2012International Chamber of Shipping Representing the Global Shipping Industry

We acknowledge with thanks the use of photos from the following associations and their member shipping companies:

ANAVE, Spain BW Shipping, Singapore Canadian Shipowners’ AssociationChamber of Shipping of AmericaChina Ocean Going (Group) Co Confitarma, ItalyCyprus Shipping ChamberDanish Shipowners’ AssociationFinnish Shipowners’ AssociationHong Kong Shipowners’ AssociationInterferryIrish Chamber of ShippingJapanese Shipowners’ AssociationRoyal Association of Netherlands ShipownersSwedish Shipowners’ AssociationTurkish Chamber of ShippingUnion of Greek ShipownersVerband Deutscher Reeder, Germany

AnnualReview2012

Representing the Global Shipping Industry

ICS (the International Chamber of Shipping) is the principal international trade association for shipowners, concerned with all regulatory, operational and legal issues. ISF (the International Shipping Federation) is the identity used by ICS when representing the industry on employment affairs issues. The membership of ICS (and ISF) comprises national shipowners’ associations representing all sectors and trades from 36 countries, covering more than 80% of the world merchant fleet.

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page Contents 4 Chairman’sOverview 5 OfficeBearersandSecretariat

6 KeyIssuesin2012 6 The‘CostaConcordia’Disaster 8 ThePiracyCrisisContinues 10 NavigatingthePoliticsofClimateChange

15 TheYearinReview 15 LowSulphurFuel 16 BallastWaterManagement 17 ChangestoMARPOL 18 ShipRecycling 18 ShipbuildingStandards 19 CargoSafety 21 TankerSafety 22 MalaccaandSingaporeStraits 24 E-NavigationandECDIS 24 TrainingStandards 27 WorkHourRegulations 27 EmploymentRelations 29 MaritimeLabourStandards 30 ILOMinimumWage

page

31 AsianDevelopments 32 EUDevelopments 34 USDevelopments 34 TradeSanctions 38 LLMCIncreases 39 PassengerShipLiability 40 EnvironmentalSalvageAwards 41 RotterdamRules 42 CompetitionIssues 44 InvestigationofIGofP&IClubs 45 FlagStatePerformance 45 ShippingPolicyandFreeTrade 46 ShipbuildingPolicy 49 CanalIssues 50 IndustryRepresentationandCo-operation 52 Publications 54 OrganisationalMatters 55 ICSBoardofDirectors 56 CommitteeStructure Membership

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ICSChairman,SpyrosMPolemisGreece

THISICSANNUALREVIEWprovidesagoodopportunitytotakestockofeventsduringthelast12monthsthatmayhelptoshapethefuturedirectionofourgreatindustry,andofsomeofthemajorchallengesthatlieahead.Sadly,thiswillbethelastoccasiononwhichIprovidetheopeningremarkstothiscomprehensivereviewofICS’sactivitiesonbehalfoftheglobalshippingindustry.TheinfluencethatICSbringstobearonmaritimeregulatoryaffairsisconsiderable;somethingwhich-despitethehugepoliticalandtechnicalcomplexitiesinvolved-ICSdoeswithconsiderablesuccess,butwithcharacteristicallyquietefficiency.

However,inaworldofmassmedia,andwithaplethoraofdifferentinterestgroupsvyingforattention,falsemodestyisnolongerseenasavirtue.Therefore,assoonasIcametoappreciatetheremarkablebreadthofICS’sactivities,thedepthofitsexpertiseandtherespectwhichitenjoysamongstgovernmentsworldwide,oneofmytasksasChairmanhasbeentotrytoincreaseunderstandingandawarenessofICS’svitalrolewithintheshippingindustryatlarge.IhopethatthisexpandedICSAnnualReviewwillcontributetothattask.Likemostthingsinlifewhichwetakeforgranted,theserviceprovidedbyICSissomethingthattheindustrywouldfindveryhardindeedtodowithout.

ICS,itsmembernationalshipowners’associationsandtheindustrywhichtheyrepresenthavewitnessedagreatdealofchangesinceIwasfirstelectedChairmansixyearsago,againstabackdropofboomingshippingmarketswhichthenplungedintodeeprecession,aswellasmajorchallengesontheregulatoryfront.

Thelattersometimesplacedstrainonthemaintenanceoftheglobalregulatoryframeworkonwhichtheshippingindustrydependstooperateefficiently.Iamverypleasedtoreportthatthisframework,underpinnedbyIMOConventions,remainsfirmlyintactandisstillstronglysupportedworldwide,bygovernmentsandindustryalike.Buttherecontinuestobeaneedtobevigilantagainstunilateralorregionalregulation,notleastwithrespecttomeasurestoaddressshipping’sCO2emissions.DuringmytenureatICS,wehaveseentheadoptionofaradicalIMOagreementthatwilldramaticallyreduceairpollutionand,inJuly2011,thefirsteverglobalagreementcoveringanentireindustrialsectorthatwillensurethatshippingreducesitsCO2emissionsby20%pertonne/kmby2020,withfurthersignificantimprovementsinenergyefficiencygoingforward.Withrespecttothesafetyandwelfareoftheseafarersthatweemploy,andonwhomtheworlddependsfortheefficienttransportationof90%ofworldtrade,wehaveseenmajoradjustmentstotheInternationalSafetyManagement(ISM)CodeandtheIMOSTCWregimegoverningtrainingstandards,aswellastheadoptionoftheILOMaritimeLabourConvention.Thisisinadditiontotheincrementalbutnumerouschangestodetailedregulationsgoverningshipconstructionandequipment,maritimelawandinsurance,andthesmoothoperationofshippingmarkets,whichallhelptoensurethatshippingremainssafe,cleanandremarkablyefficient.TheseareallimportantdevelopmentsinwhichICS,anditsmembers,haveplayedacrucialpart,helpingtoensurethatthebestinterestsoftheindustryandsociety

arereconciledsofaraspossibleinasoundandpracticalmanner.

AsthisAnnualReviewmakesclear,thenextfewyearswillbeverydifficult,withglobaleconomicuncertainty,achronicoversupplyoftonnage,andtrulyenormouscostpressures,notleastwithrespecttobunkers,aswemovetowardsburninglowsulphurfuel.Shipownersalsofacetheprospectofbeingchargedbillionsofdollarsperyearforcarbonemissions,despitebeingbyfarthemostenergyefficientmodeofcommercialtransport.Newrequirementsforballastwatermanagementalsopresentaseriouschallenge,withrespecttoboththeirtechnicalandeconomicviability.

Ofmoreimmediateconcern,shipownersandtheircrewscontinuetofacethewhollyunacceptablescourgeofpiracy,offthecoastofSomaliaandelsewhere.IhavesaiditbeforeandIwillsayitagain,itreallyistimefortheinternationalcommunitytomakeitclear,andforgovernmentstounderstand,thatcriminalattacksagainstinternationalshippingcannotandwillnotbetolerated.

Meanwhile,thedangersofcomplacencywithrespecttotheindustry’sotherwisegenerallyexcellentsafetyrecordhavebeenputintothespotlightbythe‘CostaConcordia’tragedyandotherrecentaccidentsthatwillinevitablyresultwitharobustresponsefromtheregulators.Itmustbehopedthatthisresponsewillbemeasuredandbasedonathoroughanalysisofthefacts,aswellasaproperdebateaboutthetechnicalmeritsofargumentsforanyproposedchangestorulesorprocedures.ICSwillofcoursecontributeactivelytothisdebateintheyearahead.

Chairman’sOverview

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IamverypleasedthatmylastfewmonthsinofficehavecoincidedwiththeappointmentofMrKojiSekimizuasthenewSecretary-GeneralofIMO.Iamespeciallypleasedthat,whilstsharingICS’sultimategoalofzeroaccidentsandzeroimpactfromshippingontheenvironment,hetoobelievesthatmoreshouldbedonetoexplaintheimpressiveperformanceoftheindustrytoitsinternationalregulators,topoliticiansandtohighlevelpolicymakers.ICSlooksforwardtoparticipatingalongsideIMOatthe‘Rio+20’UnitedNationsSummitonSustainableDevelopmentinJune2012.IthastrulybeenapleasuretoserveastheChairmanofICS,aswellasagreatresponsibility.Ihaveverymuchenjoyedmycontactwiththemembernationalassociations,andImustexpressmydeepappreciationtotheICSBoardofDirectors,andtothosewhocontributewithsuchdedicationtothevitalworkofICS’sexpertcommitteeswhichproduceICSpolicypositionsanddevelopinvaluableguidanceonindustrybestpractice.Iwishmysuccessorwell,andIamveryconfidentthatunderhisleadershipICSwillcontinuetoservethebestinterestsofourindustryinthehighlyconsideredandprofessionalmannertowhichwehavebecomesoaccustomed.SpyrosMPolemisChairman

MrFrankLeonhardtGermany

ICSViceChairman2011/12

MrGerardoBorromeoPhilippines

MrTrygveSeglemNorway

CaptainDirkFryCyprus

SecretariatMrPeterHinchliffeSecretary General

*positionheldjointly

MrSimonBennettDirectorExternalRelationsMsLindaHowlettDirectorLegalAffairs*MsKiranKhoslaDirectorLegalAffairs*MissCamillaAranaPolicyOfficerMrPhillipBinksAdviserMrAlistairHullTechnicalManager

MrsSusanGrayDirectorFinanceandAdministrationMrsKathrynHallPersonalAssistanttoSecretaryGeneralMrsCatherineHowlettAdministratorPublications

MrJohnMurrayDirectorMarineMrsNatalieShawDirectorEmploymentAffairsMrDavidTongueDirectorRegulatoryAffairsMrJamesLangleySeniorAdviserMissEmilyRowleyAdviserMrJohnStawpertSeniorAdviser

MrsShantelRyanPublicationsManagerMrsAnitaPowAdministratorShippingPolicyMissJulieRogersAdministratorMarineDepartment

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The‘CostaConcordia’Disaster

a‘stateoftheart’vesselmannedbyahighlyqualifiedcrewwhowereusingthelatestnavigationalequipment.

On13January2012,inthefullglareoftheworld’smedia,thecruiseship‘CostaConcordia’groundedandcapsizedoffthecoastofItalywithover4,000peopleonboard.Tragically,atleast30liveswerelost.Thisseriousmaritimecasualtyappearstohavebeenatextbookcaseofanaccidentthatshouldneverhavehappened,madeallthemorepoignantbythe100thanniversaryofthesinkingofthe‘Titanic’withwhichcomparisonshaveinevitablyiferroneouslybeenmade.Thatsaid,questionsarebeingaskedaboutwhatmighthaveoccurredhadasimilarincidenttakenplaceatamoreremotelocationawayfromsophisticatedsearchandrescueservices.

TheItaliancruiseshipstruckrocksin

EVERYONEINSHIPPINGrecognisestheneedtobepreparedfortheunexpected.Whatwasnotforeseenwasthatthedefiningeventof2012wouldbethetragiclossofthe‘CostaConcordia’andthatthesafetyrecordoftheindustrywouldbeputunderthespotlightinthemostdramaticwayimaginable.Thishighprofiledisastermayalsohaveimplicationsforothertypesofshipbeyondthecruisesector,anditwillalmostcertainlyhaveasignificantinfluenceontheimmediateregulatoryagendaatIMO.

Safetyoflifeatseamustalwaysremainthehighestpriorityandthewayinwhichtheindustryaddressesanyissuesraisedbythismajoraccidentmayreflectonitsreputationforyearstocome.Itwillbevitalfortheindustrytounderstandthesequenceofeventsthatledtothedisaster,whichinvolved

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KEY ISSUES IN 2012

theTyrrhenianSeajustofftheeasternshoreofIsoladelGiglio,withmediareportssuggestingthatthevesselcametooclosetotheislandinwhatarewellchartedwaters.Itseemstheimpactrippedanenormousgashontheportsideofthehull,floodingpartsoftheengineroomandcausinglossofpowertopropulsionandelectricalsystems.Withwaterfloodingin,theshipreachedtheislandseveralhourslater,whereitgroundedinshallowwaterwithmostofthestarboardsideunderwater.

WithICSsupport,theCruiseLinesInternationalAssociation(CLIA)andtheEuropeanCruiseCouncil(ECC)ledtheimmediatesector-specificpublicrelationsresponse.Moreimportantly,CLIAmembershavebeenconductingarootandbranchreviewoftheirsafetyandoperationalprocedures.However,ICSwillbecloselyinvolvedintheinevitable

regulatorydiscussionsatIMO,aswellasintheEuropeanUnionandtheUnitedStates.TheEuropeanCommissionhasalreadyannouncedthatitwilllaunchapublicconsultationandlegislativereviewduringthecourseof2012whiletheUSCongressisconductingitsownhearingsgiventhatalargeproportionofcruiseshippassengersareUSnationals.

ItishopedthattheItaliangovernmentwillpresenttheresultsofitspreliminaryinvestigationsforconsiderationbytheIMOMaritimeSafetyCommitteeassoonaspossible,althoughitstaskiscomplicatedbecausethedisasterissubjecttoacriminalinvestigation.Whileitisstillfartooearlytoknowwhattheoutcomeoftheaccidentinvestigationwillbe,questionsraisedbythemediasuggestthataswellasnavigationalissuesandemergencyprocedures,stabilityissuesmaycome

underfurtherscrutiny.Thedebateaboutthelargesizeofmoderncruiseships,andarrangementsconcerninginsuranceforliabilities,arealsolikelytobegivenrenewedattention.ProposalstoreviewtheproperapplicationoftheIMOInternationalSafetyManagement(ISMCode)arealsoanticipated.

Forthemomentatleastitseemsthatpoliticiansandregulatorsarecommendablyrefrainingfromknee-jerkresponsesuntilthecausesoftheaccidentarefullyunderstood.However,thisapproachmayyetchangeduringtheyearaheadasmorefactsaboutthisunfortunateincidentarereleasedandthecriminalproceedingsinItalyreceivefurthercloseattentionacrossthemedia.

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ITISIMPORTANTtorecallthatthecontinuingcrisisintheIndianOceanandattacksagainstshippingbySomalipirateshavealreadyledtoover60seafarerslosingtheirlivesandover4,000seafarersbeingtakenhostage.PiracyhasalsobeenestimatedtocosttheglobaleconomybillionsofdollarsayearandiscausinguntolddamagetotheeconomiesofAfricaandtheMiddleEast.Buttheprincipalconcernofshipoperatorsishumanitarian.Itissimplyunacceptablethatsomanyseafarershavebeenkilled,whilehundredsmorearestillbeingheldcaptiveinappallingconditions.Thousandsofseafarersstillhavetotraversethedangerareainseriousfearfortheirlives,andthestrainontheirfamiliesmustalsonotbeforgotten.

Notwithstandingthesuccessofcurrentmilitarydeployments,thereisstillapressingneedforthegovernmentsofthosenationswiththelargestmilitarynaviesintheregiontoincreaseresourcesavailabletotheextentthatisnecessarytohaveagamechangingimpact.Inco-operationwiththerestoftheindustry,includingthoseorganisationssupportingtheexcellent‘SaveOurSeafarers’campaign,ICSiscommittedtohelpingensurethattheproblemofpiracyretainssufficientpoliticalandpublicattention,sothatthecrisismightbeproperlyanddecisivelyaddressedduring2012.

SomepressreportsmayhavegiventheimpressionthatthelevelofpiracyoffSomaliaisdecreasing.Butasdatafromthemilitarymakesclear,piratecapabilityisactuallyhigherthanever.However,counter-piracyworkintermsofcompliancewiththeBestManagementPracticesdevelopedbytheindustryinco-operationwithnavies(anupdatedversion–BMP4–wasissuedinOctober2011)andsustainedmilitary

interventionwithamoreaggressivestancehasreducedthepirates’rateofsuccess.Thankfully,thenumberofcrewheldinSomaliaisalsoatalowerlevelthanhasbeenthecaseforsometime,withabout200seafarerscurrentlyincaptivity,althoughitmustbestressedthatthissituationisstilltotallyunacceptable.

InFebruary2012,thePrimeMinisteroftheUnitedKingdomhostedamajorintergovernmentalconferenceonSomalia.ICSwelcomedthecommitmentsmadetotrytorestoregovernmentandcivilsocietyinthisconflictriddencountry,theabsenceofafunctioningstatebeingoneoftheunderlyingcausesofviolentSomalipirateattacks.However,addressingtheseissueswilltakeyearsifnotdecadesandtheConferencedidnotappeartoresultinanyfirmpoliticalcommitment,ornewaction,toeliminateorsignificantlyreducethescourgeofSomalipiracyintheimmediatefuture.

ICSbelievesthatgovernmentsmusttasktheirmilitaryforcestotaketheattacktothepiratesandensurethatthemilitaryassetsrequiredtodothisaremaintainedintheatresothattheycancontinuetodefendmerchantshipsinthebestwaypossible.Encouragingly,inMarch2012,EUgovernmentssignalledthattheymaybemovinginthisdirection,andextendedthemandateofOperationAtalantauntil2014.HoweverlittlementionwasmadeattheFebruaryConferenceoftheobligationsofgovernmentsundertheUnitedNationsConventionontheLawoftheSeatoprotectmerchantshipsandtheircrewsfrompiracy,andthefearpersiststhatthecurrentlevelofpirateattacksissomethingwhichgovernmentsmightbewillingtocontinuetotolerate

becauseshipsareoutofsightandoutofmind.

Governmentabdicationofresponsibilityforshipsecuritytoprivatearmedguards,towhomshippingcompaniesarenowresortinginincreasingnumbers,isnotaviablelongtermsolutionforeliminatingpiracy.However,becauseoftheirgrowinguse,ICSisnowpressingIMO,andtheInternationalContactGroupworkingundertheauspicesoftheUN,togiveurgentconsiderationtotheregulationofarmedguardsandthecriteriaagainstwhichtheymightbevetted.TheGUARDCONcontractlaunchedbyBIMCOisaveryhelpfultool,butitdoesnotaddresseverylegalproblemtowhichshippingcompaniesandMastersmightpotentiallybeexposed.

AnotherkeyobjectiveofICSistoensurethateverycapturedpirateissenttotrial.Counter-piracyeffortshavebeengreatlydiscreditedbythelackofappropriatedomesticlegislationinmanynations,includinganyoffenceof‘intenttocommitpiracy’.ThishasledtoacontinuationoftheabsurdsituationwherebypirateswhoarecapturedbynaviesaresometimesreleasedbacktoSomalia.ICShasthereforewelcomedthefocusoftheFebruaryConferenceontheneedforapprehendedpiratestobearrested,takentoacourtoflawand,iffoundguilty,imprisoned,includingtheannouncementtoestablishanewRegionalAnti-PiracyProsecutionsIntelligenceCo-ordinationCentrebasedintheSeychelles.

ICShasalsowelcomedthedeterminationofgovernmentstobreakthefinancialchainthroughlegalactionagainstcriminalfinanciersinvestinginpiracywhereverintheworldthey

ThePiracyCrisisContinues

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KEY ISSUES IN 2012

areidentified.However,theshippingindustrywouldbedeeplyconcernedbyanysuggestionthatthepaymentofransoms,inordertosecurethereleaseofseafarersbeingheldhostage,shouldbeprohibitedorsomehowcriminalised.TheUKForeignOfficehasadvisedthatthisisnottheintentionbehindanewinternationaltaskforceonpiratefinancingthatisbeingestablishedin2012.However,thepossibilityofbanningransomshasreceivedconsiderablemediaattentionandsometimesunhelpfulcommentfromseniorpoliticianswhoshouldperhapsbemoremindfulofunintendedconsequences.

Intheeventthatseafarersaretakenhostage,theinabilityoftheinternationalcommunitytoeliminatepiracyortorescuehostagesmeansthatshipownershavenooptionbuttopayransoms.Thealternativewouldbeforshipownerstoabandon

theircrewstomonthsifnotyearsofappallingtreatment.Thisincludestortureandmurder,whichhasalreadybeentheresultwhenransomshavenotbeenpaid.Intheeventthatransompaymentswereprohibitedorcriminalised,manyseafarersandshippingcompanieswouldunderstandablyrefusetosailintheaffecteddangerarea,withsignificantimplicationsforthelargeproportionofworldtrade,includingabout40%oftheworld’soilshipments,whichistransportedviatheWesternIndianOcean.

Toreiterate,theprimaryconcernoftheindustryishumanitarian,andshipownershaveadutyofcaretotheircrewsandtheirfamilies.MentionmustthereforebemadeoftheimportantworkoftheMaritimePiracyHumanitarianResponseInitiative,towhichICShascontributed,thathascompiledgoodpracticeguidelines

forshippingcompaniesandmanningagenciestohelpsupportseafarersandtheirfamiliesaffectedbypirateattacks.

FindingasolutiontopiracyremainsaclearpriorityforICS,whichnowfindsitselfparticipatinginnumerousmeetingsatIMOandthevariousworkinggroupssetupbytheInternationalContactGrouponPiracyofftheCoastofSomalia.Whileallthesemeetings,inLondon,NewYorkandelsewhere,aretakingimportantdecisionswithrespecttodetailedfacetsoftheproblem,theyareperhapssymptomaticofthefactthatconsiderationofpiracyisbecominginstitutionalisedandthatgovernmentsmaystillbesidesteppingtherealissueofhowtotacklethepiratesmilitarily.Thetimehassurelycomeforaclearmessagefromtheinternationalcommunityofzerotoleranceofpiracyacrosstheglobe.

Year 2009 2010 2011

Pirate Attacks 117 127 151Disruptions 14 64 27Piratings 46 47 25

Source:EUNAVFOR

INJULY2011,150ormoreIMOMemberStatesconcludedagroundbreakingagreementtoreducetheshippingindustry’sCO2emissions.Thisisthefirstsuchglobalagreementforanentireindustrialsector.AsaresultofamendmentstotheMARPOLConvention,newshipswillhavetobebuiltwithanEnergyEfficiencyDesignIndex(EEDI),whilefrom2013allships,includingexistingships,willhavetoutiliseaShipEnergyEfficiencyManagementPlan(SEEMP)inordertocontrolfuelconsumptionandreduceemissions.

AsaresultofthisIMOagreementontechnicalandoperationalmeasures,andthestepsthatshipoperatorsarealreadytakingtoreducefuelconsumption,ICSisconfidentthatshippingcandelivera20%reductioninemissionspertonne/kmby2020acrosstheentireglobalindustry.

ObjectiveobserversmightbeforgivenforthinkingthatthisIMOagreementisaveryimpressiveachievement,especiallyasshippingisalready,byfar,themostenergyefficientformofcommercialtransport.However,anumberofgovernmentsstillexpectmuchmore.InthecontextofthenewGreenClimateFundthatwasestablishedbythemostrecentUnitedNationsClimateChangeConference,somegovernmentshaveactuallyproposedthatshippingshouldpayasmuchasUS$40billionperyearfortheprivilegeoftransporting90%oftheworld’strade.

TheIMOagreementontechnicalandoperationalmeasuresenjoysthefullsupportoftheshippingindustry.ICShasrecommendedthatallnewshipscurrentlycoveredbytheregulationsaredeliveredwithanEEDI,eventhoughflexibility

Navigating thePoliticsofClimateChange

existstoapplyforflagstatewaivers.ReducingCO2emissionsthroughreducingfuelconsumptionisamatterofenlightenedselfinterestforshipoperators,andtheindustryisfullyengagedinthecontinuingdiscussionsatIMOaboutrefiningtheEEDIandextendingittoshiptypesforwhichEEDIformulaehavenotyetbeenfinalisedduetothemoreproblematicnatureofthecalculations.

Aboveall,theIMOagreementisstronglysupportedbyshipownersbecauseoftheoverridingneedforglobalrulesforaglobalindustry.Ifdifferentrulesweretoapplytoshipsatdifferentendsofavoyagetherewouldbechaos,inefficiencyandseriousmarketdistortion.Aregionalapproachtoreducingships’emissionswouldalsobefarlesseffectiveinactuallyreducingCO2.Climatechange,ofcourse,isaglobalchallenge.

Notwithstandingtheconsiderableeffortsbeingmadetoreduceshipemissionsthroughtechnicalandoperationalmeasures,theindustryisunderpressuretoaccepttheadditionalburdenofsocalledMarketBasedMeasures(MBMs).MarketBasedMeasurestoreduceCO2remainaverycontroversialissueamongshipowners.SomegovernmentsarguethatMBMswillsomehowincentiviseshipownerstoachievefurtherefficiencygains,andmightbridgethegaptheyperceivebetweenthesignificantefficiencyimprovementsthatshippingisalreadydeliveringandtheexpectationsthattotalmaritimetradewillcontinuetoexpandinresponsetothe(longterm)predictedgrowthoftheworldeconomy.

Butinthefaceofrisingfuelcosts,shipownersreasonablybelievethattheyalreadyhaveeveryincentiveto

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KEY ISSUES IN 2012

improvetheirfuelefficiency.Theintroductionoflowsulphurfuels,aspartofaseparateIMOagreement,isalsoexpectedtoincreasebunkercostsbyinexcessof50%.With2012lookinglikeoneofthemostfinanciallydifficultyearsforshipownersinlivingmemory,nowiscertainlynotthetimetointroduceanadditionalcostpressureintheformofanMBM.ManyintheindustryareconcernedthatsomegovernmentsaremoreinterestedinhowmuchmoneycanbesqueezedfromshippingthroughanMBM,ratherthananyfurtheremissionsreductionthatthismightactuallydeliver.ThechallengeforICS,astheindustry’sprincipalinternationaltradeassociation,isthatdespiteshipowners’justifiedsuspicionsaboutMBMs,itisnecessaryfortheindustrytoaddressthepoliticsofclimatechangeandsomedifficultrealities.

ThefirstoftheseisthattheUNFCCC,anditshighleveldiscussionsaboutreplacingtheKyotoProtocol,isinlargepartdrivingtheagenda.Inaddition,therearethesignificant,andsomewouldargueunrealistic,commitmentsthathavealreadybeenpledgedbynationssuchasEUMemberStates,toreducetheirtotalCO2emissionsdramatically.UnlessIMOcandemonstratethatitismakingrealprogresstowardsthedevelopmentofaninternationalMBMforshipping,theindustrymaybefacedwiththeunwelcomeprospectofregionalaction.

TheotherimportantpoliticalrealityisthedecisionbythemostrecentUNClimateChangeConferenceinDurban,inDecember2011,toestablishtheGreenClimateFund.ThisaimstogenerateUS$100billionperyearby2020,inordertohelpmitigationandadaptationprojectsin

Regulationsenterintoforceforover90%ofworldfleet

ShipEnergyEfficiencyManagementPlan(SEEMP):mandatoryimplementationforallships

EEDIrequiresnewshipstomeetagreedefficiencytargets

Newshipsmustimproveefficiency10%

20%CO2reductionpertonne/km(industrygoal)

50%CO2reductionpertonne/km(industrygoal)

Newshipsmustimproveefficiencyupto20%

Newshipsmustimproveefficiency30%

IMOagreementontechnicalregulationswillreduceships’CO2MARPOLAnnexVI,Chapter4adoptedJuly2011

2013 2015 2020 2025 2030 2050

developingnations.Insimpleterms,thiscanperhapsbeseenasthepriceforpersuadingdevelopingnationstoagreetocontinuenegotiationsonanewUNclimatechangeaccord,scheduledforadoptionin2015.ThisnewUNagreementisintendedtoincludecarbonreductioncommitmentsbyemergingeconomies,notjustfromdevelopedorsocalled‘AnnexI’nationsasisthesituationatpresent.BetweennowandthenextUNClimateConference,inQatar,inDecember2012,theUNFCCCmemberswillbegintoconsiderhow,andfromwhom,thismoneyisgoingtoberaised.

AhighlevelworkinggroupsetupbytheUNSecretaryGeneralandchairedbythepremiersofNorwayandEthiopiahasappearedtosuggestthatsomeUS$16billionperyearcouldberaisedfrominternationalshipping.ButinamorerecentWorld

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TowardsanIMOMBMICSisleadingindustryrepresentationonthediscussionsatIMOtodevelopaMarketBasedMeasureforshipping,withIMOhavingaviewtoadoptionin2014.

In2011,ICSmemberstooktheimportantdecisiontodeclaretheindustry’spreferenceforanMBMdirectlylinkedtofuelconsumption,ratherthananemissionstradingscheme(ETS).IfgovernmentsdecidethatanMBMshouldbeadopted,ICSmembershaveagreedthatamechanismlinkedtofuelconsumptionistheonethatmostshippingcompaniescouldprobablylivewithinordertoensurealevelplayingfieldandtheavoidanceofseriousmarketdistortion,concludingitwouldbefarsimplertomanageandmoretransparentthananETS.

Inawelcomemove,theIMOSecretary-GeneralhasannouncedtheintentionofIMOtoconductafullimpactassessmentofthevariousMBMproposals,withdetailedtermsofreferencetobedevelopedin2012.

Bankreport,preparedfortheG20SummitinCannesinNovember2011,itwassuggestedthatshippingshouldcontributesomeUS$25billionperyear.Andthedemandsdonotstopthere.SomegovernmentshavepublicallysuggestedthatonlyaproportionofanymoneycollectedfromshippingshouldactuallygointotheGreenFund,andthatasignificantchunkshouldgostraightintothetreasuriesofthegovernmentscollectingit,implyingthatthechargeimposedonshippingcouldactuallybeevenmore,perhapsasmuchasUS$40billionperyear.ThepositionofICSisthatifgovernmentsdecidethatshippingshouldcontributetotheGreenFund,thenthepaymentsshouldbeproportionatetoshipping’scontributiontotheworld’stotalCO2emissions.TocontributethekindofsumswhichtheWorldBankhassuggestedwouldbetotallyinequitable

andalmostcertainlyviewedbymanyemergingeconomiesasataxontrade

–aformof‘greenprotectionism’.

However,theparamountgoalfortheshippingindustryistheavoidanceof‘doublecharging’throughcontributionstotheUNFCCCandviaanyMBMagreedatIMO.TherewouldthereforeseemtobeaneedforaclearlinkagebetweenanyIMOMBMandanyshippingcontributiontotheGreenFund.

TheotherpoliticalrealitythatshippinghastoaddressistheUNFCCCprincipleofCommonButDifferentiatedResponsibility(CBDR),wherebytheemissionreductioncommitmentsacceptedbydevelopingnationsarelessthanthoseofmatureeconomies.ThechallengehasbeenhowtoreconcilethiswiththeIMOprincipleofnomorefavourabletreatmentforshipsunderdifferentflags.On

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ComparisonofCO2emissionsbetweendifferentmodesoftransportgramspertonne-kmSource:NTM,Sweden

600

500

400

300

200

100

0

Cargovessel2,000-8,000dwt

21

Air freight

747-400 1,200 km

flight

540

Cargo vessel over 8,000 dwt

15

Heavy truck with

trailer 50

theonehand,theEuropeanUnionthreatensregionalactionifIMOfailstodeliveronCO2,whileontheother,developingnations-ledbyChina,IndiaandBrazil-remainopposedtosupportinganIMOagreementwhichtheyfearmightprejudicetheirpositionatthehighlevelUNFCCCnegotiations.

Intheevent,withtheindustry’sfullsupport,IMOhasalreadyproveditselftobeeminentlycapableofdeliveringaglobalsolutionforshippingwhichcanbereconciledwiththeCBDRprinciple.TheJuly2011agreement,whichadoptedbindingglobalregulationsfortechnicalandoperationalmeasurestoreduceships’emissions,willenterintoforceinJanuary2013andwillapplytoatleast90%oftheworld’stonnage.ToaddressCBDR,theagreementincludedregulationsontechnologytransferandtechnicalassistancefordevelopingnations(althoughthedetailsofhowthiswillworkarestill

beinghotlydebated)aswellasaflagstatewaiverwithrespecttotheEEDI(althoughtheindustryhasdecidednottomakeuseofthis).

SecuringsupportforanIMOMBMfromnationslikeChinaandIndiawillalsorequireaccounttobetakenofCBDR.However,reconcilingtheCBDRprinciplewithanIMOMBM,whichmustapplyequallytoshipsofallflagsinordertoavoidmarketdistortion,willnotbeaneasytask.ButifanyofthemoneycollectedbyanIMOMBMwaschannelledtotheGreenFund(perhapsviaanIMOcompensationfundintowhichmoneyraisedfromshippingwaspaid)thiscouldperhapsbeameansofmeetingtheCBDRprinciple.Developingnationswouldbereceivingmoremoneythantheywerecontributing,whilepreservingthelevelplayingfieldforshipping.However,thechallengeofpersuadingnationssuchasChinaandIndiato

agreetosuchanapproachshouldnotbeunderestimated.

ICSwillcontinuetosupportIMOasthebodywherediscussionsaboutashippingMBMandanycontributiontotheGreenFundshouldtakeplaceHowever,theindustrywillfirmlyresistanynotionthatitcanberegardedasacashcow,andwillcontinuetoemphasisethatthebestmeansofdeliveringmeaningfulCO2emissionreductionwillbethroughtechnicalandoperationmeasures,ratherthanamechanismwhoseprincipalpurposeissimplytoraisemoney.

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RepresentingtheGlobalShipping

Industry

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TheYearinReview

LowSulphurFuel

In2008,IMOadoptedradicalamendmentstoMARPOLAnnexVIgoverningatmosphericpollution,whichformostshipswillrequiretheuseofexpensive,distillategrade,lowsulphurfuel.Whiletheuseofexhaustgascleaningsystems(scrubbers)ispermittedasanalternative,itisstillunclearwhetherthesewillbetechnically,environmentally,oreconomicallyviableforuseonawidespreadbasis.

Theenormityofthischange,anditseconomicimpactonshippingshouldnotbeunderestimated.Fuelisbyfarthelargestoperationalcostforshipownersandhasalreadyincreasedinpricebyabout300%since2000.Thecurrent50%pricedifferentialbetweendistillateandresidualfueloilispredictedtoincreasefurtherifthenewdemandthatwillbecreatedbytheMARPOLrequirementsisnotmatchedbyincreasedsupply.Exhaustgasscrubbers,assumingtheywork,andthatquestionsareresolvedaboutthewastethatisproduced,havebeenpredictedtocostinexcessofUS$2millionperengineiffittedonboardlargerships.

PerhapsthemostcontroversialrequirementinMARPOLAnnexVIconcernstheneedforshipsoperatinginEmissionControlAreas(ECAs)toburnfuelwithnomorethan0.1%sulphurasfrom2015.Atpresent,theBaltic,theNorthSea,andtheentireWestandEastcoastsoftheUSandCanadahavebeendesignatedassulphurECAsbyIMO,attherequestofthegovernmentsconcerned.Thispresentsamajorchallengefortheoilrefiningindustrywhichwillhavetoexpandtheproductionofcompliantlowsulphurfueltomeetthenew

demand.ThisiscomplicatedbythefactthatitisnotyetfullyknownwhichadditionalareasmaybedesignatedasECAs.Forexample,theEuropeanParliamenthasproposedthatallEUwaterswithin200milesofthecoastshouldbedeclaredassulphurECAs.WhetherthiswillbeacceptedbyEUMemberStates,orinturnwillbesupportedbythescientificstudiesrequiredtogainIMOapproval,isstillanopenquestion.

WhentheMARPOLamendmentswereadopted,ICSwelcomedtheIMOagreementasanacceptablecompromise,althoughthiswasinthecontextoftheevenmoredraconianmeasuresproposedbymanygovernments,andthethreatbytheEUtoimposeanimmediateregionalsolutionifIMOwasunabletodeliveraglobalagreement.Howevertheimplementationofthenewrequirementswillbefarfromeasy,andICSiscloselymonitoringtheprogressthatisbeingmadetoensurethatthedemandfromshippingfordistillatefuelcanactuallybemet.IntheUnitedStates,itisstillveryunclearwhetherornotenoughfuelwillbeavailablefortheUSshippingindustry,letalonethehugeamountofinternationalshippingthattradesinandoutoftheworld’slargesteconomy.

RecentstudiessupportedbytheEuropeanCommunityShipowners’Associations(ECSA)havealsosuggestedthatthemodalshifttolandtransportthatwillprobablyresultfromtheapplicationofthe0.1%limitonsulphurinfuelcouldgreatlydamagelocalshortseashippingwhilebeingdetrimentaltothelocalenvironment.ThisisalsoabigconcernforGreatLakestradesaffectedbytheUS/Canada

15

RepresentingtheGlobalShipping

Industry

ECA.Theseconcernsarenowsharedbymanygovernments,butitremainstobeseenifanywillrequestthatIMOshouldnowrevisittherequirements.

WhilethereisaformalmechanismintheIMOagreementtocompleteareviewby2018ofprogressmadetowardsmeetingthedemandfor0.5%sulphurfuelthatismeanttobeusedoutsideofECAsby2020,ICShasbeenpressingIMOtostartworknowondevelopingamethodologythatcanconsiderallofthemajorchangesrequiredbythenewregime.Forpoliticalreasons,theUSandEUgovernmentshavesofarbeenreluctanttosupporttheICSproposal.Butthisissueoffuelavailabilityisbecomingincreasinglypressing,andICSwillagainmakeaformalwrittenproposaltotheIMOMarineEnvironmentProtectionCommitteeinOctober2012.

IMOagreementtoreduceatmosphericpollutionfromships

Year 2005 2010 2015

1.5%

1.0%

0.1%

SulphurcontentoffuelpermittedinEmissionControlAreas

BallastWaterManagement

TheIMOBallastWaterManagement(BWM)Conventionwasadoptedwithgreaturgencybygovernmentsin2004,inordertoaddressenvironmentalconcernsaboutdamagetolocalaquaticecosystemscausedbytheunwantedintroductionofforeignmicro-organisms,whichisapparentlyfacilitatedbyinternationalshipping.

TheadoptionoftheBWMConventionwasaclassiccaseofaspirationallegislation.Forreasonsthatarewellunderstood,includingtheeconomicdamagetotheUSeconomyfromtheunwantedinfluxofzebramussels,therewashugepoliticalpressureforIMOtoadopttheConventioneightyearsago.Buttheequipmentneededtocomplywiththenewrequirements,andthecomplextechnicalguidelinesneededtoensureproperimplementation,hadnotthenbeendeveloped,whichiswhyitisonlynowthatgovernmentsarealmostinapositiontoratify.

FollowinganincreaseinthenumberofratificationsithadbeenexpectedthattheConventionwouldenterintoforceduring2012.However,atanIMOmeetinginJanuary2012,somemajorchangeswereproposedtoimportantdraftguidelinesonballastwatersamplingandanalysisthatwillbeusedbyportstatecontrolinspectors,whichwouldbeverydamagingtoshipownersifadopted.ICSmadeastrongstatementattheendoftheIMOmeetingaboutthedirectionthathadbeentakenand,supportedbymanyflagstates,thesedraftguidelineswillnowbereconsidered.However,thisnowmeansthatthesesamplingguidelineswillnotbeagreeduntilatleast2013,whichinturnisexpectedtofurther

Timetablefornewlimitstosulphurcontentinships’fuelagreedbyIMO

2010-EmissionControlArea(ECA)limitreducedto1%(from1.5%)

2012-Globallimitreducedto3.5%(from4.5%)

2015-ECAlimitreducedto0.1%

2020-Globallimitto0.5%butareviewin2018,withauthoritytodelayimplementation,willdeterminewhetherthisisachievable.

2025-Globallimitto0.5%notwithstandingtheresultofthe2018review.

16

Reductioninnumberofmajoroilspillsperyear(over700tonnes)Source:ITOPF

1972-1981 1982-1991 1992-2001 2002-2011

250

200

150

100

50

0223 94 64 31

delaytheadditionalratificationsneededtobringtheConventionintoforce.ThiscreatesotherproblemsforshipownersduetothefixeddatesbywhichexistingshipshavetoinstalltheveryexpensivenewtreatmentequipmentasrequiredbytheConvention’stimeline.

Therearestillgenuineconcernsabouttheavailabilityofsuitableequipment,therobustnessofthetypeapprovalprocess,thehugeexpenseofretrofittingexistingships,andthepresentlimitedpossibilitiesfortreatmentsystemsforlargervessels.Thatsaid,progressisnowbeingmadetoapprovevariousballastwatertreatmentsystemsasanalternativetoballastwaterexchangeatseaoncethisisnolongerpermitted.

Completionofthisworkislongoverduegiventhatnewshipsarealreadymeanttobeconstructedwiththeseexpensivenewtreatmentsystems.ICShascontributedsignificantlytothisworkandcontinuestoprovideaconsultanttotheGESAMP(JointGroupofExpertsontheScientificAspectsofMarineEnvironmentProtection)BallastWaterWorkingGroupthathasbeenconductingthedetailedassessmentofthenewequipment’senvironmentalacceptability.Meanwhile,ICScontinuestoencouragefullco-operationwithlocalballastwaterexchangerequirementswhereveritissafeforshipstodoso.

SolongastheBWMConventionhasnotenteredintoforce,thiswillcontinuetoencouragethedevelopmentoflocalrequirementsthatareatvariancetothoseagreedbyIMO(seeseparateitemonUnitedStatesDevelopments).Thepossibilityremainsofballastwaterchaos.

ChangestoMARPOL

InadditiontothehighprofilediscussionsaddressingCO2andotheratmosphericemissions,awiderangeofotherenvironmentalissuesremainonIMO’sagendarequiringdetailedinputfromICS.AlargeproportionofICSresourcesiscommittedtoparticipatingintheongoingworkofnumerousIMOCommitteesandworkinggroupswhichareconstantlyupdatingenvironmentalregulationsandtechnicalcodes.

Meanwhile,atthe‘high’politicallevel,ICSplanstosupportIMOinitsparticipationatthe‘Rio+20’UnitedNationsConferenceonSustainableDevelopmentinBrazilinJune2012.ThiswillprovideauniqueopportunitytohighlightthesuccessthattheindustryandIMOhavehadindeliveringcontinuousimprovementinshipping’senvironmentalperformancethroughthedevelopmentofa

comprehensiveregulatoryframeworkandthewidespreadglobalenforcementoftheInternationalConventionforthePreventionofPollutionfromShips(MARPOL).InJuly2011,IMOadoptedchangestoAnnexVoftheMARPOLConvention,concerninggarbage,thatwillenterintoforceinJanuary2013.TheseweresupportedbydetailedguidelinesadoptedbytheMarineEnvironmentProtectionCommitteeinMarch2012.Thereisnowanewrequirementspecifyingthatdischargeofallgarbageintotheseaisprohibited,exceptwhereexpresslyprovidedotherwise(thedischargesstillpermitted,incertaincircumstances,includefoodwastes,cargoresiduesandwaterusedforwashingdeckandexternalsurfacescontainingcleaningagentsoradditiveswhicharenotharmfultothemarineenvironment).FollowingtheparalleladoptionbyIMOofnewGuidelines

17

RepresentingtheGlobalShipping

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onGarbageManagementPlansthatmustbecarriedonboardships,ICSwillbereviewingitsownmodelplanandbestpracticeguidelinesforshipowners.

Somewhatcontroversially,inJuly2011IMOalsoadoptedamendmentstoMARPOLAnnexIVconcerningthepreventionofpollutionbysewagefromships,whichincludethepossibilityofgovernmentsestablishing‘SpecialAreas’forthepreventionofsuchpollutionfrompassengerships,andwhichdesignatetheBalticSeaasthefirstsuchSpecialArea.TheimpactofpassengershipswithrespecttonitratepollutionoftheBalticiswidelyacknowledgedtobeinsignificantincomparisontomajorsourcesofpollutionsuchasagriculture.Theoperationalimplicationsofcomplianceandthedifficultiesoffindingsuitablereceptionfacilitiesareoutofallproportiontotheenvironmentalbenefit.Therealconcern,however,istheprecedentthismightcreatefortheintroductionofallsortsofotherMARPOL‘SpecialAreas’beingestablished,potentiallyapplyingtoallshiptypes.ICShasalreadyhadtocountersuggestionsthattheAnnexIVSpecialAreamightalsoapplytocargoshipswhichtypicallyhave20personsonboardasopposedto2,000.Thereisadangerthatsuchspecialpleadingbycoastalstatesmaygraduallyservetoerodetheconceptofatrulyglobalregulatoryframework.

ShipRecycling

ICSremainsfirmlycommittedtotheearlyentryintoforceoftheIMO(HongKong)ConventionontheSafeandEnvironmentallySoundRecyclingofShips,notleastthroughthepromotionoftheinter-industry

GuidelinesonTransitionalMeasuresforShipownersSellingShipsforRecycling,whosedevelopmentwasledbyICS.TheindustryGuidelinesarespecificallyintendedtohelpimprovesafetyandenvironmentalconditionsinrecyclingyardsinadvanceoftheentryintoforceofthenewConvention.

ICScontinuestoco-operateinanambitiousIMOprogrammetopromotethenewShipRecyclingConvention.InMarch2012,IMOadoptedfurtherguidelinesonimplementationforPartiessupportedbyguidelinesfortheauthorisationofshiprecyclingfacilities.ItisverymuchhopedthatthesewillnowbeappliedbythosegovernmentswithauthorityoverthevastmajorityoffacilitieswhicharelocatedinAsia.Theearlyidentificationofsoundrecyclingfacilitiesshouldgreatlyassisteffortsbyshipownerstomeettheirresponsibilitiesonavoluntary

basisinadvanceoftheHongKongConventionenteringintoforce.

ShipbuildingStandards

Themaintenanceofhighstandardsofshipconstructionisoftheutmostimportance.TheobjectiveofICSisthatshipbuildingstandardswillcontinuetobetakenforwardsothatwithanappropriatelevelofmaintenance,andadequatemarginsforcorrosion,futureshipswillbeconstructedsothattheywillcontinuetobe‘fitforpurpose’throughouttheirtypical25yearlifespan.

ICScontinuestoparticipateinacrossindustryinitiative,co-ordinatedbytheInternationalAssociationofClassificationSocieties(IACS)toprovideguidanceontheharmonisationandamendmentoftheCommonStructuralRules(CSRs)forbulkcarriersandtankers.Theintentionistoprovideaharmonisedsetofrules,forusebyallclasssocieties,oncommonaspectsofhullstructuredesign,supplementedbydedicatedsectionsonthespecificrequirementsforthesetwoshiptypes.IACShasbeenoverwhelmedbythehugenumberofcommentsreceivedfromshipowners,alargeproportionofwhichhaveleddirectlytoproposalsforrulechanges.Whilethecarefulattentionbeinggiventothisfeedbackfromindustryisverywelcome,itseemsthatthefinalisationofthenewrules,sothattheymaybesubmittedtogovernmentsatIMO(forusewiththeIMOGoal-basedStandardsinitiative)isnowlikelytobedelayeduntil2013.

CloselyrelatedtotheIACSCSRs,IMOcontinuestofinalisearrangementsfortheimplementationofthe2010amendmentstotheSOLAS

18

Conventionconcerningthenew‘Goal-basedStandards’(GBS)fortheconstructionofbulkcarriersandoiltankersof150moroverinlength.IthasnowbeenresolvedthatclasssocietiesshouldpayfortheGBSverificationprocess,butquestionsremainastowhetherthereisanadequatenumberofsuitablyqualifiedauditors.

InChina,inOctober2011,theChairmanledanICSdelegationtothelatestroundof‘Tripartite’discussionsaboutshipbuildingstandardswithrepresentativeorganisationsofshipowners,classificationsocietiesandshipyards.Topicsconsideredincluded:measurestoreduceCO2emissionsincludingtheapplicationoftheEEDIandrequirementstoensuretheprovisionofadequateship’spower;thechallengespresentedbytheimplementationoftheIMOBallastWaterManagementandShipRecyclingConventions;andthereviewbeingundertakenbyIACSofitsCommonStructuralRules.ICSwillbeco-ordinatingthearrangementsforthenextTripartitemeetingtobeheldinKoreainNovember2012.

CargoSafety

Thetransportofgoodsbyshipmaysometimesinvolveahighdegreeofphysicalriskduetothedangerspresentedbytheharshconditionsthatoftenprevailatsea.Forthemostpartthesearerisksthatcanbesuccessfullyandsafelymanagedbyshipoperatorsandtheircrews.However,suchriskscanbeseriouslymultipliedwheninsufficientcareisgiventothesafeloadingofcargoes,afactorwhichissometimesbeyondshipowners’directcontrol.WhileIMOhasbeenverysuccessfulwithrespecttoensuringthatshipbuildingstandardsand

19

safenavigationalproceduresarewidelyenforcedbygovernments,therigorousapplicationofIMOstandardsdoesnotalwaysextendsoeffectivelytothoseactionsthatoccurfarbeyondtheship/portinterface.

Thesefearshaverecentlybeenbroughthomeinamostdisturbingmanner.Thereisnowveryseriousconcern(andanger)throughouttheindustryabouttherecentlossofseveralshipscarryingnickelore/ironorefinesloadedinIndia,thePhilippinesandIndonesia,apparentlyduetocargoliquefactioncausingcargotoshiftdramatically.Somecargoes,itseems,arebeingdeliberatelymisdeclared.Especiallyupsettingwasthetragiclossof22seafarersonthe‘VinalinesQueens’afterloadinganickelorecargoinIndonesia,inDecember2011.ItmustbestressedthatsuchproblemsarenotconfinedtoAsia,withbulkcarrieroperatorsreportingthatthewatercontentofironorecargoesisbeingsimilarlymisdeclaredbyshippersinBrazil.

ICSacknowledgesthattheissuesarecomplex,buttherootoftheproblemwouldseemtobetherefusalofsomeshipperstoallowtheappointmentofindependentsurveyorstoconductcargotestinginaccordancewithIMOrequirements,plusthecommercialpressureplacedonMasterstoacceptpotentiallyunsafecargoesatwhatareoftenremotelocations.Thepreventionofsimilarincidentsisanutmostpriority.Inco-operationwithIMO,Intercargo(whichrepresentsbulkcarrieroperators)theInternationalGroupofP&IClubs,andthegovernmentsofthosenationswhereproblemsseemtoexist,ICSisendeavouringtohelpfindasolutionthatwillassistshipownersandMasterstoresistanypressuretoacceptunsafecargoes.

Meanwhile,containershippingcompaniescontinuetobeconcernedbytheincidenceofshippersprovidingincorrectcontainerweights,andtheneedtoensurethatmarineterminalsalwaysverifytheweightofloadedcontainersagainstthecargomanifest,priortoloadingonboardship.FollowingaproposaltotheIMOMaritimeSafetyCommitteemadebyICSandtheWorldShippingCouncil(WSC),IMOhasbeenconsideringhowitmightestablishanewinternationalregulatoryrequirementtoaddressthisproblem.

Theindustry’saimisthatallexportedcargocontainersshouldhavetheirweightsverified,andthatthisinformationshouldbeconfirmedbythemarineterminaluponreceipt,andbeforevesselloading,andmadeavailabletotheshipoperatorsoitcanbeusedforstowageplanning.Aswellasimprovingsafety,sucha

measurewouldhelptoaddresswidersecurityconcernsaboutthecontentofcontainers.Inawelcomemove,theInternationalAssociationofPortsandHarbors(IAPH)gaveitssupporttothisinitiativeattheendof2011.

Disappointingly,forreasonsnotentirelyclear,somegovernmentshavesofarbeenlukewarmabouttheindustryproposaltoamendtheSOLASConventionanditremainstobeseenhowtheconceptwillbetakenforwardduring2012.Butintheabsenceofarequirementthatcontainerweightsdeclaredbyshippersareverifiedbyterminalsitseemslikelythatasubstantialnumberofcontainerswillcontinuetobemisdeclaredandthatoverweightcontainerswillcontinuetoposeaseriousrisktosafeshipoperations,toships’crew,andtootherpersonnelinthetransportchain.

Totallosses1994-2011bynumberofvessels(over500GT)Source:IUMI

200

180

160

140

120

100

80

60

40

20

0‘94 ‘95 ‘96 ‘97 ’98 ‘99 ‘00 ‘01‘02 ‘03 ’04 ’05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11

20

RepresentingtheGlobalShippingIndustry

TankerSafety

In2012,IMOwillbeapproachingtheendofamajorreviewoftankersafetythatissettoresultinsomeimportantregulatorychanges.ThiswasinresponsetoamajorreportbyanInterIndustryWorkingGrouponFiresandExplosionsonBoardTankers,towhichICScontributedwiththeOilCompaniesInternationalMarineForum(OCIMF)andIntertanko,andwhichwaspresentedtoIMOin2007followingasequenceofsometimesfatalexplosionsontankers.

ICShasplayedanactivepartinthediscussionsatIMOontheextensionofthepracticeof‘inerting’cargotankatmospheres.AtameetingoftheIMOFireProtectionSubCommitteein2011,animportantdecisionwasmadewithrespecttotheproposednewmandatoryrequirementsfortheinertingofchemicaltankers.Thenewcarriagerequirementswillapplytonewshipsover8,000dwt.InconjunctionwiththeInternationalParcelTankersAssociation(IPTA),ICShadhighlightedtheenvironmentalimpactofoperatingIGequipment,andhadindicatedthatacarriagerequirementforsub5,000dwtchemicaltankerscouldbeproblematic.TheIMOdecisionisthereforecompatiblewiththeICSposition.SubjecttotheadoptionofthenewregulationsbytheMaritimeSafetyCommitteeinMay2012,thisdevelopmentwillbeaddressedinaneweditionoftheICSTankerSafetyGuide(Chemicals)whichICSintendstofinalisein2013.

ICSfullysupportstheproposalstoamendSOLAStoprovidefortheapplicationofinertgas(IG)tonewoilandchemicaltankersabove8,000dwt.Itshouldbenoted,however,thatIMOdecidedthatthepossibleextensionofnewmeasurestoexistingtankersoflessthan20,000dwtwouldonlybe

21

consideredinthelightofexperiencegainedfollowingintroductionofIGonnewshipsof8,000to20,000dwt.However,aseriousexplosioninKoreainJanuary2012whichinvolvedasmallchemicaltankermightputrenewedpressureonIMOtoaccelerateitsconsiderationofIGforexistingships,asmightamajorfireonboardachemicaltankerthatoccurredintheGulfduringMarch2012(whichinvolvedtheadditionaldramaoflocalportsrefusingtoprovideaplaceofrefugeforthestrickenship,contrarytoIMOGuidelines).

ItisimportanttorecallthatadisturbingconclusionoftheoriginalindustryreportthatinformedtheIMOreviewwasthatotherwisecompetentandqualifiedseafarersarestillpronetobypassacceptedproceduresduringcargooperations,andthatthishadbeenafactorinanumberofsometimesfatalexplosionsontankers.Thesolutionsarecomplex,involvingmattersthatdonotalwaysreadilylendthemselvestoprescriptiveregulations,suchashowtofurtherinculcateagenuine‘safetyculture’amongstships’crews,whichtheneweditionoftheICSTankerSafetyGuideChemicalswillseektoaddress.

MalaccaandSingaporeStraits

Eachyeartherearemorethan70,000transitsbyshipsthroughtheStraitsofMalaccaandSingapore,whichisoneoftheworld’smoststrategicallyimportantinternationalwaterways,linkingtheFarEasttotheIndianOcean,theMiddleEastandEurope.WhilewishingtohelpensurenavigationalsafetyandenvironmentalprotectionoftheStraits,thelongstandingobjectiveofICShasbeentoencouragethemaintenanceoftheprinciplesoffreedomofnavigation

governinginternationalwaterwaysasenshrinedintheUnitedNationsConventionontheLawoftheSea(UNCLOS),sothatindividualshipsarenotchargedforsafetyservices.However,thishashadtobereconciledwiththechallengefacedbythelittoralstatesofIndonesia,MalaysiaandSingaporeinfinancingnavigationalsafety.ICShasconductedadetailedsurveyofincidentreportswhichitisanticipatedwillresultinthedevelopmentofproposalstoenhancethemanagementoftrafficintheStraits.InOctober2011,ICSpresentedthereport’sfindingstothemaritimeadministrationsofthelittoralstatesatameetinginKualaLumpur.

Onlyaverysmallproportionoftransitsresultinaccidentsornearmisses.However,theICSsurveyhasidentifiedheavyshippingtraffic,inappropriatespeedandthelossofsituationalawarenessassignificantfactorsthatneedtobeaddressed.TheICSreportpraisestheskillandprofessionalismofthosemanaging,operatingandnavigatingshipsintheMalaccaandSingaporeStraits.However,itisimperativethatsafetycontinuestobeprioritised.ICShasthereforealsosuggestedthatimprovementscouldbemadewithrespecttothelocationofpilotboardingareasandthetimingofpilotdepartures.ThereisalsoconcernabouttheunderstandinganduseofnavigationsystemssuchasECDIS,AISandradar,bothatseaandashore.Oftheincidentsexamined,whichinvolvedarangeofvesselsfromtugstotankers,68%resultedincollisions.Encouragingly,thelittoralstateshavewelcomedtheICSreportandarealreadytakingmeasurestofurther

22

23

RepresentingtheGlobalShipping

Industry

improvenavigationalservicesintheStraits.InconjunctionwithICS,itishopedthattheywillmakeajointsubmissiontoIMO,advisingonthecurrentstatusofthisimportantwork.

Meanwhile,althoughithastakensomewhatlongerthanexpected,thelittoralstatesareabouttostartconductingseatrialsintheStraitswithrespecttoaMarineElectronicHighway(MEH),althoughanumberofissuesneedtoberesolvedsuchaswhetheranAIScomponentwillbeincorporated.WhileitisICS’sintentiontorequestthatshipsactivelyparticipateinthesetrials,thiswillnotbepossibleuntildetailedplanningiscompleteandtheinfrastructureisfullyinplace.ICShasstressedtheimportanceofstandardisationandinteroperabilitybetweenshorebasedcomponentsofe-navigationinordertoavoidshippinghavingtocommunicatewithunharmonisede-navigationresourcesindifferentgeographicalregions.ThequestionoffreeaccessduringthetrialstotheseMEHdataservices,inaccordancewithUNCLOSprinciples,alsostillneedstoberesolved.

E-NavigationandECDIS

ICSwelcomesthegreatpotentialofe-navigationforimprovingnavigationalsafety.However,ICScontinuestoemphasisetheneedfora‘userfocused’approach,sothate-navigationisnotdrivensolelybyideasfromequipmentmanufacturersortheavailabilityofnewtechnology.ICSiscurrentlyengagedindetaileddiscussionsatIMO,andalsowithintheInternationalAssociationofMarineAidstoNavigationandLightHouseAuthorities(IALA),abouttheimplementationofIMO’se-navigationstrategy.Thisincludesuserneedsandservices,andthe

technicalspecificationsofvariousshipboarddevices.Inparticular,ICSisstillseekingtoensurethatnationalauthoritieswillnotregardVirtualAidstoNavigationasacheapermeansofprovidingstatutoryservices,andthattheycontinuetobeseenasacomplementratherthanareplacementforphysicalaidstonavigation.Apressingissueconcernsarrangementsfortheintroduction,inJuly2012,ofthenewmandatoryIMOrequirementsforECDIS(ElectronicChartDisplayandInformationSystems),whichICShaslongsupportedprovidedthattheindustry’sdefinitionof‘sufficientElectronicNavigationChart(ENC)availability’canbemetbeforethephased-incarriagerequirementbecomeseffective.ICShasbeencloselymonitoringprogressattheInternationalHydrographicOrganization(IHO)towardsmeetingtheENCcoveragenecessarytomakethemandatorycarriageofECDISviable.

Inparticular,ICShasbeenengagedwiththeIHOandotherinterestedorganisationsindiscussionsoverpotential‘operatinganomalies’thathavebeenidentifiedwithECDIS.AtesthasbeendevelopedbyIHOthatallcompanieshavebeenencouragedtouseinordertodetectsuchanomalies.DisturbinglyithasbecomeapparentthatnotallECDISsystemsmaybefullyeffective,withathirdofthosetestedreportedlyfailingtodisplaysignificantunderwaterfeaturesinthe‘standard’displaymode.AtleastonemanufacturerhasconfirmedtoIHOthatearlierversionsofitsECDISwillnotdisplaysometypesofwreckandunderwaterobstructionsinanydisplaymode,necessitatingthecontinueduseofpapercharts.

InviewofconcernsaboutfullENC

coverageandECDISoperatinganomalies,ICSisalsoquestioningproposalsbyAustralia(andothergovernments)toamendtheSOLASConventionwiththeeffectofprohibitingtheoperationofECDISintheRasterChartDisplaySystem(RCDS)mode.Therearealsoworriesabouttheambiguityofsuggestednewrulesonupdatingrelevanthardwareonboardthatcouldimplythatshipoperatorsmightconstantlyhavetoreplaceveryexpensiveequipment.

WiththecarriageofECDISabouttobecomemandatory,ICScontinuestohighlighttheimportanceoftrainingseafarersinitsuse.ICShasthereforecontributedtotheproductionofguidanceonissuesofcompetencyandtrainingwhichhasbeenco-ordinatedbytheNauticalInstitute.ICShasalsosubmitteditsowndetailedproposalsonECDIStrainingrequirementstotheIMOSubCommitteeonStandardsofTrainingandWatchkeepingwhichmeetsinMay2012.ThesesuggestbestpracticerecommendationsforthetimingofdeliveryofECDIStrainingforbothnewandexistingseafarers,takingaccountofpresentrequirementsforupgradingtrainingascontainedinthe2010amendmentstotheSTCWConvention.

TrainingStandards

Thecompetenceofseafarersisamostcriticalfactorinthesafeandefficientoperationofships,andhasadirectimpactonthesafetyoflifeatseaandtheprotectionofthemarineenvironment.TheIMOConventiononStandardsofTraining,CertificationandWatchkeepingforSeafarers(STCW)constitutesacomprehensivesetofregulationsintendedtomaintainthehigheststandardsofcompetenceglobally.Inparticular,the

24

RepresentingtheGlobalShipping

Industry

STCWConventionplacesimportantresponsibilitiesonmaritimeemployers.

InJanuary2012,widerangingamendmentstotheSTCWConventionenteredintoforce,havingbeenadoptedbyaDiplomaticConferenceinManilainJune2010.Withimmediateeffect,companiesarenowrequiredtocomplywiththenewSTCWminimumresthourprovisionsforseafarers(seepage27).Manyoftheothernewrequirementswillbephased-inbetweennowand2017.SomegovernmentsarenowexpectedtobeginapplyingthenewSTCWrequirementsonanationalbasis,suchasenhancedfiveyearlyrefreshertraining,orthenewmandatoryrequirementsfortheonboardtrainingofratingstobedocumented.ThisincludestrainingforthenewSTCWgradesofAbleSeafarerDeckandAbleSeafarerEngine,whichmanyflagstatesareexpectedto

requireexistingratingstoundergoinordertocomplywiththeirminimumsafemanningrequirements.

FromJanuary2013,allnewseafarerscommencingtrainingwillberequiredtodosoinaccordancewiththenewtrainingandcompetencestandardsinSTCW2010.However,until2017governmentsmaycontinuetorenewandrevalidateexistingcertificatesinaccordancewithcurrentSTCWprovisionswhichappliedimmediatelypriortoJanuary2012.

NumerousamendmentswereadoptedbyIMOtotakeaccountofrecenttechnicaldevelopmentsrequiringnewshipboardskills,suchastheuseofElectronicChartDisplayandInformationSystems(ECDIS)ortheneedtogivemoreemphasistoenvironmentalmanagement.Butthechangesalsocoversuchmattersasnewtrainingrequirementsforleadershipandteamwork,enhanced

refreshertrainingforqualifiedseafarers,aswellastheintroductionofdetailedstandardsofcompetenceforthenewgradeofAbleSeafarermentionedabove.Therearealsonewcompetencetablesandtrainingrequirementsforpersonnelonoilandchemicaltankersandgascarriers.

Althoughnotadirectresponsibilityofcompanies,theindustrywillwishtoensurethatasmanygovernmentsaspossiblecomplywiththerevisedrequirementstoreporttoIMOtheactionsthathavebeentakentoimplementthenewSTCWstandards.Thiswillbenecessary,byJuly2013,ifgovernmentswishtomaintainaplaceontheIMO‘whitelist’ofnationsthathavedemonstratedcontinuingadherencetoSTCWstandards,soastoavoidportstatecontroldifficultiesfortheirships,orflagstaterecognitionproblemsforseafarersworkingonforeignshipstowhomtheyhaveissuedSTCWcertificates.

25

ICSanticipatesthattheremaybeaneedtoclarifytheinterpretationofhowsomeofthenewstandardsaretobeapplied,forexamplewithregardtohownewrefreshertrainingshouldbeimplemented,deliveredandassessedorwhenthenewsecuritytrainingrequirementsenterintoforce.Thereisalreadyevidencethatsomemaritimeadministrationsmaybeintendingtoapplythenewrequirementsoverzealously.

TheoverridingobjectiveofICSanditsmembernationalshipowners’associationsisthatthestandardsrequiredbytheSTCWConvention,asamendedin2010,areputintoeffectassoonaspossible,andthatthehigheststandardsofseafarercompetencewillcontinuetobemaintainedworldwide.In2011,ICSthereforepublishedaneweditionoftheISFGuidelinesontheIMOSTCWConventiontoadviseshippingcompaniesandshipboardpersonneloftheirfundamentalobligationsasrequiredbythe‘Manilaamendments’.Aswellasprovidingadviceoncompliance,theGuidelinesalsogivebackgroundinformationonthephilosophyunderlyingthecompetence-basedapproachtotrainingwhichtheSTCWConventionseekstopromote.

In2012,ICSaimstocompleteitsambitiousscheduleofrevisingitswidelyusedISFonboardtrainingrecordbookstotakeaccountoftheManilaamendments.UpdatedOnBoardTrainingRecordBooksfordeckandengineratings(includingthegradesofAbleSeafarerDeckandEngine)havealreadybeenpublished,andrevisedtrainingrecordbooksfordeckandengineofficertraineesshouldbepublishedinthefirsthalfof2012.ICS/ISFiscurrentlyindiscussion

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withmajorlaboursupplynationssuchasthePhilippinesabouttheuseandapprovaloftheupdatedbooks.

AsaresultoftheSTCWamendments,employersshouldnowgenerallyhavefargreaterconfidenceinthevalidityofseafarers’certificates,regardlessofthecountryofissue.Thisisnottosaythatquestionsaboutthequalityoftraininginmanytraininginstituteshavebeeneradicatedcompletely.However,thereisnowaclearersensethatallseafarersworkinginternationallyarepartofthesameglobalprofession,inwhichtheparamountimportanceofsafetyoflifeatseaandtheprotectionofthemarineenvironmentisfarmorewidelyrecognised.

WorkHourRegulations

Thepreventionoffatigueamongstships’crewsanditspotentialimpactonsafetyisamajorpriorityfortheindustryanditsregulators.InJanuary2012,asaresultoftheentryintoforceofChapterVIIIoftheIMOSTCWConvention,newandstricterregulationscameintoforcegoverningseafarers’hoursofrest.Theminimumrestthatmustbereceivedinany7dayperiodisnow77hoursratherthan70hoursandtheflexibilitypreviouslypermittedbythe‘2dayderogation’ruleundertheIMOruleshasnowbeenremovedsothatseafarersmustalwayshave10hoursrestinany24hourperiodwithnoexceptions(apartfromduringemergencies).Amostimportantrequirementisthatshippingcompaniesarenowrequiredtomaintain,onamandatorybasis,individualrecordsofseafarers’hoursofworkandrestthatmaybesubjecttoinspectionbyportstatecontrol.

TherationaleforthenewSTCWrequirements,whichwereadoptedin2010,wastoensurethattheIMOrequirementsarecompatiblewiththosecontainedintheILOMaritimeLabourConvention(MLC)onceitentersintoforce.ThetaskofIMOwascomplicatedbecausetheregimesadoptedbyIMOandILOweredevelopedfordifferentpurposes.STCWprescribesminimumresthoursfromthesafetyperspective,whiletheILOConventionalsotakesaccountofsocialissues,suchasthepointatwhichadditionalpaymentsforovertimeshouldnormallybemadeandtheextenttowhichworkhoursmaybesubjecttonegotiationbetweenemployersandunionsincollectivebargainingagreements-issuesoutsidetheremitofIMO.

ICSissatisfiedthatthechangestominimumresthoursagreedbyIMOarefullycompatiblewiththeILOrequirements,althoughinpracticetheyaresomewhatstricter.Inreality,giventhattheSTCWamendmentshavealreadyenteredintoforcetheyarelikelytobecomethedefaultregimeforportstatecontrolinspectors.AnimportantaspectofSTCW2010isthesocalled‘Manilaexception’clauseswhichcontinuetopermitoccasionaldeviationfromthenormalminimumresthoursprovidedcompensatoryrestisprovided.Whilelackingtheflexibilityoftheold‘2dayderogation’rule,thiswillallowsomeflexibilityduringperiodsofpeakworkload,particularlyimportantforshortseaoperators.However(withtheexceptionofemergencies)allseafarersarenowprohibitedfrombeingondutyformorethan14hourswithinany24hourperiod.

Manycompaniesarenowensuringthattheyaremaintainingaccurate

recordsofthehoursofworkandrestonboardshipbyusingtheISFWatchkeepersoftware,which,aswellasproducingindividualseafarer’srecordsintheformatrecommendedbyILOandIMO,allowscompaniesandcrewstoensurethattheycomplyfullywithboththeILOandIMOlimits.AnupgradedversionofISFWatchkeeperVersion3,whichallowsaccounttobetakenofthenewIMOSTCWresthourlimits,waslaunchedduring2011.

EmploymentRelations

Anunusualfeatureofinternationalshipping,whichobserversfromoutsidetheindustrysometimesfindsurprising,isthatthereisapowerfulandglobalseafarers’tradeunionintheformoftheInternationalTransportWorker’sFederation.TheITFhasadirectimpactonseafarers’employmentandworkingconditionsonaworldwidebasis.Whetheremployerslikeitornot,theITFisprobablyasrelevanttodayaswhenitwasfoundedover100yearsago,althoughtheemploymentconditionsenjoyedbyseafarersin2012areofcoursegreatlyimprovedandcompareextremelyfavourablytothosewhichtheywouldreceiveinsimilarjobsashore.

Atthe2011AnnualGeneralMeetingsofICSandISF,thedecisionwastakentofullyintegratethetwoassociations.However,theInternationalShippingFederationistheidentitywhichICSwillcontinuetousewhenaddressinglabourrelationsquestionsasa‘partisan’employer’sorganisation.AspartofamajorstrategicreviewwhichledtothedecisiontointegrateICSandISF,oneoftheimportantissuesidentifiedwastheneedtostrengthendialoguewithITFatbothstrategicandworkinglevels.The

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aimofmembernationalshipowners’associations,whichhavetheirownrelationshipswiththeirnationaltradeunionsthatareaffiliatedtoITF,istobeactivelyco-operativeonnon-contentiouspracticalmatters,buttostandfirmwhenrequired.

ISFhasalongstandinginstitutionalrolewithITFasitsofficial‘socialpartner’attheInternationalLabourOrganization(ILO),andhascommoncausewithITFnationalunionaffiliatesonmanyissuessuchaspiracyandtheunwarrantedcriminalisationofseafarers,aswellasmattersrelatingtotheregulationofsafetyandhighqualitytraining.Inthesphereofemploymentrelations,however,thecharacteristicrelationshipbetweenISFandITFhassometimesbeenmoreconfrontational,primarilyduetoITF’s‘FlagofConvenienceCampaign’againstopenregisters,anditsinsistencethatshipoperatorspayITFminimumwageratesinthefaceofthethreatofboycottactionbyitsdockworkeraffiliates.

Inrecentyears,however,lessemphasisperhapsthanhithertohasbeengiventothismoredifficultaspectofrelationswithITF.InpartthishasbeenduetothepositivefocusgivenbybothsidestothesuccessfuldevelopmentoftheILOMaritimeLabourConventionanditssubsequentimplementation.TherelationshipbetweenISFandITFhasalsoevolvedduetotheemergenceoftheInternationalMaritimeEmployers’Committee(IMEC),whichcomprisesindividualcompanies,andisnowanassociatememberofISF/ICS,andtheestablishmentoftheInternationalBargainingForumwhichconductsinternationalwagenegotiationswithITF.ISF’shistoricrefusaltonegotiatedirectlywithITFaboutseafarers’

termsandconditions,whichisamatterforindividualcompaniesandtheirnationalassociations,isthereforelessofanissue.RelationswithITFhavealsoimprovedfollowingtheresumptionofdiscussionsattheILOJointMaritimeCommissionaboutarevisionoftheILOMinimumWageforAbleSeafarers(seepage30).InMay2012,inordertoexploremeansoffurtherimprovingco-operation,ISFheldahigh-levelmeetingbetweenseniorrepresentativesofnationalshipowners’associationsandITFunionaffiliatesinLondon,thefirstsuchmeetingoutsideoftheinstitutionalsettingoftheILOforover10years.ItishopedthatthiswillbefirstofseveralmeetingsatwhichISFandITFmemberswillbeabletoidentifyissuesonwhichtheycancollaboratemoreeffectively,whilemaintainingdialogueonthosemattersonwhichtheremaystillbefundamentaldifferencesofapproach.

MaritimeLabourStandards

Forthelargemajorityofseafarers,employmentconditionsatseaalreadymatch,orinmostcasescomfortablyexceed,thosethattheycouldobtaininshorebasedemploymentathome.However,themaintenanceofgoodemploymentconditionsiscrucialtotheindustry’sabilitytoattractandretainthecompetentandwellqualifiedseafarersonwhomitdepends.

Followingratificationbyagrowingnumberofflagstatesincludingthemajoropenregisters(26ofthe30nationsrequired,atthetimeofwriting)theILOMaritimeLabourConvention(MLC)isexpectedtoenterintoforcegloballyverysoon,probablyduring2013.Therequired

tonnagethresholdhasalreadybeenachievedandcompaniesthereforeneedtobereadytoensurefullimplementationandcompliancewiththeMLCstandards.

TheILOMLCaddressesawiderangeofmattersincluding,amongstothers,theobligationsofshippingcompanieswithrespecttoseafarers’contractualarrangements,theresponsibilitiesofmanningagencies,workinghours,healthandsafety,crewaccommodation,cateringstandards,andseafarers’welfare.Asanofficialsocialpartner,underthetripartiteILOprocess,ISFwasresponsiblefornegotiatingthetextoftheConventiononbehalfofmaritimeemployers,withgovernmentsandseafarers’tradeunions.ISFthereforehasaveryspecialinterestinwantingtoassisttheConvention’ssmoothimplementation.

AnimportantaspectoftheConvention’senforcementwillbetheissuancebyflagadministrationsofMaritimeLabourCertificates,usuallyfollowinginspectionbyaRecognizedOrganizationsuchasaclassificationsociety,appointedbytheflagstate.ThereisalsoaseparaterequirementforshipstomaintainaDeclarationofMaritimeLabourCompliance.Importantly,compliancewiththeMLCwillbesubjecttoportstatecontrolaswellastoinspectionbyflagadministrations.

InDecember2011,inGeneva,ISFco-ordinatedshipownerrepresentationatamajortripartitemeetingofgovernments,employersandunionswhichagreedtermsofreferenceforaSpecialTripartiteCommitteethatwilloverseeproposalsforamendmentstotheILOMLConceitentersintoforce.TheChairman

oftheISFLabourAffairsCommittee,ArthurBowring(HongKong)servedastheemployers’spokesman,supportedby25delegatesfromnationalshipowners’associations.

ThevastmajorityofcompaniesshouldnothaveanydifficultycomplyingwiththesubstanceoftheConvention,sincethisislargelyderivedfromexistingILOmaritimestandardsandacceptedgoodemploymentpractice.However,theenforcementmechanismisnew,anditwillbeimportanttoavoidteethingproblemsassomeofthemoredetailedrequirementsareappliedandinterpreted.

Duringthecourseof2012,ISFexpectstopublishanupdatededitionofitsGuidetotheMLC.ThefirsteditionwasproducedshortlyaftertheMLCwasadoptedin2006,andsoughttointroduceshipoperatorstotheirobligationsunderthenewregime.Intheinterveningperiod,muchworkhasbeendonebyseveralILOtripartiteworkinggroups,comprisinggovernments,unionsandnationalshipowners’associationstoensurethatallconcernedunderstandtheirresponsibilities.ThissecondeditionhasthereforebeenupdatedtotakeaccountoftheserecentclarificationsfromILO.AdditionalguidancehasalsobeenaddedinordertohelpmaritimeemployersapplytheILOstandardsinapracticalmanner.ItishopedthatthesecondeditionoftheISFGuidewillproveusefulinassistingshippingcompaniesinpreparingfortheimplementationoftheMLCbygovernments,whetherintheircapacityasflagstates,portstatesorlaboursupplynations.ISF’sintentionistopromoteandhelp

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deliverthegloballevelplayingfieldofdecentmaritimelabourstandardsthatboththeshippingindustryandseafarersrequire.

ILOMinimumWage

Abouttwothirdsoftheworld’s1.5millionmerchantseafarerscomefromdevelopingcountries.Whilewageratesarecommonlyaffectedbyaseafarer’scountryofresidence,theshippingindustrygenerallyprovideshighlevelsofremunerationtoallthoseemployedatsea.Indeed,theshippingindustryisprobablyuniqueinthatithasamechanismforrecommendingminimumacceptableinternationalwagerates.

TheMinimumWageforAbleSeafarersisagreedbytheInternationalLabourOrganization(ILO)JointMaritimeCommission(JMC)whichcomprisesrepresentativesofnationalshipowner’sassociationsandseafarers’unions.ISF(theidentityusedbyICSwhenactingasanemployers’organisation)istheco-ordinatoroftheEmployers’GroupattheJMCwhiletheInternationalTransportWorkers’Federation(ITF)co-ordinatesseafarers’representation.UnlikeotherILOinstitutions,theJMCisbipartiteanddoesnotinvolvegovernments.InJanuary2012,theILOMinimumWageforAbleSeafarersincreasedtoUS$555amonthfromthepreviousfigureofUS$545whichhadcomeintoeffectin2009inlinewithanearlierscheduleofagreedincreases.ThislatestincreasefollowedanagreementbytheJMCwhichmetinGenevaattheendofApril2011.Inreality,theJMChasagreedafouryeardealwherebytheILOminimumwagewillincreasetoUS$568for

2013andUS$585for2014,withnofurtherrevisionexpectedtotakeeffectuntilatleast2015.Thiswillhopefullyprovideemployerswiththestabilitytheyneedduringthedifficulteconomiccircumstancesanticipatedintheyearsahead.

ISFbelievesthatthenewILO

ILOheadquartersinGeneva

wagefiguresarerealisticgiventhecontinuinguncertaintycreatedbytheglobaleconomiccrisis.ISFhadpreviouslyexplainedtoITFthatemployerssimplycouldnotagreetoanyimmediatefurtherincreases.However,whilemanyunionsrecognisedtheneedtohelpsafeguardemploymentforseafarers,some

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RepresentingtheGlobalShippingIndustry

unionswereclearlydisappointedbythisresponse.TheJMCthereforeagreedtoadoptascheduleofincreasesthatwillapplyuntil2015.

ISFremainsstronglycommittedtotheprincipleoftheILOMinimumWagerecommendationwhichisnowreferencedinthenewILOMaritimeLabourConvention,althoughithasinfactexistedforover50years.Whileitisonlyrecommendatory,andisnotdirectlyrelevanttootherseafarergrades,ithasastrongmoralauthorityandisparticularlyimportantforemployersindevelopingcountries.TheILOMinimumWagealsoinfluencesmanycollectivebargainingagreements,includingthoseenforcedbyITF,andissometimesreferredtoinlegalrulings.

TheILOMinimumWageissubstantiallyhigherthanthatpaidforcomparativeworkashoreindevelopingcountries.Moreover,theactualminimumwageissignificantlyhigher,typicallyperhaps50%more,onceovertimehours(fixedataminimumofoneandaquartertimesbasicpay)andothermandatoryILOrequirements,suchaspaymentsforleaveentitlements,aretakenintoaccount.Itisalsoonlyaminimum.Mostratingsfromdevelopingcountriesreceivesignificantlymore,whileofficersreceivesubstantiallymore,withdifferentialsbetweenofficersfromOECDanddevelopingcountriescontinuingtonarrow.

AsianDevelopments

Toacertainextent,somepartsoftheshippingindustryhavebeenshieldedfromtheeffectsoftheglobaleconomicslowdownbycontinuinggrowthinAsia,drivenespeciallybyChina’sinexorableexpansionanditsseeminglyinsatiabledemandforrawmaterials.However,inearly2012,Chinaannounceditsintentiontosubtlyrebalanceitseconomy,withlessemphasisonmassivefurtherinfrastructuregrowthandaredirectionofresourcesintoincreasedpersonalconsumption.WhileChinaisstillexpectedtocontinuetogrowatanimpressiverate,thisshiftinpolicycouldeventuallyhaveimplicationsforthefutureexpansionofChina’sdemandforshippingservices.Inthelongerterm,moreover,ithasalsobeensuggestedthataswagedifferentialsbetweenChineseworkersandthoseinotheremergingeconomiesreduce,theremayarelocationofmanufacturingtowardsLatinAmericaand,inparticular,toMexicowithitscloseproximitytotheUnitedStates.Moreimmediately,however,withmostoftheEurozonenowinrecessionthecurrentconcernisthatthisislikelytohaveadirectimpactonmaritimetradeastheimportofChineseproductsisreduced.

Ontheregulatoryfront,AsiannationsgenerallyhaveatrackrecordofbeinglessinclinedtowardstheadoptionofunilateralshippingregulationsatvariancewithinternationalstandardsagreedbyIMO.However,oneissuethatICShasbeenfollowingcloselyhasbeentheChinaPollutionRegulations.TheRegulationscameintoeffectin2010andintroducednewoperationalandliabilityrequirementsforshipowners.Implementationoftherequirement

tocontractwithlocalShipPollutionResponseOrganisations(SPRO)inordertoenterChineseportscommencedfrom1January2012andwasenforcedinallportsfromMarch.InNovember2011,attheinvitationoftheInternationalGroupofP&IClubs,ICSandrepresentativesoftheChinaandHongKongShipowners’AssociationsmetwiththeChineseMaritimeSafetyAgencyinBeijing.Shipowners’concernsabouttheabilitytocomplywiththerequirementtopre-contractwithanapprovedSPRObytheinitial1January2012implementationdatewereconveyed,alongwithconcernsabouttheveryhighSPROretainerfeesthathadbeenquoted.Theinitialimplementationprocesshasbeenproblematicbutitishopedthatitwillbesmoothergoingforward.

ItisgenerallyacceptedthatthecentreofgravityoftheshippingindustryismovingtowardsAsia.ApositivedevelopmentisthatAsianmaritimeadministrationshavebecomeincreasinglyconfidentandarticulatewhenpresentingtheirviewsatforasuchasIMO,notleastonissuessuchastheregulationofCO2.Inparticular,ICShasfoundcommongroundwithChinawithrespecttoitsemphasisonefficiencyimprovements,asopposedtosettingabsolutetargetsforemissionreductionsasfavouredbytheEU.IndiahasalsomadeanimportantcontributiontothedebatebywarningofthedangersofCO2regulationbeingappliedasaformofgreenprotectionism.Inawelcomemove,inDecember2011,IndiaratifiedAnnexVItotheMARPOLConventiongoverningatmosphericemissions,whichalsoincludesthetechnicalandoperationalmeasuresforCO2reductionagreedbyIMOinJuly2011.

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Asreportedelsewhere,ICShaswelcomedthepragmaticapproachofAsianauthoritiestowardsthedevelopmentofmaritimecompetitionregulation.Thisincludestheadoption,inJune2011,ofguidelinesconcerningnon-ratefixingagreementssuchasconsortia,bytheAsiaPacificEconomicCo-operationforum(APEC)whichisbecomingincreasinglyactiveonmaritimeissues.

ICScontinuestoenhanceitsgoodrelationswiththeAsianShipowners’Forum(ASF)whosemembershipcomprisesnationalshipowners’associations,manyofwhichalsobelongtoICS.Asasignofthisincreasingco-operation,ASFhasparticipatedinrecentmeetingswiththeConsultativeShippingGroup(CSG)ofmaritimeadministrationsorganisedbyICS,whiletheASFSecretaryGeneralnowattendsICSBoardmeetings.InMay2012,inAustralia,theASFAnnualMeetingwillforthefirsttimebeheldback-to-backwiththatofICS.

EUDevelopments

During2012,thesituationinEuropeisexpectedtobedominatedbythe

continuingcrisiswithrespecttothelongtermviabilityoftheEuro.ThishasbeenbroughtaboutbythedivergingeconomiccircumstanceswithinindividualEUMemberStates,notleastwithrespecttoincreasingunsustainablelevelsofsovereigndebt.EUleaders,innumerouscrisissummits,havesoughttorespondbyprovidingsupporttofailingeconomiessuchasGreece,aswellaspumpinghugeamountsofmoneyintotheEurozonebankingsectorasawhole.However,thejuryisstilloutonwhetherthe

singlecurrencywillweatherthestormandholdtogetherinthelongerterm.WhilethecurrentrecessionintheEurozonewillalmostcertainlyhaveanegativeimpactonglobalshippingmarkets,iftheEurozonecrisisworsenstheeffectontheworldeconomycouldbeveryseriousindeed.Moreimmediately,however,theEuropeandebtcrisisalsomeansthatamajorsourceofshipfinancinghasvirtuallydriedup,withmostofthemajorshippingbanksbeinglocatedinEurope.

DespitethepoliticalandeconomicturmoilinEurope,theEUinstitutionsremaincommittedtotakingforwardtheiragendawithrespecttomaritimeregulation.Inco-operationwiththeEuropeanCommunityShipowners’Associations(ECSA),ICSseekstoensurethatproposalsinEuroperemaincompatiblewiththeglobalmaritimeregulatoryframeworkwhichtheshippingindustryrequires.

NotwithstandingIMO’sachievementinadoptingapackageofinternationalregulationstoreduceshipping’sCO2emissions,theEuropeanCommissionisproceedingwiththedevelopmentofregionalmeasuresforshippingintheeventthatIMOisunabletoreachagreementonMarketBasedMeasures.Whilethisdecisionisdisappointing,thetimescalefortheimplementationofsuchmeasuresisbelievedtobefiveyears,andtheCommissionisunderstoodtoremainseriousinitspreferenceforaglobalsolutiontobeagreedatIMO.Nevertheless,inconsultationwithECSA,ICShassubmittedcommentstoaformalconsultationbyDGClimateAction,disputingtherationaleforaregionalregimeandreiteratingoppositiontotheinclusionofshippingintotheEUEmissionsTradingScheme(ETS).Inpublic,theEuropeanCommissionis

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RepresentingtheGlobalShippingIndustry

stillopenmindedaboutapplyingtheETStoshipping.Buttheapplication,inJanuary2012,ofaregionalETStointernationalaviation,hasnotbeenapleasantexperiencefortheCommissionwhichhashadtofacevigorousoppositionfromtheUnitedStatesandChina,amongstothers,whohaveindicatedtheymaytakeretaliatorymeasuressuchascancellingordersforEuropeanaircraft.ItremainstobeseenwhethertheEUwillbackdownwithrespecttoaviation,butifitshoulddosoitisdifficulttoseehowanETScouldthenjustifiablybeappliedtoshipping,whichunlikeaviationalreadyhasaninternationalagreementinplacethatwilldramaticallyreduceemissions.

AsdiscussedelsewhereinthisAnnualReview,otherimportantEUfilesinclude:thedraftDirectiveontheimplementationoftheIMOregulationsonsulphuremissions,whichmayincludetheextensionofEmissionControlAreas;itsresponsetothe‘CostaConcordia’cruiseshipdisaster,andtheimplementationoftheEUPassengerLiabilityDirective;andtheongoinginvestigationbytheCompetitionDirectorateoftheInternationalGroupofP&IClubs.ThecontinuingcommitmentoftheEUtocounter-piracyoperationsintheGulfofAdenisalsomostimportantandisgreatlyappreciatedbytheinternationalshippingindustry.

AnothermostimportantissueisthecurrentreviewoftheEUStateAidGuidelinesfortheMaritimeSectorwhichwilldecidewhethertopermitthecontinuationoftonnagetaxregimesinEurope.ThereviewisimportantbecauseEUtonnagetaxschemeshaveprovidedamodelforsimilarregimesthatarenowappliedbygovernmentsthroughoutthe

world,andarevitalforshippinginorderforittooperateinwhatarevolatileandhighlycyclicalglobalmarkets.However,thereviewiscomplicatedbecauseitisbeingoverseenbytheCompetitionDirectorateratherthanDGMOVEashaspreviouslybeenthecase,theformerperhapsnotbeingsofamiliarwiththeuniquecircumstancesthatapplytoshipping.AttherequestofECSA,ICSisthereforesubmittingcommentstotheCommissioninfavourofthemaintenanceofthestatusquo.

USDevelopments

UnlikeEurope,theUSeconomyisshowingsignsthatitisbeginning

torecover,althoughwhetherthiswillbesustainedfarbeyondthePresidentialelectioninNovember2012isunknown,asistheextenttowhichthiswillfeedintoincreasingdemandforshipping.AninterestingdevelopmentisthattheUnitedStatesisgraduallyreducingitsdependencyonforeignenergysuppliesasitdramaticallyincreasesitsexploitationofshalegas.InNovember2011,theAdministrationalsoannounceditsproposedfive-yearplanforoffshoreoildrillingwhichcalledfortheopeningofnewareasintheGulfofMexicoandAlaska.Anotherinteresting‘knownunknown’istheimpactthattheexpansionofthePanamaCanal(whichisduetobecompletedin2014)willhaveonUSshippingtrades,especiallycontainers.Inviewoftherun-uptothePresidentialelections,legislativeactivitywithinCongressisexpectedtobelimited,althoughUSFederalregulatoryagenciesstillhaveafullagenda,whileindividualUSStates

continuetoseektoimplementrulesatvariancetobothFederalandinternationalrequirements.Indeed,onecharacteristicoftheObamaAdministrationthathasbeenasourceoffrustrationforshippinghasbeentheapparentreluctanceofthecurrentUSAdministrationtodefendFederalregulationsfrominfractionsbyUSStates.ApositivedevelopmentinApril2012wasthepublicationbytheUSCoastGuardofitsfinalrulemakingonballastwatertreatment,whichadoptsa‘killstandard’formarinemicro-organismswhichmatchesthatadoptedintheIMOBallastWaterManagementConvention.However,seriousquestionsremainastowhethertheUSstandardsfortypeapprovalofequipment(inlinewithitsEnvironmentalTechnologyVerificationProgram),ortheballastwatersamplingstandardsthatwillbeusedtoinspectshipstradingtotheUS,willbeconsistentwiththoseexpectedtoadoptedbyIMOin2013.ThedoorisalsostillopenfortheCoastGuardtointroducemorestringenttreatmentstandardsifitisestablishedthatthetechnologyhasbecomeavailableinthefuture,whichwillbeofconcerntothoseshipownersinvestingmoneyintoexpensivetreatmentequipmentnow.Moreover,theproblemremainsofsomeindividualUSStatesstillconsideringtheimplementationoftreatmentstandards100timesmorestringentthanwhathasbeenagreedatIMOandforwhichtheequipmentrequiredsimplydoesnotexist.

ICSisalsoengagedintheongoingsagaofCalifornia’sunilateralairpollutionrules,whichincontraventiontoUNCLOSapplytoshipswithin24milesoftheUSCoastevenifnotcallingataCalifornian

port,andarestillsubjecttolegalchallengebythePacificMaritimeAssociation.However,followingUSratificationoftheIMOMARPOLrequirementsonsulphuremissionsfromships,itishopedthatthetemptationforindividualUSStatestodeveloptheirownenvironmentalruleswilldiminish.

AparticularexampleofunwelcomeregulationadoptedbyanindividualUSStateisthatadoptedbyMassachusetts.ThisstipulatesthatvisitingtankersthatdonotelecttocomplywithcertainadditionalrequirementswillbesubjecttofinancialliabilitiesinexcessofthosesetoutinFederallawintheeventofapollutionincident.TheissueforICShasbeenoneofprinciple,duetotheencouragementthatthiscoercivelawmightgivetootherUSStatestotaketheirownunilateralactions,whichwillresultinconflictingregulations.Inco-operationwithotherindustryassociations,ICShasthereforebeeninvolvedwithalegalchallenge.TheintentionoftheactionwastomaketheUSCoastGuarddefenditsownregulations.Disappointingly,however,theCoastGuardhassofarshownlittleinterestindoingthisforwhatareprincipallyassumedtobepoliticalreasons.

TradeSanctions

Oneofthemajorpoliticaldramasbeingenactedin2012istheactionbeingtakenbytheinternationalcommunityinresponsetoIran’snuclearprogramme.Inaworstcasescenario,tensionintheMiddleEastcouldleadtoclosureoftheStraitsofHormuzthroughwhichsomuchoftheworld’soilpasses,withdramaticeffectsonoilpricesandtherecoveryoftheworldeconomy.However,theimmediatepreoccupationforICS

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RepresentingtheGlobalShipping

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RepresentingtheGlobalShippingIndustry

hasbeenthechallengepresentedbysanctionslegislation.

Inco-operationwiththeInternationalGroupofP&IClubs,ECSAandtheChamberofShippingofAmerica,ICShassoughttoprovideinformationvianationalassociationsabouttheimpactonshippingcompaniesofsanctionsagainstIranannouncedbytheEuropeanUnionandtheUnitedStates.Itremainstobeseenwhetherotherimportanttradingnationswillintroducesimilarsanctions.

Thereisundoubtedlyaneedforgovernmentstoprovidegreaterclarityanduniformitywithrespecttotheapplicationofsanctions,whetherinthecontextofIranorothernations,suchasSyria,towhichtheymightbedirected.Thesituationisnothelpedbythefactthatgovernmentsnodoubtwanttheirsanctionslegislationtobeasambivalentandflexibleinitsinterpretationaspossible,inordertofurthertheirforeignpolicyobjectives.ThesanctionssofarenactedagainstIranhaveanimpactfarbeyondEUorUSoperators,evenforshipsflaggedinandtradingtocountriesoutsidetheEUandUS.Thisisbecausemostmarineinsurance(andreinsurance)isbasedinLondon;whileUSlegislationwillpreventtankeroperatorsthatcallinIranfromtradingtotheUS.

AlthoughmanyquestionsraisedbyshipownershavebeenaddressedbyextensiveadviceproducedbytheInternationalGroupofP&IClubs,thereisstillsomeuncertaintyastotheprecisescopeofthesanctions,particularlywithregardtotheirimpactoncompulsoryinsurancecoverasrequiredbytheCivilLiability(CLC)andBunkersConventionsforoilpollution.

ThenewEUsanctionsannouncedinJanuary2012extendtothecarriageofpetrochemicalproductsandcrudeoil,andwillfullyapplytoanyexistingcontractsfromMayandJulyrespectively.TheseactuallybuilduponprevioussanctionsrelatingtoanyitemsthatmightassistIran’snuclearprogrammeintermsoftheterritoryandtheentitiestowhichtheyapply.Inshort,thesanctionsapplytoshipownersincorporatedordomiciledinEUnations,toshipsregisteredinorflyingtheflagofanEUMemberState,andtoallvessels,regardlessofplaceofregistration,whichtradetoEUports.

However,theEUsanctionsalsoapplytoinsurerswithintheEU,prohibitingthemfromissuingormaintaininginsurancewithregardtoanysanctionableactivityortrade.TheythereforeapplytoP&IClubs(andtheirreinsurers)aswellastohullinsurers(andtheirreinsurers),whichareincorporated,domiciledorregulatedwithinanEUMemberState.MostP&IClubs,andalargeproportionofhullinsurers,arelocatedinEurope,whilemostreinsuranceisprovidedinLondonorintheUnitedStates,whereitwillalsobeaffectedbytheUSsanctions.

WithspecificregardtothirdpartyliabilityinsuranceprovidedbytheInternationalGroupofP&IClubs(IG),theEUsanctionswillalsoaffectvesselsthatwouldotherwisefalloutsidethejurisdictionofEUMemberStates,evenifsuchvesselshavetheirP&Iinsurancewithanon-EUregisteredP&IClub.ThisisbecausesuchaClub(ifanIGmember)willbeunabletoobtainaccesstoreinsurancefromtheEUbasedClubsviatheIGPoolingAgreement.Anon-EUClubwillalsobeunabletoaccessmarket

reinsurancecoverfromotherEUbasedreinsurers.

AllInternationalGroupClubshaveincludedintheirrules,inoneformoranother,eitherexpresssanctionstocoverterminationorexclusionprovisionsforimprudentorimpropertrading.Theeffectoftheserulesistowithdraworexcludecoverinrelationtosanctionsoffendingvoyages.Inotherwords,ifashippingcompanyundertakessuchavoyageitsliabilitieswillnotbeinsuredbytheInternationalGroup.

ThisrestrictionwillthereforealsohaveanimpactonanycompulsoryinsurancecertificationrequiredbyIMOConventions(whilepaymentforliabilitiesthataresubjecttocompulsoryinsurancemayalsobecaughtbytheprohibitionsinthesanctions).Asaconsequence,shipownersinbreachofsanctionsmayalsobeviolatingflagstatelaw,eveniftheflagstateisnotconnectedwiththeEU.Aswellasmonetaryfines,penaltiesmayincludedetentionofthevesselandsuspensionofthevessel’scertificateofregistry.

InApril2012,itwasstilluncertainwhattheexactscopeofthesanctionswouldbe.However,theconcernremainsthatthoseresponsiblefordevelopingsanctionspolicymayhavelittleunderstandingofthewiderconsequencesforshippingandtrade,manyofwhichmaybeunintended.

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LLMCIncreases

InApril2012,theIMOLegalCommitteeagreedsignificantincreasestothelimitsofliabilityundertheLimitationofLiabilityforMaritimeClaimsConvention1996(LLMC).UndertheIMO‘tacitamendment’procedure,the51%increaseswillcomeintoeffectin2015.Inadditiontogeneralmaritimeclaims,theLLMClimitsalsoapplytoclaimsunderIMOConventionsgoverningliabilitiesforbunkerspills(otherthanclaimscoveredbytheCivilLiabilityConvention)andwreckremovaloncetheNairobiConventionentersintoforce.

TheincreasesweremadeattheinitialrequestofAustraliainresponsetothe‘PacificAdventurer’bunkeroilspillinQueenslandin2009wheretheclean-upcostswerethoughttohaveexceededtheapplicablelimitationamount.Australiahadsupportfrom20co-sponsoringnations,whichmeantthatthefactthelimitswouldbeincreasedwasprobablyneverindoubt.Intheeventtherealdebatewasaboutthequantumoftheincreases.Australiahadmadeitclearfromtheoutsetthatitwasseekingthemaximumamountpossibleviathetacitamendmentprocedure,namely6%peryearcalculatedonacompoundbasisfrom1996.However,Japanwasfirmlyoftheviewthattheincreasesshouldnotbehigherthantherateofinflationduringtherelevantperiod(some2.7%peryearcompounded).

ThroughoutthedebateatIMOoverthepasttwoyears,ICSobservedthattheindustrywasopentoadiscussionofincreases,butthatthesehadtobebasedonthecriteriaspecifiedinthe‘tacitamendment’procedure,namely

RepresentingtheGlobalShippingIndustry

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theclaimshistory,inflation,andtheeffectonthecostofinsurance.

SomenationscontinuedtoexpressdoubtastowhetheranyincreaseswerejustifiedinviewofthestatisticscompiledbytheInternationalGroupofP&IClubs.Theseshowedthatonlyasmallnumberofclaimshadnotbeencompensatedfullyunderthepresentlimits.TherewasalsoarobustdiscussionabouthowinflationshouldbecalculatedwithmanystatessupportingtheJapaneseposition.Itwasacknowledgedthatitwasnotpossibletoquantifytheeffectofincreasedlimitsoninsurancepremiumsbecausethatwoulddependonfutureclaims.Butifamajorincidentnowoccursthatissubjecttothehigherlimits,thenthisislikelytobereflectedinincreasedpremiumssoonafterwards.ICSbelievesthatthefinalincreasesagreedbyIMOareareasonablecalculation.Itremainstobeseenwhateconomicimpactthenewlimitswillhaveontheindustryaftertheycomeintoeffectin2015.However,itistobehopedthattheincreaseswillensurethattheprincipleoflimitationofliabilitywillbemaintained,whichisvitalifshipownersaretocontinuetohaveaccesstoaffordableinsurance.ItisalsohopedthatthenewlimitswillnotdeterlessdevelopednationsfromsubscribingtotheLLMC.

PassengerShipLiability

Questionsrelatingtopassengerliabilityinsurancearelikelytoreceiveadditionalattentionasaresultofthe‘CostaConcordia’cruiseshiptragedy.However,theimmediatefocusofICSistheimplicationsoftheentryintoforceofthe2002ProtocoltotheIMOAthensConvention(whichisexpected

soonfollowingratificationbyEUMemberStates)notleasttheneedforcertificationofinsurancecoverforterrorismandwarrisks.

Inco-operationwithECSA,andtheInternationalGroupofP&IClubs(IG),ICSisalsoseekingtoaddressthesimilarproblemsthatmayariseasaresultoftheenforcementoftheEUPassengerLiabilityRegulation(PLR)withwhichshipoperatorsmustcomplyfrom31December2012,andwhichbroadlymirrorstheIMOAthensProtocolrequirements.

Theissuesarecomplex,butthethornyissueofterrorismcoverhashamperedimplementationoftheIMOProtocolsinceIMOMembersStatesfirstrejectedindustryargumentsthatterrorismisanattackonsocietyatlargeandthatthecostsshouldthereforebebornebygovernments.InsteadIMOdecidedthattheprovisionofsuchcovershouldbelefttothemarket.

ThepotentialliabilitiestowhichtheClubsmightbeexposedundertheAthensProtocolarehuge,perhapsinexcessofUS$5billionpershipinaworstcasescenario.TheP&IClubscommunicatedtheirdifficultiesinprovidingcoverforterrorism(whichcouldhaveimplicationsfortheinsurancetheyprovidetonon-passengershipping)andacompromisewasarrivedatbytheIMOLegalCommitteein2006,wherebycoverforterrorismcouldbelimitedtoUS$500million.However,thisIMOcompromisewasunderpinnedbyaschemeproposedbytheinsurancebrokerMarshLtd.WhileMarshhasadviseditsschemewillbeupandrunningintimefortheapplicationoftheEUPLRattheendof2012,questionsaboutthescheme’sviability

continue,anditisstillunclearwhattherateswillbeandwhetherlargershipswillbecovered.

AlthoughtheIGP&IClubshavenowdecidedtoissuecertificatesofinsuranceforthenon-warrisksarisingundertheEUPLRandtheIMOAthensProtocol,theyhaveyettodecideontheprovisionofIGClubcoverforthewar/terrorismrisks.

InOctober2011,ICSmetwithEUgovernmentstoobtaintheirviewsonthestructureoftheinsurancevehicleproposedbyMarshLtd,andfromthelimitedresponsesreceiveditwouldseemthatgovernmentswillacceptit,notwithstandingthepracticaldifficultiesthatmightariseforclaimantsintheaftermathofacasualty,suchastheneedtodealwithamultiplicityofinsurersfortheirindividualindemnities.Thegovernments’approachappearstobeguidedbyageneralunderstandingthatsuchcovermightnotbeavailableelsewhereandthatthisisthebestthatcanbeobtainedfromthecommercialmarket.Butitisuncertainwhethertheyarefullyaufaitwithallofthepotentialcomplexitiesinvolved

Giventhecomplicationofhavingtohaveseparateterrorismcover,theindustryistryingtopersuadegovernmentstodevelopacommonpositionwithregardstoportstateacceptanceofinsurancecertificates.ICSandECSAarealsoencouraginggovernmentstoensurethatwhenratifyingtheAthensProtocoltheymaketheimportantreservation,asagreedandrecommendedbyIMO,withrespecttoshipowners’liabilityforwarandterrorismrisks.However,somedetaileddiscussionswillbeneededbetweennowandtheendoftheyear.

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EnvironmentalSalvageAwards

Inco-operationwiththeInternationalGroupofP&IClubs,ICScontinuestoleadshipownerrepresentationonsalvageissues,particularlyinrelationtothesmoothoperationoftheLloyd’sOpenFormandSCOPIC(specialcompensation)regime.

ICSismaintainingitsfirmoppositiontoproposalsfromtheInternationalSalvageUnion(ISU)foranewseparateawardfor‘environmentalsalvage’whensalvorshavecarriedoutoperationsinrespectofashiporcargowhichhaspresentedathreatofdamagetotheenvironment.ICSisdeeplyscepticalabouttheproposal,believingthatsalvageservicesarealreadygenerouslyrewardedunderthepresentsystem.

AworkinggroupestablishedbytheLloyd’sSalvageGroup,inwhichICSparticipates,hasreachedastalematefollowingtheISU’sinabilitytodemonstratethatitsproposalwouldimprovesalvageresponse,ordelivercostsavingstothosepayingforsalvageservices.However,theISUhassucceededinpersuadingtheComitéMaritimeInternational(CMI),theinternationalassociationofmaritimelawyers,togiveconsiderationtoitsproposalsforarevisionoftheIMOConventiononSalvageandalsotoamendtheLloyd’sOpenForm(LOF).

Despitethelackofindustryconsensus,aCMIworkinggrouphasalreadystartedworkonpossibleamendmentstotheLOF.ICSregardsthisdevelopmentwithparticulardismaysinceitappearstoinvolvethediscussionofproposalstoamendwhatineffectisaprivatecontractwithouttheinvolvement

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ofatleastoneoftheparties,whilstbypassingthelongstandingforumalreadyestablishedtocarryoutsuchworkwhichistheLloyd’sSalvageGroup.InMarch2012,ICSandtheInternationalGroupofP&IClubswroteformallytoCMI,settingoutshipowners’concernsinthestrongestpossibleterms.

TheISU’sproposalswithrespecttoenvironmentalawardswillbediscussedfurtherattheCMIConference,inBeijing,inOctober2012atwhichICSwillberepresented.GiventhatCMIdoesnotplantoinvitedetailedpresentationstobemadeontheseissuesbyalloftheinterestedparties,itisoftheutmostimportancethatthereportoftheCMIworkinggroupisasbalancedaspossibleandreflectsthedivisionwithintheindustry.TheCMIshouldalsobearinmindthatamendmentstoIMOConventionshavetobeproposedbygovernments,andthattheIMOLegalCommitteeisunlikelytoentertainproposalsthatfailtodemonstrateanycompellingneed.

ICSdoesnotbelievethattheproposalsconcerningenvironmentalsalvageenjoythesupportofmostnationalmaritimelawassociations,andinMarch2012ICSpublishedadetailedpositionpaperreiteratingtheargumentsastowhytheyshouldnotbesupported.

RotterdamRules

ICScontinuestopromotetheratificationoftheRotterdamRulesoncargoliabilitywhichwereformallyadoptedin2009bytheUnitedNationsCommissiononInternationalTradeLaw(UNCITRAL).TheRotterdamRulesareintendedtoreplaceoutdatedcargoliability

regimessuchastheHamburgandHague/VisbyRules,takingaccountofmodernmulti-modaltransportand‘doortodoor’deliverypractices.

ICSrecognisesthatthenewrulesmaynotbeperfect,andinsomerespectsareoverlycomplex.However,maintenanceofthestatusquoisnotarealisticoption.IftheRotterdamRulesdonottakeholdthentheUnitedStatesandtheEUwillalmostcertainlypursuetheirownregionalregimesandtheopportunityforglobaluniformitywillbelostforanothergeneration.FollowingathoroughanddetailedanalysisoftheRotterdamRules,ICSmembershavethereforeconcludedthatthenewregimemustbestronglypromotedbytheshippingindustryinordertoavoidtheriskofaproliferationofregionalcargoliabilityregulations.

Encouragingly,theUnitedStatesappearstobecommittedtotheearlyratificationoftheConvention.WiththefullsupportofUScarriersandshippers,theStateDepartmenthaspreparedafiletobeputbeforeCongresswhichisexpectedtotakethisforwardafterthe2012PresidentialElection.Thiswillalmostcertainlygivecriticalmomentumtotheprocessofratificationworldwide,withChinaandotherAsiannationslikelytowishtoaligntheirregimeswiththeUS.Meanwhile,althoughsomepartsoftheEuropeanCommission,whomayhavebeeninfluencedbytheEuropeanShippers’Council(ESC),havebeenambivalentabouttheUNCITRALConvention,forthemomentatleasttheEUhasputasideplansforaregionalcargoliabilityregime,andmanyEUStatesareproceedingtowardsratification.Moreover,thedoubtsabouttheRotterdamRulesdisplayedbytheESC

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arenotsharedbytheGlobalShippers’ForumwhichembracesUSandAsianshippers.Whilethosewhoweredeeplyinvolvedinthenegotiations,suchasICS,areclearabouttheneedtoencouragegovernmentstoratifyandimplementtheRotterdamRules,therestillappeartobereservationsinsomequarters,includinginAsia,aboutthebenefitsofthenewregime.AnongoingpriorityforICS,inco-operationwithlocalnationalassociationsandbodiessuchastheAsianShipowners’Forum,istoexplaintotheseinterestswhytheRotterdamRulesshouldbesupported.

CompetitionIssues

Compliancewithcompetitionlawismostimportantgiventhateven‘technical’violationsbyshippingcompaniescanresultinpenaltiesamountingtotensofmillionsofdollars.InMay2011,mostofthemajorinternationalcontainerlineswerepresentedwithasharpreminderofthiswhentheEuropeanCommissionlaunchedadawnraidonnumerouscompanyoffices.Apparentlythiswastoestablishthatitsmajorshake-upofcompetitionrulesin2008isbeingfullycompliedwith.ItisunderstoodthattheEuropeanCommissionwasnotrespondingtoanyparticularcomplaint;noristherereasontobelievethattherehasbeenanynon-compliance.(However,inMarch2012,theEuropeanCommissionalsodemonstrateditspowerbyfining14internationallogisticscompanies,includingUPSandKuehne&Nagel,€169millionforcollusionwithrespecttosecuritysurcharges.)

Theabovenotwithstanding,in

thosepartsoftheworldwheretheyarestillpermitted,ICSpolicyistodefendthecontinuedexistenceoflinerconferencesandothersimilarexemptionstocompetitionlawsuchasdiscussionagreements.TheEUCompetitionDirectorate,however,continuestoargueforcefullythatitsforeigntradingpartnersshouldfollowitsunilateralexampleofmakingshippingcompanies’participationinsuchmechanismsillegal.

ICShasthereforewelcomedthepublication,inFebruary2012,bytheUnitedStatesFederalMaritimeCommission(FMC)ofitsdetailedstudyoftheimpactoftheEUprohibitiononUStrades.ManyoftheFMC’sconclusionsappeartosupporttheICSpositioninfavourofthemaintenanceofthestatusquowithrespecttocurrentantitrustimmunitythatappliesinnon-EUtrades.Basedonitsexaminationoftheperiod2006-2010,theFMChasconcludedthattherepealoftheEUBlockExemptionhasapparentlynotresultedwithanyrelativedeclineinEUfreightratescomparedwithFarEast/UStrades.Inotherwords,shippersinEUtradeshavenotbeenadvantagedasaresultoftheEUdecisioncomparedtoshippersinFarEast/UStradeswheretheEUprohibitiondoesnotapply.TherealsoappearstohavebeenanincreaseinratevolatilityinEUtrades,comparedtoFarEast/UStrades,andtheFMCsuggeststhattheactivitiesofdiscussionagreementsthatarestillpermittedinnon-EUtradesmayhavehada‘dampeningeffect’onratevolatility.

ABillintroducedtotheUSCongressin2010proposedremovalofmuch

oftheantitrustimmunitywhichisstillenjoyedbytheinternationallinerindustryinUStrades.Fortunately,thisBillisnowdeadandlittlefurtheractionisanticipateduntilafterthePresidentialelectionsinNovember2012.TheFMChasreachednofirmconclusionsastowhetheranychangesarewarrantedwithrespecttocurrentUScompetitionregulationssuchastheOceanShippingReformAct.However,theFMCstudydoesseemtoprovideevidenceinsupportofmaintainingthestatusquoshouldtherebefurthercallsfortheUStofollowtheexampleofEurope.

Meanwhile,inAsia,followingonfromthedecisionbySingaporethatitsblockexemptionfromcompetitionrulesforlinershippingagreementswillbeextendeduntil2016,ICShaswelcomedthesimilardecisionbyJapan,inJune2011,tomaintainitsAntitrustImmunitySystemuntilatleast2015.JapanhasalsoconcludedthattheEUrepealofantitrustimmunityhasledtoincreasedvolatilityoffreightratesinEuropeanlinertrades,aswellasariseinsurchargesleviedbyindividualcarriers.Inaddition,theJapanesegovernmentwasconcernedthatthedrasticrationalisationoflinerservicesbyindividualcarrierswhichhasensuedsincethedownturn,andwhichhasresultedwithareductionofavailableservices,waspartiallyaresultofthelines’reducedabilitytoco-operate.ICShaswelcomedtheagreementbytheAsiaPacificEconomicCo-operationforum(APEC),inJune2011,onguidelinesonmaritimecompetitionrules,specificallyforco-operationagreementswhichdonotinvolveratesetting,suchasconsortia.Althoughafarlooserformofco-operationthanconferences,

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consortiahaveprovidedstabilitytomarkets,helpingguaranteethemaintenanceofscheduledservicestomoreremotedestinationsandpermittingefficienciessuchasslotsharingoncontainerships.Inparticular,consistentwithargumentspresentedbyICS(andtheWorldShippingCouncil)atanearlierAPECconsultationmeetinginTokyo,ICShaswelcomedtherecommendationthatfilingrequirementsshouldbelefttothediscretionofindividualgovernments,sincethesearecommonlyrequestedbythosegovernmentswhichcontinuetoallowamoreflexibleapproachwithregardtoco-operationbetweenshippingcompanies.

AnumberofotherAsianjurisdictionsarealsoreviewingtheapplicationofantitrustlawtoshippingaspartoftheirdevelopmentofgeneralcompetitionlaw.ThelatestcountrytodothisisNewZealand.InSeptember2011,ICSsubmittedcommentstotheNewZealandProductivityCommissionandurgedtheNewZealandgovernmenttoconsiderthemaintenanceofpracticespermittedintherestoftheAsia-Pacific.

InJanuary2012,NewZealandreleasedadraftreportofitsenquiryintointernationalfreighttransportserviceswhichrecommendsthatitsexemptionforratemakingorcapacitylimitingagreementsberepealed,butthattheexemptionfornon-ratemakingactivitiesshouldberetained,conditionalonfilingtheagreementswiththeMinistryofTransport.

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ECInvestigationofIGofP&IClubs

ICSfirmlybelievesthatthecurrentsystemofmutualthirdpartyliabilityinsuranceprovidedbytheInternationalGroupofP&IClubs(IG)continuestoservethebestinterestsofshipoperatorsandtheircustomersextremelywell,alongsideservingtheinterestsofclaimantsandthegeneralpublic.Inparticular,themutualinsurancearrangementsprovidedbytheClubsenabletheprovisionoftheveryhighlevelsofinsurancerequiredunderinternationalliabilityconventions,underwhichcompensationtoclaimantsisgenerallypaidregardlessoffaultandwithoutlegalwrangles.

ICSisthereforecloselyfollowingtheEuropeanCommission’sinvestigationsoftheactivitiesofthe

IG,theCommissionhavingopenedformalproceedingsin2010.TheCommissionhadstatedthatitwassimplyconductinganinvestigation,andthatthisdidnotimplythattherewasanyproofofinfringement.TheCommissionhadalsoadvisedthatithadopenedtheinvestigationonitsowninitiativeandthatithadnotreceivedanyformalcomplaints.

ItwasoriginallyunderstoodthattheCommissionwishedtoexaminewhethercertainprovisionsoftheIGAgreementandPoolingAgreement,notablytheGroup’sclaimssharingandreinsurancearrangements,mightsomehowlessencompetitionbetweentheClubsorrestricttheaccessofcommercialinsurersorothermutualP&Iinsurerstotherelevantmarkets.InbilateraldiscussionswiththeCommission,ICSandECSAhave

thereforeemphasisedthatthemutualinsurancearrangementsprovidedbytheP&IClubsareefficientandcosteffective.Fortheirpart,theCommissionofficialswhoweretheninvolvedhadstressedthattheywerenotintentondestroyingthesystembutwereinterestedinthequotationprocedure,releasecalls,andtheavailabilityofcommercialP&IinsuranceoutsidetheInternationalGroupsystem.

In2011theCommissionsentoutquestionnairestoindividualshippingcompaniesseekingfurtherinformationontheapplicationoftheIGAgreement,andalsorequesteddetaileddocumentationandinformationfromtheIGClubs.However,developmentshavebeenmuchslowerthanexpected,apparentlyduetotheappointmentofanewteamofcasehandlers.

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FlagStatePerformance

Inaglobalisedindustrysuchasshipping,thereisnothinginherentlywrongwitharegulatorysysteminwhichtheflagwhichashipchoosestoflyisdifferenttothecountryofbeneficialownership.Inparticular,ICSbelievesthatgeneraliseddistinctionsbetweentheperformanceofopenregistersandsocalledtraditionalmaritimeflagsareneitherhelpfulnorrelevant.Pejorativetermssuchas‘flagsofconvenience’havemoretodowithindustrialrelationsissuesofthe1980sthanthesituationwhichpertainsto2012.FlagstatessuchasBahamas,Liberia,HongKongandSingaporeareamongsttheverybestperformersintermsoftheirimplementationofIMOandILOrequirementsandportstatecontrolinspectionrecords,whiletheownershipprofileofmanyOECDshipregistersnowincludeslargenumbersofforeignownedshippingcompanies.

Nevertheless,ICSbelievesthatabalancehastobestruckbetweenthecommercialadvantagesofshipownersselectingaparticularflagandtheneedtodiscouragetheuseofanyshipregisterthatdoesnotmeetitsinternationalobligations.Whileitisshippingcompaniesthathaveprimaryresponsibilityforthesafeoperationoftheirshipsitistheflagstatethatmustenforcetherules.

ICShasthereforebeenastrongsupporteroftheIMOMemberStateAuditSchemeandhaswelcomedthedecisionbyIMOfortheauditstobecomemandatoryin2014,oncethefirstroundofvoluntaryauditsiscomplete.InMarch2012,IMOfinalisedadraftofitsIMOInstrumentImplementationCode,whichwillunderpinthemandatoryschemesubjecttoadoptionbythe2013IMOAssembly.However,intheinterestsoftransparency,ICSbelievesthattheresultsoftheIMOauditsshouldbepublished,andthat,asaminimum,informationshouldbemadeavailablebyIMOastowhethermaritimeadministrationshaveactuallyputthemselvesforwardforinspection.Inthemeantime,ICShaswelcomedthedecisionofsomeofthemajorregionalportstatecontrolauthoritiestorequestinformationastowhetherauditshavebeenconductedaspartoftheircriteriafortargetinginspections.AsacomplementtotheIMOScheme,andasaservicetotheindustry,ICScontinuestoproduceitsannualShippingIndustryFlagStatePerformanceTablewhichcollatesvariousdataavailableinthepublicdomainandwhichcanbedownloadedfromtheICSwebsite.However,underthesupervisionofICS’smembernationalshipowners’associations,thepresentationofthe

Tablefor2011hasbeenmodifiedslightlyinordertoaddressfeedbackfromgovernments,includingcommentsattheIMOFlagStateImplementationCommitteewhichquestionedsomeofthecriteriausedbyICSandwhetherthedatamightbepresentedinamorepositivemanner.

However,thepurposeofthenewTableisthesame:toencourageshipownerstoexaminewhetheraflagstatehassubstancebeforeusingitandtoencouragethemtopressuretheirflagadministrationtoeffectanyimprovementthatmightbenecessary.ICSmakesnoapologyforcontinuingtosubjectflagstatestoscrutiny,inthesamewaythatshipsandcompanyproceduresarerightlysubjectedtoinspectionbygovernments.Theoverridinginterestinpromotinghighperformingflagsisthattheyarelesslikelytotoleratesub-standardoperatorswhowouldotherwiseenjoyanunfaircommercialadvantageoverthevastmajorityoffullycompliantshippingcompanies.

ShippingPolicyandFreeTrade

Forthepastfouryearstheshippingindustryhasbeenconfrontedwithunprecedentedeconomicturmoil.Muchoftheindustryisstillstrugglingwiththeseriousconsequencesofatrulymassivecontractionineconomicactivity,withglobaltradeestimatedtohavedeclinedbynearly10%in2009.Whiletradepickedupalittle,especiallyinAsia,thelatestWorldTradeOrganizationprojectionsfor2012arenotverypositiveandoverallglobaltradeisprobablynotmuchimprovedonthelevelsthatexistedbefore2008.Thepracticeofsoundshippingpolicybygovernmentsisthereforeasimportantasever.

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ShippingpolicyinvolveslongtermengagementbyICSanditsmembernationalassociationsinthelargelyunseendiplomaticactivitynecessarytohelpensurethemaintenanceoftheopenmarketswhichtheshippingindustryneedstooperatecompetitivelyandefficiently.Shippingalsorequiresaregulatory‘levelplayingfield’and,inviewofthegreatmarketvolatilitybeingexperiencedduringthecurrenteconomicdownturn,thecontinuationofthecertaintyprovidedbythetonnagetaxregimesthatnowapplytoshippingcompaniesinmostcountries.InJune2011,ICSmadetheseimportantpoints(aswellashighlightingtheissueofSomalipiracy)asoneoftheleadingindustryparticipantsatamajorConferenceoftheworld’stransportministersinLeipzig,organisedbytheOECDInternationalTransportForum,whichhascontinuedtofocusontheimplicationsfortransportasitemergesfromtheeconomicdownturn.ICSwillagainberepresentingtheindustryatthenextOECDtransportministers’conferenceinMay2012.

Moreroutinely,ICScontinuestoplacegreatimportanceonrelationswiththeConsultativeShippingGroup(CSG)ofgovernments,whichistheguardianofmaritimefreetradeprinciples.InJune2011,inco-operationwithECSAandtheRoyalBelgianShipowners’Association,ICSheldaseminarontradepolicyforCSGgovernmentsattheirmeetinginBrussels.InconjunctionwithASFandtheSingaporeShippingAssociation,asimilareventwasorganisedinApril2012attheCSGmeetingheldinSingaporewhich,interalia,discussedthepossibletradeimplicationsof

marketbasedmeasuresforCO2emissions.

ICShascontinuedtogiveinput,vianationalassociations,onissuesrangingfromproblemsofmarketaccesstogovernmentinterferenceinlocalmarkets.TheCSGisalsoausefulconduitforthediscussionofsensitivediplomaticissues,suchasthetreatmentofpiracy.

InadditiontothebroaderroleoftheCSGasaforumfordiscussionofshippingpolicyandtradeissues,itstillmaintainsitsoriginalfunctionasprovidingameansfortheworld’smajorshippingnationstocommunicatewiththeUnitedStatesgovernment,whichhistoricallyhasoftenbeenslightlydetachedfromthemainstreamoftheinternationalshippingcommunity.ICSwillparticipateatthenextCSGdialoguemeetingwiththeUnitedStates,inWashingtonDC,inJune2012.AmajorconcernofICSnationalshipowners’associationshasbeentodiscouragegovernmentsfromrespondingtothecurrenteconomiccrisiswithprotectionistmeasures,whichwillonlydamageworldtradefurther.Moreparticularhasbeentheneedforgovernmentstoavoidmeasuresthatrestrictfairandopenaccesstoshippingmarkets.Acaseinpoint,whichreceivedcloseattentionin2011,wastheapparentattemptsbytheChineseauthoritiestorestrictaccesstoChineseterminalsfortheultralargebulkcarriersoperatedbytheBrazilianironoreproducerVale,althoughthisissuenowseemstohavebeensettledsatisfactorily.Likewise,whilstICShasnoopinionabouttheunderlyingissuessurroundingthefutureoftheFalklandIslands(Malvinas),any

restrictionsbyArgentinaonshipsthathavecalledattheislandswillbeofgreatconcernbecauseofthenegativeprecedentthatcouldbesetwithrespecttothemaintenanceofmaritimefreetradeprincipleselsewhere.

Althoughoflittleimmediatecomforttothoseindividualcompaniesthatmaystillbestrugglingtosurvive,oneconsolationisthatgovernmentssofarappeartohavemadeadeterminedefforttoavoidtheexcessiveuseofprotectionistmeasures,(althoughinearly2012somebackwardlookingmoveswereproposedwithintheEUwithrespecttogovernmentprocurement).Buttherecoveryoftheworldeconomyisstillfarfromcertain,anditwillremainimportantforICS,andlike-mindedgovernments,toremainvigilant.Inparticular,ICSremainscommittedtotheinclusionofshippinginanynewagreementonservicesthatmaybeagreedbytheWorldTradeOrganization(WTO),inordertocodifytheliberaltradingpracticeswhichalreadyapplytomostshippingmarkets.However,progresstowardsanewWTOdealontraderemainsslow,largelyduetosignificantdifferencesbetweengovernmentsonissuessuchasagriculture.

ShipbuildingPolicy

Shipping,ofcourse,istheservantofworldtradeandjustasitbenefitedfromtheboomyearsofthemid2000sitsfortunesarenowalsoinextricablylinkedtotherecentfallinthedemandforitsservices.Butmanyoftheproblemsconfrontingshippinghaveundoubtedlybeenexacerbatedbyshipownersplacingordersforfartoomanyships,withfartoofewcargoestocarry.With

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vastamountsofnewtonnagebeingdeliveredduring2012,inmanytradesthereisnowamajorglutofships.

Currentmarketswouldappeartobedemonstratingjusthowseriouslydamagingtheoversupplyofshipshasbeentoshipowners’revenues,withmanynowstrugglingtomeettheiroperatingcosts.However,theproblemsofindividualownersaside,thebiggestdangerperhapsistheovercapacitythatexistsintheshipyards,withanalmostobsessivecommitmenttomarketsharebeingdisplayedbythethreemajorshipbuildingnations:China,KoreaandJapan,where90%ofworldtonnageisbuilt.Evenifshipyardsgobankrupt,itislikelythattheirgovernmentswillstepinsothattheycancontinuetoproduceshipswhichfewpeoplewant,otherthanspeculatorswhomaybefoolishlytemptedbyknockdownprices.However,amarketmightbefoundforotherwiseunwantedChineseshipsbytheChinesefleetitself,withChinahavingawidelyrecognisedgoalofseekingtocarryamuchlargerproportionofitscargoes–perhaps50%-onboarditsownvessels.

ItisthereforeasourceofdisappointmentthattheOECDhasconfirmeditsdecisiontoterminatenegotiationsonanewagreementtoeliminatesubsidiesandmarketdistortingmechanismsintheshipbuildingindustry.ThiswasprimarilyduetodifferencesbetweentheEuropeanCommissionandAsiangovernmentsaboutthetreatmentofpricingofnewshipsinanynewagreement,thelatterwishinginsteadtoconcentrateontheeliminationofsubsidies-apositionsupportedbyICS.However,theOECDWorkingPartyonShipbuildingwillcontinue

tomeet,inordertoexplorefurtherwhatconstitutesmarketdistortionandthemeansofachievinggreatertransparencyongovernmentsupportmeasures.ICSwillattendameetingthatOECDisorganisinginParisinJune2012,withthegoalofencouragingtheresumptionofthetalksassoonaspossible,eveniflittleimmediatemovementisanticipated.Inviewoftheserioussupply/demandimbalancethatcurrentlyprevailsitisclearthatspeculativeorderingofshipsthathavenoeconomicpurposeshouldbediscouraged.Whatevermightseemrationalfromanindividualcompany’sperspectivemightnotbegoodwhenseeninthecontextoftheindustryasawholeandtheindividualcompaniesitcomprises.

However,onethingonwhichICSisclearisthatitwillresistanysuggestionthatallshipsaboveacertainageshouldautomaticallybescrapped.ICSwillcontinuetoresisttheconceptofamaximumageforshipswhich,aswellasdamagingthecommercialinterestsoflargenumbersofcompanies,wouldremoveincentivestomaintainoldershipsandwouldhavenegativeimplicationsforsafetyandenvironmentalprotection.

CanalIssues

ThePanamaandSuezCanalsreducethelengthofmanyseavoyagesbythousandsofmiles,buttheprivilegeofusingthemisexpensive.Individualtransitsbylargevesselscancosthundredsofthousandsofdollars.WhilebothCanalsarededicatedtoprovidingexcellentservicetheyarealsoverymuchcommittedtoprofitmaximisation.

ThecurrentAdministratorofthe

PanamaCanal,MrAlbertoAlemánZubieta,whohasbeenpivotalinoverseeingthecurrentCanalexpansionandstrengtheningliaisonwithindustryhasannouncedthathewillstepdownfromhispostlaterthisyear.ICSlooksforwardtoworkingwithhissuccessor,MrJorgeQuijano,whowilltakeoverinSeptember2012.

InJanuary2012,ICShostedameetingofinternationalindustryrepresentativeswithadelegationfromthePanamaCanalAuthority(ACP)todiscussthefutureofoperationsafter2014,whenthetrulyimpressiveCanalexpansionprojectisscheduledforcompletion.TherewasapositiveexchangeabouttheACP’spreliminarythoughtsonhowCanaltollsmightchange.Ingeneral,theACPindicatedthatitwouldliketointroducemoresegmentationinitstollsinordertobetterrespondtomarketfluctuationsthataffectthecompetitivenessoftheCanalasaroute.Theindustryhadunderstoodthattheseideaswereatanearlystageandwouldbesubjecttomuchfurtherdiscussion.ICSwasthereforesurprisedwhen,attheendofApril20I2,theACPannouncedmajortollincreases,formanylarger(non-container)ships,of15%overthenexttwoyears,commencinginJuly,withevenlargerincreasesformanysmallervessels.Inaddition,theACPhasannouncedgeneralincreasesintariffsforsecurityandoilspillresponseservices,bothofwhicharemandatoryforshipspassingthroughtheCanal.Theindustryisexpectedtoopposethesedevelopmentsverystrongly.Meanwhile,ICShasopposedthe3%tollincreasesannouncedbytheSuezCanalAuthority(SCA)inDecember2011,atatimewhentheindustryisstillstrugglingtomanagetheeffects

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oftheglobalfinancialcrisis.SuezCanaltollshaveremainedfrozenforthepastthreeyearsinrecognitionofdifficultshippingmarkets.ICSthereforeco-ordinatedanindustryresponsetotheSCA,explainingthattheeconomicsituationhasnotimprovedandrequestingthattheincreasesbeadjustedordeferred.Disappointingly,however,theincreaseswentaheadunchangedinMarch2012.

FollowingthedramaticpoliticaleventsinEgyptin2011,andthecollapseofothermajorsourcesofforeignincomesuchastourism,theSCAisnodoubtunderpressuretomaintainitsrevenue.TotheSCA’scredit,theCanalhascontinuedtofunctionsmoothly.However,ICShassincerepeateditsrequestforfullandproperconsultationbetweentheindustryandtheSCA,particularlywhenevertolladjustmentsarebeingcontemplated.

IndustryRepresentationandCo-operation

Astheprincipalinternationalassociationfortheshippingindustry,theprimaryfocusofICSrepresentationistheInternationalMaritimeOrganization(IMO).ICSparticipatesactivelyinvirtuallyeveryIMOCommitteeandSub-Committeeaswellasnumerousspecialistworkingandcorrespondencegroups.ICSisthereforeacknowledgedbygovernmentsasrepresentingtheconsideredviewsofallinternationalshipoperators.

Whilstefficientglobalshippingdependsonasystemofuniformglobalrules,shipoperatorsstillliveinaworldofnationstates.Theimportanceofnationalshipowner’s

associationsthereforeremainsasessentialasever.ThestrengthofICS’sadvocacyatIMO(andthevariousotherforathatimpactonshipping)isverymuchdependentontheICSmemberassociationswhichpresentagreedICSpositionstotheirmaritimeadministrationsinadvanceofintergovernmentalmeetings.ICSmemberassociationscollectivelydeveloptheindustry’sglobalpositionsthroughacomprehensivestructureofspecialistcommittees(seepage56).

UsingitsseparateISFidentityasanemployers’organisation,ICSisalsoanofficialsocialpartnerattheGeneva-basedInternationalLabourOrganization(ILO)andactsasSecretarytotheEmployers’GrouponallILOmaritimeissues.

InadditiontointeractingwithindividualgovernmentsduringmeetingsatIMOinLondonandILOinGeneva,ICScontinuesregularattendanceatmoregeneralpolicymeetingsheldbytheUnitedNationsinNewYork,theWorldTradeOrganization(WTO),theOrganizationforEconomicCo-operationandDevelopment(OECD),theConsultativeShippingGroup(CSG)ofmaritimeadministrations,theUnitedNationsConferenceonTradeandDevelopment(UNCTAD),theWorldCustomsOrganization(WCO),and,insofarastheyarerelevanttoseafarers,bodiessuchastheWorldHealthOrganization(WHO).GiventheimportanceofdiscussionsaboutCO2emissionsreduction,ICShasalsotakenupconsultativestatuswiththeUnitedNationsFrameworkConventiononClimateChange(UNFCCC)andrepresentedtheindustryatthelastUNClimateChangeConference(COP17)inDurbaninDecember2011.

ICSenjoysgoodrelationswithmanyotherintergovernmentalbodiesthatimpactonshippingincludingtheInternationalAssociationofMarineAidstoNavigationandLightHouseAuthorities(IALA),theInternationalHydrographicOrganization(IHO)andtheWorldMeteorologicalOrganization(WMO).ICSalsohasconsultativestatuswiththeInternationalMobileSatelliteOrganization(IMSO),whichisthebodythatoverseespublicsafetyandsecuritycommunicationservicesincludingtheGlobalMaritimeDistressandSafetySystem(GMDSS).Inaddition,ICSattendsmeetingsofboththeParisandTokyoMOUsonPortStateControl.

Asanemployers’organisation,andanofficial‘socialpartner’attheILO,theoppositenumberofISFistheInternationalTransportWorkers’Federation(ITF).Asreportedelsewhere,inApril2012nationalshipownerassociationsandITFunionaffiliatesheldameetingtoexchangeviewsonmattersofcommoninterest,thefirstsuchmeetingoutsidetheconfinesoftheILOforadecade.Itisintendedthatthispositivedialoguewillcontinue.Inaddition,ISFcontinuestobeamemberoftheInternationalCommitteeonSeafarers’Welfare(ICSW)whichembracessecularandreligiousseafarers’welfareorganisations.

Inviewoftheimportanceofensuringglobalregulationforaglobalindustry,ICScontinuestoworkcloselywiththeEuropeanCommunityShipowners’Associations(ECSA)incommunicatingonissueswithEuropethatarerelevantfromaninternationalperspective,andparticipatesinconsultationsorganisedbytheEUinstitutions.IntheUnitedStates,ICS

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IMOinsession

changesnecessitatedbytheSTCW2010amendments.

AnticipatingtheentryintoforceoftheILOMaritimeLabourConvention,aneweditionoftheISFGuidelinestotheILOMLCisexpectedtobepublishedinthefirsthalfof2012,inordertotakeaccountofthevariousclarificationsagreedbyILOsincetheMLCwasadoptedin2006.Incorporatingnewadviceoncomplianceandtheadoptionofbestemploymentpractices,itishopedthatthispublicationwillcometoberegardedasasisterpublicationtothedefinitiveICS/ISFGuidelinesontheApplicationoftheInternationalSafetyManagement(ISM)Code.

WorkisnowwelladvancedonaneweditionoftheICSTankerSafetyGuide(Chemicals).Thisisamajorundertakingbutpublicationisanticipatedin2013.Lookingforwards,aworkgrouphasalsobeenestablishedtobeginareviewofthecurrenteditionoftheICSTankerSafetyGuide(Gas).WorkisalsounderwayonaneweditionoftheICSBridgeProceduresGuidetotakeaccountofdevelopmentsine-navigation.

Meanwhile,inco-operationwiththeOilCompaniesInternationalMarineForum(OCIMF)andtheSocietyofInternationalGasTankerandTerminalOperators(SIGTTO)workhasprogressedonanewconsolidatededitionoftheShiptoShipTransferGuidethatwillcoverpetroleum,chemicalandgasoperations.Publicationisexpectedduring2012.

workswiththevariousUSagenciesthatimpactonshippinginliaisonwiththeChamberofShippingofAmerica,whichbyagreementofficiallyrepresentsICSinUSdiscussions.Additionally,ICSenjoysgoodrelationswiththeAsianShipowners’Forum,whosemembersarealsonationalshipowners’associations.ICSisalsonowdevelopingarelationshipwiththeAsiaPacificEconomicCo-operationforum(APEC)whichisbecomingincreasinglyengagedwithmaritimetransportmatters.

ICSworkscloselywithadiverserangeofotherindustryorganisationsthatareengagedgenerallyontransportissues,includingtheInternationalChamberofCommerce(ICC),theInternationalOrganizationforStandardization(ISO),theBusinessandIndustryAdvisoryCommitteetotheOECD(BIAC),theInternationalOrganizationofEmployers(IOE)andtheWorldOceanCouncil(WOC).

Lastbutnotleast,ICSenjoysgoodrelationswithvariousspecialistindustrybodiessuchastheInternationalAssociationofClassificationSocieties(IACS),theInternationalGroupofP&IClubs(IG),theInternationalUnionofMarineInsurance(IUMI),theInternationalAssociationofPortandHarbors(IAPH),theInternationalMaritimePilots’Association(IMPA),theNauticalInstitute(NI),andtheGlobalShippers’Forum(GSF).This,ofcourse,isinadditiontocloseco-operationwithotherspecialistinternationalshippingassociationsincludingBIMCO,theCruiseLinesInternationalAssociation(CLIA),Intercargo,Interferry,Intermanager,Intertanko,theOilCompaniesInternationalMarineForum(OCIMF),theInternationalMarineContractorsAssociation

(IMCA),theInternationalMaritimeEmployers’Committee(IMEC),theInternationalSupportVesselOwners’Association(ISOA),theInternationalParcelTankersAssociation(IPTA),theSocietyofInternationalGasTankerandTerminalOperators(SIGTTO)andtheWorldShippingCouncil(WSC).

Publications

AlargeproportionofICSresourcesisdevotedtotheproductionofpublicationsforthebenefitoftheindustry.IssuedunderthebannerofMarisecPublications,ICSpublishesover30titleswhichprovideguidanceonregulatorydevelopmentsandindustrybestpractices,especiallywithregardtosafety,environmentalprotectionandemploymentstandards.

UnderthebadgeofISF,ICScurrentlyhasanambitiousprogrammetoupdatevariouspublicationstoreflecttheentryintoforce,inJanuary2012,ofthe2010amendmentstotheIMOConventiononStandardsofTraining,CertificationandWatchkeepingforSeafarers(STCW).In2011,thisincludedpublicationoffullyupdatedGuidelinestotheSTCWConvention,followedbyrevisedonboardtrainingbooksfordeckandengineratings,whichtakeaccountofthenewSTCWgradesofAbleSeafarerDeckandEngine.Updatedonboardtrainingrecordbooksfordeckandengineofficercadets,thatwilladdressthenewSTCWcompetencestandards,areduetobepublishedinthefirsthalfof2012.Inco-operationwithitspartnerITEnergy,ISFhasalsolaunchedaneweditionofitspopularISFWatchkeepercomputersoftware,whichallowsseafarers’workandresthourrecordstobemaintainedinaccordancewithIMOandILOregulatoryrequirements,including

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ICS/ISFPublications

2012

Available from Marisec Publications

www.marisec.orgInternational Chamber of Shipping

In

ternational Shipping Federation

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RepresentingtheGlobalShipping

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OrganisationalMatters

ThecurrentICSmembershipcomprisesnationalshipowners’associationsfrom36countries,representingallsectorsandtradesandover80%oftheworldmerchantfleet(seeinsidebackpage).InJanuary2012,theInternationalMaritimeEmployers’Committee(IMEC),whichengagesincollectivebargainingnegotiationswithseafarers’unions,joinedICSasanAssociateMember.

PeterHinchliffecontinuestoserveasICSSecretaryGeneral.SincehisappointmentinSeptember2010hehasalreadyoverseensomesignificantorganisationalchanges.The2011AnnualGeneralMeetingtooktheimportantdecisiontofullyintegratetheICSorganisationwiththatoftheInternationalShippingFederation(ISF).ForallintentsandpurposesICSandISFarenowthesameorganisationandthearticlesandrulesofICShavebeenamendedaccordingly.However,ICSwillcontinuetousetheseparateidentityofISFwhenrepresentingtheindustryasanemployers’organisation,forexampleatmeetingsoftheInternationalLabourOrganizationorwhendealingwithlabouraffairsquestions.

SinceJune2011,theCommitteesofICSandISFhavebeencombinedintoasinglestructure,asshownoverleaf,reportingtoasingleICSBoardofDirectors,membershipofwhichhasbeenexpandedandtowhichallFullMembersthatsubscribetobothtradeassociationandemploymentaffairsservicesarenowentitledtoberepresented.ThiswillhelptoensurethatthepositionsadoptedbyICS

trulyreflecttheconsideredviewsoftheentireglobalshippingindustry.

TheSecretariatandstaffofICSisprovidedbyMaritimeInternationalSecretariatServicesLimited(Marisec),whichiswhollyownedbyICS.MarisecalsocontinuestoprovideservicestotheInternationalSupportVesselOwners’Association(ISOA).

InOctober2011,ICSrelocatedtobrightnewofficesatStMaryAxeintheCityofLondon.InDecember,thenewofficeandmeetingfacilitieswereofficiallyopenedbytheICSChairmaninthepresenceofrepresentativesfromthevariousinternationalmaritimeorganisationswithwhomICSworksmostclosely.

The2011AnnualGeneralMeetingofICS(andthefinalAnnualGeneralMeetingofISF)washostedbytheGermanShipowners’AssociationinHamburginMay.Underthenewarticlesofassociation,thefourICSViceChairmenelectedfor2011/2012wereCaptainDirkFry(Cyprus),MrFrankLeonhardt(Germany),MrTrygveSeglem(Norway)andMrGerardoBorremeo(Philippines).AnexpandedBoardofDirectors,whichmeetsthreetimesayear,wasalsoelectedbytheICSAGM,asshownontheoppositepage.MrSpyrosMPolemis(Greece)continuedtoserveasChairmanfollowinghisre-electionin2010.

MrPolemishasservedasICSChairmanforthelastsixyearsandhasannouncedthathedoesnotintendtoseekre-electionfor2012/13.AsuccessorwillbeelectedattheICSAnnualGeneralMeetinginMay2012,whichwillbehostedbytheAustralianShipownersAssociationinPortDouglas,Queensland.

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ICSSecretaryGeneral,

PeterHinchliffe

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ICSBoardofDirectors2011-2012

ICSSecretariat

ICSChairman,SpyrosMPolemisopensthenewofficesatStMaryAxe

Australia MrNoelHart Bahamas MrChrisOliver Belgium MrPeterVierstraet Canada MrGerryCarter Cyprus CaptainDirkFry Denmark MrCarstenMortensen Finland MrJanHanses France Mr.ChristianGarin Germany MrFrankLeonhardt Greece MrAnastasiosPapagiannopoulos HongKong Mr.RobertHo Ireland MrJohnDolan Italy MrStefanoMessina Japan MrHiroshiHattori Liberia MrMarkMartecchini Mexico MrLuisOcejo Netherlands MrsKarinOrsel Norway MrTrygveSeglem Philippines MrGerardoBorromeo Singapore MrEsbenPoulsson Sweden MrLarsHöglund Turkey MrTamerKiranUnitedKingdom MrMichaelParker UnitedStates MrCharlesParks

ICSOrganisationalStructure

MarineCommittee

Chairman:CaptainTrevorSmith

Singapore

FullMembersAssociateMembers

BoardofDirectors

OffshorePanel

Chairman:MrDavidBlencowe

Denmark

DangerousGoodsPanel

Chairman:MrJohnLeach

UnitedKingdom

EnvironmentSub-Committee

Chairman:MsTeresaLloyd

Australia

CanalsSub-Committee

Chairman:MrKoichiInoue

Japan

PassengerShipPanel

Chairman:MrTomStrang

UnitedKingdom

ContainerPanel

Chairman:MrMikeDownesUnitedKingdom

GasCarriersPanel

Chairman:Tobeconfirmed

BulkCarrierPanel

Chairman:MrDimitriosFafalios

Greece

ChemicalCarriersPanel

Chairman:MrJosephLudwiczak

Liberia

OilTankerPanel

Chairman:MrRogerRestaino

Liberia

Manning&TrainingCommittee

Chairman:MrTjitsoWestra

Netherlands

InsuranceCommittee

Chairman:MrMatheosLos

Greece

Construction&Equipment

Sub-CommitteeChairman:

MrMauriziod’AmicoItaly

ShippingPolicyCommittee

Chairman:MrJohnCLyras

Greece

MaritimeLawCommittee

Chairman:MrViggoBondi

Norway

LabourAffairsCommittee

Chairman:MrArthurBowring

HongKong

Radio&NauticalSub-Committee

Chairman:CaptainPaulJones

Singapore

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Members of the International Chamber of Shipping

FULL MEMBERS

AUSTRALIA Australian Shipowners Association BAHAMAS Bahamas Shipowners’ Association BELGIUM Royal Belgian Shipowners’ Association BRAZIL Syndarma•• BULGARIA Bulgarian Shipowners’ Association• CANADA Canadian Shipowners’ Association CHILE Chilean Shipowners’ Association CHINA China Ocean Shipping (Group) Co•• CROATIA Mare Nostrum, Croatian Shipowners’ Association• CYPRUS Cyprus Shipping Chamber DENMARK Danish Shipowners’ Association FINLAND Finnish Shipowners’ Association FRANCE Armateurs de France GERMANY German Shipowners’ Association GREECE Union of Greek Shipowners Hellenic Chamber of Shipping• HONG KONG Hong Kong Shipowners’ Association INDIA Indian National Shipowners’ Association IRELAND Irish Chamber of Shipping ISLE OF MAN Isle of Man Shipping Association•• ITALY Confederazione Italiana Armatori (Confitarma) JAPAN Japanese Shipowners’ Association KOREA Korea Shipowners’ Association KUWAIT Kuwait Oil Tanker Co. LIBERIA Liberian Shipowners’ Council MEXICO Grupo TMM S.A. NETHERLANDS Royal Association of Netherlands Shipowners NORWAY Norwegian Shipowners’ Association PHILIPPINES Filipino Shipowners’ Association SINGAPORE Singapore Shipping Association SPAIN Asociación de Navieros Espanoles SWEDEN Swedish Shipowners’ Association• Swedish Shipowners’ Employer Association•• SWITZERLAND Swiss Shipowners’ Association• TURKEY Turkish Chamber of Shipping UNITED KINGDOM UK Chamber of Shipping UNITED STATES Chamber of Shipping of America

ASSOCIATE MEMBERS

Abu Dhabi National Tanker Co. (Adnatco)• BW Fleet Management Pte. Ltd• Chamber of Shipping of British Columbia• Cruise Lines International Association (CLIA) European Dredging Association (EuDA) Interferry• International Maritime Employers. Committee (IMEC) Sail Training International Shipping Australia Ltd• World Shipping Council• • Trade Association Only •• Employers Organisation Only

Representing the Global Shipping Industry

International Chamber of Shipping

38 St Mary AxeLondon EC3A 8BH

Tel +44 20 7090 1460Fax +44 20 70901484

info@ics-shipping.org

www.ics-shipping.org