are all now held
The three most frequently heard arguments a considerable economic legally liable for their
against liability are that the relatively small size liability for losses caused by negligence. While certainly
of classification fees cannot justify the potential true that classification
liability exposure; the shipowner has ultimate
their negligence. societies perform important
responsibility for vessel seaworthiness; and and valuable research on
the “special character” of a public service institution should provide improving safety at sea, commentators have questioned whether it
relief from legal liability. is still appropriate for that research to be carried out by each society
individually. If classification societies are deserving of special treatment
In today’s world, class is hardly unique among professionals who with regards to liability because of their public mission, then many
charge relatively small amounts for their services, yet still risk a believe the public mission would be more efficiently and effectively
considerable economic liability for losses caused by their negligence. pursued by combining resources through one set of standards rather
Other professionals customarily minimise the risk through different than the societies competing amongst themselves.
forms of insurance arrangements and increasingly class has done
the same. And with earnings sheets that are more comparable to The long simmering debate over classification society liability was
successful businesses than service institutions, today’s classification raised a notch in 2003 when the Spanish government sued the
societies have a more reasonable ratio of fees to exposure than a classification society responsible for classing the Prestige. And there
whole host of organisations and industries. are no signs of it cooling anytime in the near future. As shipowners
are increasingly held accountable by class for their performance and
While the shipowner always remains responsible for his vessel’s actions they are expecting nothing less than the same of class. On the
seaworthiness, he or she should be able to rely on the class certificate. legal front, the trend in Norway is in favour of increased liability for
But if the classification society is unwilling to accept legal responsibility government bodies dealing with typically “service nature” and class
for its judgments then how much credibility can an owner or insurer seems unlikely to escape the same fate in the long run.
be reasonably expected to place in the certificate? In the case of
newbuildings, the class representative (customarily paid by the yard)
has not just performed one survey but rather been a regular presence
on site throughout the vessel’s construction. Under such circumstances, FOR MORE INFORMATION, CONTACT:
is it appropriate for a new owner to bear the risk for loss caused by the Gry Bratvold (gba@wr.no),
classification society’s negligence if the vessel is designed, built and Stephen Lamb (stl@wr.no) or
tested in accordance with the classification society’s own rules, and Gaute Gjelsten (ggj@wr.no)
where this control has led to a classification certificate and delivery
of the vessel?
WIKBORG REIN JANUARY 2006 9

10. SUBJECT
Marine insurance
Proposed new legislation:
[ Pursuant to the proposal, the marine insur-
ance companies will be entitled to exchange
information on vessels. ]
SAFETy AT SEA AND
PROFESSIONAL SECRECy OF MARINE INSURANCE
The Norwegian Ministry of Commerce recently The proposal will not affect marine insurance companies` possible
proposed new legislation concerning the duty of criminal and/or tort liability by e.g. issuing incorrect information.
confidentiality (aka “professional secrecy”) for The proposal was issued by the Ministry on 1 November 2005 with
marine insurance companies. a comment period closing on 9 December 2005. The new legislation
is expected to be implemented into the Norwegian Shipping Act or
The proposal would provide a limited exemption for insurance com- the new Norwegian Ship Safety Act. It is expected that the propos-
panies from the current regulation in Norwegian Insurance Com- al will be adopted by the Norwegian parliament and subsequently
panies Act section 1-3. Pursuant to the new legislation, marine come into force during the second half of 2006.
insurance companies would
be allowed to exchange
certain information about
vessel safety and also to
forward such information
to the relevant public au-
thorities and classification
societies without the prior
consent of their customer.
The purpose of the proposal
is to increase the marine
insurers’ involvement in the
shipping industry’s efforts
in limiting so-called sub-
standard shipping.
Pursuant to the proposal,
the marine insurance com-
panies will be entitled to
exchange information on
vessels and will be obliged
to forward certain informa-
tion for vessels flying the
Norwegian flag to relevant
public authorities. The pro-
posal defines the relevant
information as “information
regarding ship safety”, with
reference to the proposed
new Norwegian Ship Safety
Act. The new professional
secrecy rules apply both
to vessels insured by the
insurance company at the
relevant time and to vessels previously insured by the insurance FOR MORE INFORMATION, CONTACT:
company, provided such vessels were insured by the insurance com- Birgitte Karlsen (bka@wr.no) or
pany during the last three years before the information is given. Trond Eilertsen (tei@wr.no)
10 WIKBORG REIN JANUARY 2006

11. SUBJECT
Shipbroking
THE SHIPBROKER’S RIGHT TO COMMISSION
- CHANGE OF BROKER CHANNEL
Under Norwegian law there are four conditions that all must be This was discussed in the “Fearncoast” case (ND 191 p 233). In
fulfilled in order for a broker to be entitled to commission: his award Sjur Brækhus, as sole arbitrator, held that a principal
can stop the negotiations through one established broker chan-
1 the broker must have been engaged to act as an nel when he has a substantial and justifiable reason to do so.
intermediary, This would for instance be the situation where it is impossible to
2 a binding contract must have been concluded between the continue through this channel. Furthermore he held that change
buyer and the seller, of broker channel could be accepted “… where the possibility
3 the conclusion of the contract must be a result of the to come to a positive result through the existing channel is far
broker’s activities, and worse than the possibilities through other channels.” This test
4 the contract must be the one, or equivalent to the one, the was later also applied by Brækhus in another arbitration, the
broker was engaged to negotiate. As under Norwegian law “Knock Adoon” case (ND 1994 p 202).
in general, there is no need for the concluded contract to
be in writing. The same applies to the contractual The underlying principle that a principal has a clear duty towards
relationship between the principal and the broker. the broker first engaged can also be seen in a recent judgment
by Borgarting Court of Appeal in March 2005 (LB-2003-1495)
Recently we have seen several cases where the court held that the principal in question had no valid
where parties have concluded binding reason to change the broker channel.
[ ]
contracts either with the assistance
of other brokers than To summarise, it can be stated that under Norwegian law a
the broker originally en- principal, whether
gaged, or without bro- Only in special circumstances seller, buyer, owner,
charterer or others,
kers at all. The broker will the principal be entitled to can only change the
originally engaged may
thus be prevented from
change the broker channel with- broker channel if he
fulfilling all conditions out being liable towards the bro- has a substantial and
justifiable reason for
for earning commission. ker originally engaged. doing so. Otherwise
Although brokers often
hesitate to bite the hand the original broker
that feeds them, such may have a claim,
cases frequently give rise to disputes either as a claim for commission or as a claim for damages for
on whether the original broker is enti- breach of contract, and the principal may end up paying double
tled to commission. commission. Consequently, parties that have engaged brokers to
assist in any deal should think twice before changing the existing
It is a general principle under Norwe- broker channel.
gian brokerage law that a principal
has a duty to see to it that the bro-
ker is given the opportunity to earn
his commission. This implies that the FOR MORE INFORMATION, CONTACT:
principal has a duty of loyalty towards Martin Nes (mne@wr.no) or
the broker that has been engaged Anders W. Færden (awf@wr.no)
and that he normally must continue
through this channel. Only in special
circumstances will the principal be
entitled to change the broker channel
without being liable towards the bro-
PHOTO: © O.Kobayashi ker originally engaged.
WIKBORG REIN JANUARY 2006 11

12. SUBJECT
Offshore management
MANAGING OFFSHORE PROJECT RISK
- A CHECKLIST FOR NORWEGIAN DRILLING COMPANIES OPERATING ABROAD
Wikborg Rein lawyers participate in a wide range change and profit repatriation issues that affect contractor’s ability to
of activities related to the offshore sector, which in- take out operating revenue from the host country (to the extent contrac-
tor receives payment in local currency, and/or through local banks);
creasingly involves drilling and production projects Overlapping claim to same territorial waters by neighboring country
located in the developing world. (e.g. dispute between East Timor and Australia in East Timor Sea);
Nationalization programs and their risk of interrupting operations (e.g.
These projects require a special understanding and ability of risk as- Venezuala);
sessment, and very often involve operations in a country with an unsta- Applicable requirements under any unitization treaty or other form of
ble political situation and unclear legal framework. Our lawyers have joint development arrangement between host country and other neigh-
experience from many such countries not only with respect to offshore boring countries (e.g.
projects, but also through our work in the shipping sector generally as joint develop-
well as gas pipelines, hydropower facilities, oil and gas terminals and ment of
other infrastructure projects. We have on the map indicated some coun- Tur
tries where lawyers from Wikborg Rein have gained experience from
international projects over the last few years.
Our offshore lawyers typically get involved in the representation Jordan
of the owner of a drilling unit, floating production unit (FPSO) Egypt
or a floating storage unit (FSO) during negotiations of a
contract with a petroleum producer. Upon contract finali- Morocco
Dominican Republic
zation, the owner then mobilizes the vessel and support Antigua
Mexico
operations for relocation to the relevant offshore loca-
Belize Benin
tion. The producer commonly holds a license to explore Guatemala
Venezuela
for and produce petroleum in an offshore block located Sierra Leone
honduras
in the territorial waters of countries with challenging Costa Rica Cote d’Ivore
business environments such as Iran, Indonesia, India, Panama Niger
Mexico, Vietnam, Brazil, countries in West Africa, and Colombia Equatorial Guine
several former Soviet Union countries. In many cases, Peru Gabo
the host country strongly depends on revenue from the Congo
oil and gas sector for its income. Bolivia
Brazze
We have on the basis of our experience developed the Brazil
checklist of issues below that our clients would typically con-
sider before they commit to a project in any such country. Most Chile
Argentina
of these issues also apply in developed countries, but the out-
come of the risk assessment may in these countries be more predict-
able. Depending on the country in question, the client may also obtain
a “Country Risk Assessment” from one of the international consultancy
firms focusing more on the non-legal aspects, such as political, corrup- off-
tion, crime and other risks and threats that the project may face. shore blocks
in the Gulf of
Host country issues Thailand between Thailand and Malaysia);
Project structure and the need for operating (in part or in full) through Limitation on operation in sanction countries imposed by outside
a local entity established in the host country, local partner requirements, jurisdictions (e.g. Norwegian sanction laws related to Burma, US sanc-
local flag requirement and possibility of dual registration etc.; tion laws related to Iran and other countries applicable to Norwegian
Concessions and licenses needed for operation from central and/or corporates that have raised capital or debt financing in the US market);
local governments; Reputation of local judicial system for enforcing contracts, foreign
Import licence for mobilisation and export licence (and other formali- judgements and international arbitration awards against local parties
ties and monetary obligations) for demobilisation; (applicable when operator contracts through local entity);
Tax issues, including withholding tax and VAT on operation revenue, Local safety, environmental and labour regulations of stricter content
tax on profit and other local and central taxes and duties, claw back than applicable international regulations and those of the flag state of
regulations and personal income tax for expats; the offshore unit;
Limitations on convertibility of local currency and other foreign ex- Local content requirements and actual ability to procure local labour
12 WIKBORG REIN JANUARY 2006

13. SUBJECT
Offshore management
and supplies, including related to insurance cover through local insurance Services (scope, duration, option to extend, right to vary), and no
companies; obligations of the operator under terms of PSA or a license should be
Consequence of facilitation payments and other instances of petty cor- applicable to the contractor by reference to such terms without clear
ruption (e.g. criminal liability under anti-corruption provisions in the Nor- specification in the contract;
wegian Penal Code as well as applicable anti-corruption laws in the United Unit specification (equipment and personnel, performance stand-
States); ards, certifications, surveys, audit rights and availability);
Contracts with operation support suppliers; Well-related matters (e.g. operation program, location, completion,
Work visas for expats and other immigration issues; drilling records, supply of sub-sea data etc.), and no well or produc-
Applicability of relevant international treaties; and tion related risks to be accepted by contractor;
Availability scope of cover and cost of political risk insurance, or cover of Compensation matters (e.g. operating rate, redrill rate, breakdown
political risks under other insurances. rate, standby rate, force majeure rate, waiting on weather rate, mo-
bilization, demobilization, accommodation and meals, level of per-
Operator and contractual issues sonnel, rate conflicts), as well as applicability and amount of early
Identification of contractual counter party (e.g. whether operator termination fee;
contracts on its own Allowed time for maintenance programs with downtime risk;
Pakistan behalf or on Materials, supplies and equipment (contractor-furnished and op-
Afghanistan Bangladesh
Ukraine Russia
rkey behalf of erator-furnished);
the Payment matters (invoice presentation, right to question invoices,
audit rights, timing, place, currency, termination payments, set-off
China rights, liens, etc.);
Performance of services (performance standards, prevention of
South Korea fires and blowouts, discipline, safety, authorized representa-
tives, environment, unsatisfactory performance, operator’s
take-over right, performance bond, etc.);
Taiwan Local content requirements (e.g. employment of local
hong Kong personnel, preference for local suppliers, preference for
UAE local subcontractors, cooperation with local companies,
Laos Philippines
India accurancy of information);
Vietnam Insurance matters (e.g. policy type, policy scope, in-
Sri Lanka Thailand
ria Cambodia surance company non-performance, failure to provide,
Malaysia New Guinea
ea certifications, notice of claims, consequential losses,
Uganda Singapore
on Indonesia East Timor cognisance, etc.);
o- Liability and indemnity matters, and applicability of
Tanzania
eville “knock for knock” principle between license group and
Madagascar contractor group, and applicability of mandatory local
Angola
Congo
Mosambique laws;
Demurrage risks related to off-loading operations;
South Africa Australia Responsibility for blowouts, pollution and damage to geologi-
New Zealand
cal formations;
Taxes and customs duties (contractor’s scope of coverage, whether
operator should take risk for changes/new taxes, indemnity for non-
li- payment, operator’s set-off and withholding rights);
cense Permits, laws and regulations (compliance with applicable laws,
IMAGE: © gettyimages group? May evidence of required authorizations, compliance with operator in-
the parties in the structions);
license group change during Force majeure (e.g. definition scope with understanding of spe-
the time of the contract, and thereby change credit risk position of the cial country-related risks, consequences of prolonged force majeure,
contractor?); claim procedures, etc.);
Contractor recourse against multiple operator parties on a several liabil- Termination (events of default, remedies, payment of demobiliza-
ity basis in many different jurisdictions; tion fee, post-termination services, and other country-specific issues
Need for credit enhancement mechanisms (e.g. payment guarantees from such as applicability and understanding of “mandatory termination
banks or parent companies, letters of credit, etc.); rights” as in Mexico); and
Validity of rights under production sharing, licensing or other concession Dispute resolution (international arbitration, jurisdiction of foreign
arrangements; and local courts, possibility of enforcement etc.).
Corporate authorizations for execution of contract and related agree-
ments, local permits, government approvals, etc.; FOR MORE INFORMATION, CONTACT:
Area of operation, and risks related to moving the unit between defined Finn Bjørnstad (fbj@wr.no) or
areas; Kelly Malone (kma@wr.no)
WIKBORG REIN JANUARY 2006 13

14. SUBJECT
Maritime liens
RIGHT TO LIEN ON CARGO UNDER CHINESE LAW
- BLESSING OR CURSE?
Under Chinese law complex questions outstanding freight or other fees incurred at the loading port is more
arise regarding the carrier’s right to arguable. According to Article 69 and 8 of the Maritime Act, the
consignee or holder of a bill of lading shall not be liable for freight
lien on the cargo and the enforcement or other fees incurred at the loading port, unless his obligation for
of such lien, often leaving the carrier payment for such is expressly stipulated in the bill of lading. In
the judgment issued by the Shanghai High Court regarding China
with a difficult dilemma of whether or Limber Huadong v. Milena Ship Management Co. Ltd. and Charter
not to exercise a lien Harvest Shipping Ltd.
199, upholding the
Right to lien original judgment from
Article 8 of the People’s Republic of China (“PRC”) Maritime Shanghai Maritime
Act provides that: “if the freight, contribution in general average, Court, the court further
demurrage to be paid to the carrier and other necessary charges clarifies that even when
paid by the carrier on behalf of the owner of the goods as well as a charterparty which
other charges to be paid to the carrier have not been paid in full, nor terms are incorporated
has appropriate security been given, the carrier may have a lien, to into a bill of lading
a reasonable extent, on his goods”. makes the consignee
or bill of lading holder
There is one school of opinion that the right to lien arises from the the liable party for the
provision of transportation and therefore the carrier shall have the freight or other fees
right to lien regardless of the ownership of the cargo. The 1999 PRC incurred at the loading
Contract Act adopted this view and stipulated in Article 315 under port, the consignee or
the chapter of Contract of Carriage that “when the shipper or the bill of lading holder shall
receiver fails to pay the freight and other relevant fees, the carrier not be bound by such
has the right to lien on the corresponding goods carried, unless the provision unless it is
parties agree otherwise.” expressly stipulated in
the bill of lading.
However, the prevailing opinion in practice is that a right to Exercise and
lien arises only if the goods is owned by the party liable for the enforcement of lien
outstanding freight, demurrage, general average contribution or The carrier is not required
other relevant charges. Scholars and judges holding this opinion to resort to judicial
argue that the wording “his goods” under Article 8 of the Maritime procedures in order to
Act indicates that only goods owned by the debtor may be liened. In exercise his right to lien
on cargo. However, the
case of carriage of goods by sea, the Maritime Act applies in priority
carrier is required under
to the Contract Act.
the PRC Guarantee Act
to give the debtor a
In sum, it is widely agreed that whether or not the carrier can period of no less than
exercise a lien on the goods depends on whether or not the owner 2 months (the “Performance Period”) to pay off the debt when he
of the goods in question has the contractual obligation for the announces the lien.
outstanding fees.
In order to maintain his right to lien, the carrier shall keep the cargo
In the case of a bill of lading issued under a voyage charterparty, under his control and has the obligation to take care of the cargo
therefore, the key to whether or not the carrier may exercise lien lies under custody. The right to lien will be lost if the cargo leaves the
is whether the bill of lading holder is liable for the outstanding fees. custody of the carrier. In practice, the carrier can usually exert control
The carrier may exercise lien on the cargo for demurrage occurring over the cargo via the help from its local agent.
at the discharge port. However, exercise of lien on cargo for
14 WIKBORG REIN JANUARY 2006

15. SUBJECT
Maritime liens
[ When the carrier intends to exercise the lien on the cargo for outstanding fees and
expenses occurred at the loading, he could actually be facing considerable risk.
]
The PRC Guarantee Act grants the carrier the right to enforce lien Dilemma faced by the carrier
when the debtor fails to pay the outstanding fees by the end of the As can be seen from above, when the carrier intends to exercise the
Performance Period by sale or auction of the cargo or by agreeing lien on the cargo for outstanding fees and expenses occurred at the
with the debtor on the value of the cargo and offset the same with loading, he could actually be facing considerable risk that the lien
the outstanding claims. will be held illegal by a Chinese court at a later stage. Should the lien
be held illegal, the Owners may face claims from the receiver ranging
PRC Maritime Act does not clarify the ways to enforce a lien. The from storage fee, fines from customs office for late clearance, drop in
price, to the court fees of the proceedings. In order
to avoid providing the cargo receiver the grounds
to claim for a wrongful lien, some Owners might
consider choosing to lien the cargo “quietly”, i.e.
withholding the cargo without formally announcing
the lien. Assuming that the local agent is willing
to convey its full cooperation in the custody of the
cargo and in the refusal of delivery of cargo to the
receivers, the frustrated receiver may still resort
to the court for an injunction to enforce delivery.
Without announcing the lien in the first place, the
Owners will then probably be forced to release the
cargo for lack of justifiable reason to withhold the
cargo, in addition to facing claims for late delivery.
It could indeed be a tough call for the Owners
to decide whether or not to announce the lien
on the cargo. Either way, the Owners will face
considerable risks. A further question might be:
when to officially announce the lien. Various
factors should apparently be evaluated before the
Owners make a decision, e.g. the pressure that the
receiver could exert on the charterer to settle the
outstanding fees to exchange for a timely release
of the goods, the cost and fees for the storage, and
the extent of cooperation the Owners may get from
the local agent or port.
Even if the legitimacy of the lien is not an issue,
when the receiver is the same as the charterer, the
PHOTO: © O. Kobayashi Owners may still face difficult situations, e.g. the
storage of the cargo for a period up to two months,
wording of Article 88 of the Act, however, leaves room for some the sale or auction of the cargo. The sale of cargo without the court’s
practitioners to argue that the lien on cargo may be enforced only involvement may be held illegal at a later stage, while the auction of
through a forced auction held by a court. There are conflicting the cargo via judicial proceedings may turn out to be both time and
opinions in this regard among scholars, practitioners and judges and cost consuming.
unfortunately Chinese courts are not bound by previous judgements
on same issues. Consequently, this is far from being a settled In any event, while the right to lien could be an effective way to
issue and the safest approach to the enforcement of a lien remains secure the Owners’ claims, Owners are advised to be cautious when
applying to the court for the auction. they exercise this right, because of the complexities involved.
WIKBORG REIN JANUARY 2006
WIKBORG REIN JANUARY 2006 15
15

16. SUBJECT
Conventions
INTERNATIONAL CONVENTIONS RATIFIED By CHINA
Important shipping related international Important shipping related international conventions
conventions to which China has acceded: to which China has NOT acceded:
Contract of carriage Contract of carriage
• Athens Convention relating to the Carriage of Passengers • International Convention for the Unification of Certain Rules of Law
and their Luggage by Sea, 194, as amended by its 196 Pro- relating to Bills of Lading, 1924 (”Hague Rules”)
tocol (but not the 1990 and 2002 Protocols) • Protocol of 1968 to amend the International Convention for the Unifi-
cation of Certain Rules of Law relating to Bills of Lading, 1924 (“Hague-
Admiralty Visby Rules”)
• International Convention for the Unification of Certain Rules • United Nations Convention on the Carriage of Goods by Sea, 198
of Law with respect to Collision between Vessels, 1910 (“Col- (“Hamburg Rules”)
lision Convention”)
• International Convention on Certain Rules Concerning Civil Pollution
Jurisdiction in Matters of Collision, 1952 • International Convention on the Establishment of an International
• International Convention on Salvage, 1989 (“Salvage Con- Fund for Compensation for Oil Pollution Damage, 191, as amended by
vention”) (China has made reservations on Article 1 litra a, b the 1992 Protocol (“1992 Fund Convention”)
and d)
• International Convention for the Safety of Life at Sea, 194, Limitation of liability
as amended by its 198 and 1988 Protocols (“SOLAS Conven- • Convention on Limitation of Liability for Maritime Claims, 196
tion”) (“LLMC”) or the 1996 Protocol
• Convention on the International Regulations for Preventing
Collisions at Sea, 192 (“COLREG”) Arrest of vessel
• International Convention for the Unification of Certain Rules Relating
Pollution to the Arrest of Sea-going Ships, 1952 (“Arrest Convention, 1952”)
• International Convention for the Prevention of Pollution from • International Convention on Arrest of Ships, 1999 (“Arrest Conven-
Ships, 193, as modified by the Protocol of 198 (“MARPOL tion, 1999”)
3/8”) (China has not acceded Annex IV or VI)
• International Convention Relating to Intervention on the High Miscellaneous
Seas in Cases of Oil Pollution Casualties, 1969, as amended • International Convention on Liability and Compensation for Damage
by its 193 Protocol in Connection with the Carriage of Hazardous and Noxious Substances
• International Convention on Civil Liability for Oil Pollution by Sea (“HNS Convention”), 1996
Damage, 1969, as amended by its 196, 1984 and 1992 Pro-
tocols (“CLC 92”)
Miscellaneous
• International Convention on Maritime Liens and Mortgages,
1993
FOR MORE INFORMATION, CONTACT:
Deborah yu (dyu@wr.no) or
yafeng Sun (yfs@wr.no)
This firm [Wikborg Rein] has traditionally had a stronghold in
the shipping market in Norway according to commentators, and
is still considered by many to have the best grip on the Norwe-
gian clients. Chambers Global 2004-05
16 WIKBORG REIN JANUARY 2006
WIKBORG REIN JANUARY 2006

17. SUBJECT
Voyage data recorders
VOICE RECORDING USING VOyAGE DATA RECORDERS
- REQUIRES NOTICE TO THE DATA INSPECTORATE
Like black boxes carried on aircrafts, voyage data on international voyages. The following vessels shall, according to
recorders (“VDRs”) enable accident investigators the SOLAS regulation, be fitted with VDRs:
to review procedures and instructions in the mo- - New passenger ships before they are put into service
ments before an incident and helps to identify the - Existing ro-ro passenger ships not later than the first survey for
cause of any accident by, inter alia, recording the safety equipment on or after 1 July 2002
conversations on the vessel’s bridge. The SOLAS - Existing passenger ships other than ro-ro passenger ships not
convention chapter V regulation 20 requires that later than 1 January 2004
- Cargo ships of 3,000 gross tonnage and upwards construed on or
certain vessels on international voyages must be after 1 July 2002, before they are put into service
fitted with VDRs. Voice recordings conducted with
VDRs fall within the scope of Norwegian legisla- Norwegian legislation has a broader scope requiring several other
tion protecting the processing of personal data. vessels to be fitted with a VDR under sections 19 A to 19 C in a
Shipowners must therefore notify the Data In- regulation issued by the Norwegian Ministry of Trade and Industry
of 15 September 1992 no. 01, as amended (“Forskrift om navigas-
spectorate (in Norwegian: “Datatilsynet”) of such jonshjelpemidler m.m.”).
systems and comply with other procedures as de-
scribed in this article, to avoid fining. In addition to the duty to notify the proper authorities of the use of
VDRs, shipowners must comply with the following procedures under
Voice recording performed with electronic equipment fall within the the Data Protection Act:
scope of the Norwegian Act of 14 April 2000 no. 31 relating to the
Processing of Personal Data (“Personal Data Act”), as such informa- Shipowners must inform the crew about the data collection, cf.
tion may be linked to a physical person. section 19. Shipowners must not store personal data longer than
necessary to carry out the purpose of the processing, cf. section
Consequently, recordings through VDRs can only take place if the 28. Recordings by VDR equipment will normally be erased continu-
shipowner (or appointed manager) comply with conditions set out in ously. Recordings are generally, while not yet erased, subject to
the Personal Data Act. Shipowners must therefore notify the Data satisfactory data security since access requires special technical
Inspectorate of the use of VDRs. The notification is due 30 days be- knowledge.
fore any instalment and/or commencement of use of the VDR. Upon
receipt of such notification the Data Inspectorate will give the con- Furthermore, shipowners must ensure that voice recordings are
troller a receipt of notification. used exclusively for stated purposes, such purposes being objec-
tively justified by the activities of the shipowner. As an example, re-
The provisions in the Personal Data Act applies to shipowners es- cordings cannot be used in a labour dispute with a current or former
tablished in Norway, and to all shipowners established outside the employee. The recordings must further be adequate, relevant and
European Economic Area who make use of equipment in Norway for not excessive in relation to the understanding of accident causes.
the purpose of processing personal data. Shipowners based else-
where in the European Economic Area will normally be subject to The Data Protection Act does not limit the Marine Authorities’ ac-
the data protection laws of the European Economic Area country in cess to recorded material in the course of an investigation. Other
which they are based. third party access must be evaluated on a case by case basis. Ac-
cess to recordings should always be subject to reasonable controls,
Anyone who wilfully or grossly negligently omits to send notification which might include passwords, compartmentalised access and ac-
to the Data Inspectorate is liable to fines or/and imprisonment. The cess logs. Reasonable steps should be taken to detect and prevent
Data Inspectorate has not yet issued any fines for infringement of unauthorised access. The relevant considerations are throughout
the notification provisions in the Personal Data Act. any process confidentiality, integrity and accessibility.
The relevant vessels subject to the duty of notification are vessels
under regulation 20 of the revised SOLAS chapter V; ships engaged FOR MORE INFORMATION, CONTACT:
Lars Tormodsgard (lto@wr.no) or
Lars Inge Ørstavik (lio@wr.no)
WIKBORG REIN JANUARY 2006 1

18. SUBJECT
Voyage chartering
Wikborg Rein remains (…) in the premier division of
shipping law firms, and with offices in Oslo, Shang-
hai, London, Singapore and Kobe, has a truly global
dimension to its shipping practice. Legal 500 2005
NOTICE OF READINESS UNDER VOyAGE CHARTERS
- The four “Ws” under Norwegian law
In order to minimise the risk of waiting costs at busy ports, many place for vessels to wait for a berth. Still, many different factors may
owners add one or more of the four ‘W’s to a standard form have to be considered in order to decide whether the vessel may be
charterparty so that notice of readiness (“NOR”), may be tendered considered as arrived in port. Statutory, fiscal and geographical limits
(1) whether in port or not; (2) whether in berth or not; (3) whether may be good starting points, but other factors may also be relevant.
customs has been cleared or not, and; (4) whether free pratique has Moreover, the limits and boundaries for a customary waiting place
been obtained or not. Normally used under charterparties governed may also be a source for doubts and discussions. By introducing a
by English law, uncertainty may arise when the clauses are inserted “whether in port or not” clause owner will be given some leeway
into contracts governed by different national law.
This article examines the impact of the clause when
used in charterparties, such as the Hydro Voyage
Charter (“Hydrocharter”), which are governed by
Norwegian law.
“Whether in berth or not”
Normally, the Hydrocharter is considered a port
charter since NOR may be given when the vessel
has arrived at the loading and/or discharging port(s).
Invoking a clause saying that NOR may be tendered
“whether in berth or not”, is thus of less value to
the owner under the Hydrocharter. Without such a
clause, the owner may also be entitled to tender a
NOR before approaching nominated berth.
However, when the nominated place is undoubtedly
a berth or terminal, uncertainty may arise as
to whether the owner has also agreed that an
effective NOR may not be tendered until the vessel
actually has arrived at this berth or terminal. In this
event, a clause stating “whether in berth or not”
would be to owner’s advantage and clarify that the
charter should still be considered a port charter.
A “whether in berth or not” clause is quite
commonly used in order to make what otherwise
would be a berth charter into a port charter.
“Whether in port or not”
It is more uncommon to add a “whether in port or
not” clause, and when done the effects are less
certain. As the question of what constitutes arrival
at port may not always be easily determined, the PHOTO: © Tomas Pinås, shipspotting.com
introduction of a “whether in port or not” clause can
clarify the issue and hopefully avoid unnecessary
discussion regarding the issues of arrival at port, tendering of valid in this respect and consequently rest easier that his NOR has been
NOR and commencement of laytime. tendered effectively.
Under a port charter, the owner may normally tender an effective Still, the question of when an effective NOR may be tendered
NOR when the vessel arrive at a safe place within the jurisdiction cannot be up to the sole and full discretion of the owner. Even with a
of the port and/or when the vessel is anchored at the customary “whether in port or not” clause, the vessel should still be somewhere
18 WIKBORG REIN JANUARY 2006