Crew costs rose in 2007

Ship operating costs surged over 11% last year, mainly due to higher crew costs, according to shipping accountant and Maritime London member Moore Stephens.

The firm's ship operating cost benchmarking tool OpCost 2008, shows an annual average increase of 11.2% in total operating costs in 2007, the financial year covered by the survey.

The OpCost container ship index saw the largest overall increase of 24 points, or 18%, mainly driven by higher crew costs in all three container ship types covered. The tanker index has increased by 16 index points (11.1%) on a year on year basis, while the bulker index has seen a smaller increase this year of 10 index points (7.4%).

Moore Stephens partner Richard Greiner says: “Container ships saw crew wages rise an average of 20% this year, and the average crew wage rise over all ships was over 10%. We also saw Stores going up by an average of 16%, down a little from the sharp 20 % rise last year but still significant. Most of that rise was down to a sharp increase in lube oil costs.”

Owners continued to spend more on repairs and maintenance, with costs in that category going up an average of 12%, although there was significant variation across vessel types. Insurance increased by around 7%, down on last year’s increase.

Mr Greiner says, “This year we have over 24% more ships included in our sample, meaning we derive the data from the actual costs experienced by over 1,800 ships in service. OpCost is firmly established as the primary source of operating cost information for the international shipping industry and owners see the benefit to themselves of submitting their accounts for inclusion. They help improve the data, and they help themselves by being able to see clearly how they are doing in managing operating costs compared to their peers.”

He adds: “Next year we hope to add an LPG carrier type to the database, and also a new container ship size bracket of over 6,000 TEU and perhaps an LNG carrier type as well. We hope owners with ships in those sizes and types will join in with us.”

Graduating from Plymouth University

University of Plymouth graduate Caroline Friis has been awarded the Maritime London prize for “Outstanding Performance in Maritime Business and Maritime Law.”

Maritime London chief executive Doug Barrow said: “We’re delighted to award this prize to such a high calibre student. The maritime business needs to attract high quality graduates such as Caroline if it is to continue to prosper. We wish Caroline all the best in her future career.”

Accepting the prize, Caroline Friis said: “The course offered me more than just a basic shipping degree, its content and the opportunities for progression in maritime business, along with many professional links to the shipping industry added greatly to my experience and knowledge.”

She added: “The most positive experience I had whilst on the course came from being taught by the academically accredited and industry experienced maritime business and maritime law staff, this was invaluable for my educational development and personal inspiration.”.

More than a quarter of the 10,000 commercial disputes resolved in London last year were maritime related according to the latest statistics from International Financial Services London (IFSL).

The 40 full members of the London Maritime Arbitrators’ Association (LMAA) handled 2,751 cases in 2007, up slightly on 2006. Since 2000 the annual number of appointments has been in the range of 2,600 to 3,100. The number of awards fell to 463 in 2007 from 511 in 2006 and 602 in 2005.

Awards are also made under the Lloyd’s Form of Salvage Agreement, the oldest and most widely used standard salvage contract. Referrals have been in the range of 80 to 110 a year since 2001, with 107 in 2007. The number of awards rose to 33 in 2007 up from around 20 in the three previous years. ”

Readers of London Matters are invited to take part in a short online survey to give Maritime London a better understanding of the needs of the UK based maritime services industries from both members and non-members alike.

Maritime London chief executive Doug Barrow said: “As the UK’s representative body for the maritime services we need to make sure that we’re supporting our members in the right way and targeting the right overseas markets. We have a greater number of members than ever before and we want to work with them in the most effective way possible.”

The closing date for returns is 24 October.

An agreed set of cross-border rules for international shipping is absolutely essential but the current trend is towards uncertainty, according to Dr Aleka Mandaraka Sheppard of the London Shipping Law Centre.

Dr Sheppard highlighted these issues last week at the Centre’s Cadwallader Memorial Lecture at the IMO headquarters. She said recent legislation has produced a conflict of laws to the detriment of legal certainty and the harmonisation of law between national regimes.

She emphasised: “No one would dispute that legal certainty is essential to the delivery of justice but it is equally important that the right balance must be struck. Insisting on a rigid application of law, irrespective of effect, is tantamount to looking at laws through narrow lenses. For legal rules to work, account must be taken of their context. For example, the EU Directive on ship-source pollution conflicts with international law.”

The recent equivocal decision of the European Court of Justice on questions referred to it by the English High Court has compounded the problem, said Dr Sheppard.

“The ECJ decided it could not assess the validity of the Criminalisation Directive in relation to MARPOL because the European Community is not a party to MARPOL----notwithstanding that its members are. The ECJ, nevertheless, proceeded to interpret the term ‘serious negligence’ in Article 4 of the Directive as a ‘patent breach of the duty of care.’ This test is still lower than that provided by MARPOL.”

Dr Sheppard continued: “Such law is hardly consistent with legal certainty. It does not assist the development of coherent rules, since EU members will, inevitably, be bound by two conflicting laws: the EU Directive and MARPOL. Which law should apply?”

The Law Centre head said that shipowners, legislators and lawyers need to tackle the following issues: who should make the law in a complex, global industry and how it should be implemented effectively; the relationship between regulations and rules at international level and those adopted regionally; which law should apply when there is conflict between international treaties and regional laws; which courts or tribunals would have competent jurisdiction to decide disputes; and how to reconcile differences between court decisions to enhance certainty in the law.

Marine salvage companies meeting in Malta last month at the International Salvage Union (ISU) annual general meeting decided to call for publication of Lloyd's Form Salvage Awards, including the full text of the Arbitrator’s Reasons.

ISU president Arnold Witte said: “It is important that the Lloyd's arbitration system is not only entirely fair to all sides but is also seen to be fair. An open policy on publication, should the parties involved in the particular case agree, would amount to a great advance in demonstrating the impartiality, validity and flexibility of the Lloyd's Open Form (LOF) system"

The ISU also decided move ahead rapidly to produce best practice guidelines for Marine Casualty Management. The guidelines are intended to assist governments, shipowners and managers, port authorities and other interests directly involved in ship salvage operations.

For several years the International Salvage Union (ISU) has proposed the production of best practice guidelines for Marine Casualty Management (MCM Guidelines). Now the intention is to complete the guidelines during 2009.

Mr Witte said: “There is existing International Maritime Organization (IMO) guidance on the issue of places of refuge. There is also very general IMO guidance on general issues relating to the control of ships in emergency situations. What is missing is specific, comprehensive guidance on best practice throughout the entire casualty management process. The MCM Guidelines will fill that gap and, in doing so, will sharpen and enhance marine emergency response capabilities worldwide. Our intention is to consult with our maritime industry partners when finalising the guidelines.”

US judgement welcomed

The UK club says that a recent ruling by US Court of Appeals for the Fifth Circuit Court that some dangers and unstable conditions should be “open and obvious” to stevedores injured during ships’ cargo discharge will be welcomed by shipowners.

The Fifth Circuit, which covers Louisiana, Mississippi and Texas, sustained this defence in the recent Kirksey v. Tonghai Maritime case. The ruling is likely to be seen as significant by all P&I clubs. A third of all claims made against the UK P&I Club are for personal injury. More than half of such claims for over USD100,000 are brought in the American courts.

The club explains that, while unloading the vessel Tonghai, longshoreman Kirksey was severely injured by a falling four-ton steel coil, leading to amputation of his right leg above the knee. He sued both vessel owner and charterer, both UK Club members, in a federal court in Texas before, according to the UK club, “a highly sympathetic judge.”

Under the Longshore and Harbor Workers Compensation Act (LHWCA), an owner has a duty to ensure that he turns over his ship and equipment in a condition whereby an experienced stevedore can perform his job in reasonable safety. He must warn the stevedore of latent or hidden dangers, take reasonable care to avoid negligence and exercise a limited duty to intervene.

Although the cargo stow, which had shifted during the voyage, had arrived in port in a condition showing open and obvious hazards, the judge in the initial trial ignored this fundamental defence, accepting Kirksey’s argument that the stow was “unreasonably dangerous” and that he should have been warned about it. The judge awarded Kirksey USD1.9m damages.

The UK Club says it felt compelled to appeal this case as the plaintiff’s claim would set precedents for further suits from longshoremen. If the judge’s opinion and ruling were allowed to stand, one of the fundamental liability defences provided by LHWCA - that the hazardous condition of the cargo stow should be open and obvious to a stevedore - would lapse. This would effectively resurrect the strict liability regime for shipowners which had been abolished by LHWCA.

Insurance broker Willis Re has appointed a new London team to lead its recently created P&I and marine insurance section.

Robin Brown, a 33-year veteran of the insurance industry, will become managing director of the new P&I marine mutual reinsurance unit, which will be a part of the firm's Specialties Marine division. The company has also hired Bruce Clayton, Martin Meier and Charles Spanton to become new executive directors of the unit, joining current executive director Jason Cudlipp.

The Merchant Navy Training Board (MNTB) says it is involved in an “exciting project” to develop a suite of National Occupational Standards (NOS) for management level staff involved in shore based activities in the management and operation of ships.

The work is being carried out in collaboration with the Maritime Skills Alliance and covers: technical/ engineering/ marine superintendents and fleet operators.

An MNTB statement says: “The NOS are important for a whole host of purposes. They will particularly provide a means to ensure shore-based staff can develop their skills, access progression opportunities (including for seafarers seeking to move ashore) and gain recognition for their expertise through relevant qualifications.”

The project is overseen by a steering group made up of representatives from a range of shipowners and ship management companies and interests including Northern Marine Management, Bibby Maritime/Meridian Marine, BP Shipping, Caledonian MacBrayne, Evergreen Marine (UK), Graig Ship Management, Saga Shipping, Shell Ship Management, IMarEST, Nautilus UK, the Nautical Institute and Scottish Enterprise.

The draft NOS cover the competencies required for the following areas of work:

• Employing and managing marine personnel for vessel activities
• Ensuring vessels are procured, maintained, supplied and equipped for service
• Establishing and administering systems to ensure quality and continuity of service
• Ensuring the safety and security of operations
• Ensuring personal and professional management skills to support shipping services

The draft standards are now being made available to the industry as a whole for full consultation, to ensure they fully and accurately identify the competencies required by shore-based ship management staff.

For further information contact Glenys Jackson at the MNTB.
T: 020 7417 2876
E glenys.jackson@mntb.org.uk

Maritime London member and conference organiser Seatrade is calling for entries to its annual Seatrade Awards. The Seatrade Awards scheme rewards innovative solutions for safe, efficient and environmentally friendly shipping.

From small research companies through to large corporations across the world, the Seatrade Awards attract interest from all sectors of the maritime industry.

The awards ceremony takes place in London on 18 May 2009.