Note from the Vice Chair

Jeanne M. Grasso

Happy fall! As the seasons change, so do the issues confronting the maritime industry…or not. Over the past few years, several topics have consistently remained in the headlines and as a thorn in the side of many shipowners. In the environmental arena, these issues have generally involved MARPOL enforcement, ballast water management, the Environmental Protection Agency’s (“EPA”) Vessel General Permit (“VGP”), and air emissions in light of the upcoming International Maritime Organization’s (“IMO”) 0.5-percent sulfur cap.

The MARPOL Annex I oily water separator cases have continued apace, with at least half a dozen guilty pleas in 2018 to date, and several more pending. These cases have been going on since the mid-1990s and not a lot has changed— engineers are still bypassing the oily water separator, albeit in more creative ways (e.g., discharging through the sewage or graywater systems), and finding creative ways to trick the oil content meter. Most cases still arise as a result of whistleblowers reporting misconduct to the U.S. Coast Guard (“USCG”), owners still must enter into burdensome security agreements to get their ship out of port, crewmembers are commonly “voluntarily” held in the United States for upwards of a year or more, and guilty pleas with fines and stringent environmental compliance plans are the outcome. To help owners avoid this fate, we have developed a Maritime Compliance Audit Program that tests the effectiveness of a company’s environmental management system to prevent MARPOL violations, a summary of which can be found here and which we are happy to discuss with you.

The ever-changing ballast water management regime continues to pose challenges as well as owners trying to navigate compliance with the IMO Convention and the USCG regulations. The USCG’s policy on compliance date extensions is ever-evolving and we, along with industry partners, continue to work with the USCG to find practical compliance-focused solutions for owners endeavoring to comply with both the USCG’s and IMO’s requirements in an efficient manner and effective manner.

As many of you know, the EPA’s 2013 Vessel General Permit, which regulates incidental discharges from vessels, is set to expire in December 2018. The expectation was that the EPA would publish a new draft for comment sometime last year or early this year, but that did not happen. That said, the Chamber of Shipping of America reports that the EPA expects the new proposed 2018 VGP to be published in March 2019, with at least a 30-day comment period. To this end, the current 2013 VGP is expected to be administratively continued until the final 2018 VGP is issued; vessels currently covered under the 2013 VGP will automatically be covered by the administrative continuance without further action; and new vessels whose keel is laid prior to December 18, 2018, must file a Notice of Intent (“NOI”) to be covered by the 2013 VGP prior to December 18, 2018, otherwise they will not be covered until the 2018 VGP is finalized (and hence cannot discharge in the United States, which basically prohibits them from operating in the United States).

And, IMO’s 2020 sulfur cap is looming on the horizon and investors, charterers, and owners are contemplating compliance options, as well as studying the risks and rewards of exhaust gas cleaning systems (i.e., scrubbers), which will be a topic addressed in the next issue of Mainbrace.

So, finally, we are proud that we have another issue Mainbrace to share with you, full of interesting information, ranging from what is (or is not) happening in the U.S. Congress to tariffs and trade, arbitral awards, and, importantly, celebrating diversity, and much, much more.

We hope you enjoy Mainbrace and we would welcome any feedback you might have. Cheers!

Impact of New U.S. Import Tariffs on the Maritime Industry

Joan M. Bondareff and Matthew J. Thomas

President Trump, from his campaign through his time in office, has been a vocal supporter of U.S. manufacturing jobs and a critic of what he characterizes as unfair trade practices from traditional U.S. trading partners. This is one reason he withdrew from the Trans-Pacific Partnership, and currently is renegotiating the North American Free Trade Agreement (“NAFTA”). As we are putting this issue of Mainbrace to bed, the administration has announced the successful completion of a new trade agreement with Mexico and Canada, which is now called the U.S.-Mexico-Canada Agreement (“USMCA”). At a later date we will provide insights into the “new” NAFTA and its potential impact on the maritime industry. Keep in mind that Congress will ultimately have to approve the USMCA before it goes into effect.

Although there are hints of some negotiations between the United States and China, we expect this is the last trade deal that President Trump will negotiate because of his increasing rhetoric and tougher stance on the imposition of billions of dollars of new tariffs that go into effect on January 1, 2019. This also explains his imposition of tariffs on thousands of products imported from China, and steel and aluminum tariffs for most countries, including the European Union, as well as his threats to impose tariffs on automobile imports. In this article, we analyze the potential impact of these tariffs on the broader maritime industry. Continue reading “Impact of New U.S. Import Tariffs on the Maritime Industry”

Joan Bondareff Receives NAMEPA’s 2018 Marine Environment Protection Award

Blank Rome Of Counsel Joan M. Bondareff has been named the North American Marine Environment Protection Association’s (“NAMEPA”) 2018 Marine Environment Protection Individual Award winner in recognition of her lifetime career in working to protect the marine environment. Joan serves as general counsel and secretary of NAMEPA, a nonprofit organization that promotes sustainable practices for the shipping industry.

Joan will be presented with the award at NAMEPA’s 2018 Annual Conference and Awards Dinner on October 25, 2018, aboard the Hornblower Infinity in New York City. The theme for this year’s conference is “The New CSR: Ethical, Strategic, Sustainable,” and the awards dinner will recognize the achievements of individuals and corporations who “Save Our Seas.”

Enforcing and Challenging Maritime Arbitral Awards in the United States

Thomas H. Belknap, Jr.

When we speak of maritime arbitral awards in the United States, we could mean one of three kinds: 1) “domestic” awards, 2) “nondomestic” awards, or 3) “foreign” awards. This distinction is important, because it controls what law applies to matters of recognition and enforcement. To understand the source and importance of these distinctions, we must start with the Federal Arbitration Act (“FAA”).[1]

The FAA and the New York Convention

The FAA is in three chapters. Chapter 1 is titled “General Provisions,” and it applies generally except where there is a conflict with a provision of one of the other applicable chapters. Chapter 2 is titled “Convention on the Recognition and Enforcement of Foreign Arbitral Awards” and is the implementing legislation for the international treaty of the same name (also called the “New York Convention”), to which the United States is a party.

Chapter 1 of the FAA expressly defines “maritime transactions” to mean “charter parties, bills of lading of water carriers, agreements relating to wharfage, supplies, furnished vessels or repairs to vessels, collisions, or any other matters in foreign commerce which, if the subject of controversy, would be embraced within admiralty jurisdiction.” Section 2 of the FAA states that a “written” arbitration agreement “in any maritime transaction or a contract evidencing a transaction involving commerce…shall be valid, irrevocable, and enforceable” on the same basis as any other contract term. Continue reading “Enforcing and Challenging Maritime Arbitral Awards in the United States”

DOJ Urges U.S. Companies Acquiring or Merging with Foreign Companies to Self-Disclose FCPA Misconduct Identified during Due Diligence

Carlos F. Ortiz, Shawn M. Wright, Mayling C. Blanco, and Alexandra Clark

In a keynote address at the Ninth Global Forum on AntiCorruption Compliance in High Risk Markets, Matthew S. Miner, Deputy Assistant Attorney General of the Department of Justice’s (“DOJ”) Criminal Division, urged U.S. companies merging with or acquiring foreign targets to voluntarily disclose potential misconduct to the DOJ pursuant to the revised Foreign Corrupt Practices Act (“FCPA”) Corporate Enforcement Policy (the “Policy”).

As previously reported by Blank Rome, the Policy incentivizes companies to voluntarily self-disclose potential FCPA-related misconduct, fully cooperate with the government’s investigation, and remediate the alleged misconduct through a robust compliance program. Companies satisfying these three criteria are entitled to a presumption that the DOJ will resolve the case through a declination. Continue reading “DOJ Urges U.S. Companies Acquiring or Merging with Foreign Companies to Self-Disclose FCPA Misconduct Identified during Due Diligence”

Kate Belmont Appointed to Port of NY/NJ and Port of Albany Area Maritime Security Committee’s Executive Steering Committee

Kate B. Belmont, a senior associate in Blank Rome’s maritime group, has been appointed to the Executive Steering Committee (“ESC”) to the Port of New York/New Jersey and Port of Albany Area Maritime Security Committee (“AMSC”), a community of port stakeholders with an interest in port security who regularly advise on maritime security issues.

The ESC comprises designated individuals from the maritime industry, maritime trade and labor organizations, maritime associations, and federal, state, and local law enforcement and first responders. Kate was invited to join the ESC for her valuable insight and knowledge of maritime cybersecurity and information security.

In addition to this new role and her practice at Blank Rome, Kate serves as president of the Women’s International Shipping and Trading Association USA’s New York/New Jersey Chapter, is a founding member of the Maritime Law Association Cybersecurity Committee, and is an adjunct professor at The Stevens Institute of Technology where she teaches Information Security and Law.

Enforcing Ipso Facto Clauses in International Transactions and the Importance of Being Proactive in Dealings with Troubled and Insolvent Entities

Michael B. Schaedle and Gregory F. Vizza

A proactive creditor often ends up in a better legal position, and has more negotiating power, than a reactive one. While that may seem obvious, it is a lesson driven home by a 2017 decision in the SunEdison bankruptcy case, which involves issues of international comity, choice of law provisions, and ultimately, the tactics employed by a Korean debtor in connection with its contractual relationship with SunEdison. In SMP Ltd. v. SunEdison, Inc. and GCL-Poly Energy Holdings Limited, 577 B.R. 120 (Bankr. S.D.N.Y. 2017), the SunEdison bankruptcy court refused to apply Korean insolvency law in a contract termination dispute, and enforced a contractual New York choice-of-law provision. Notwithstanding the chapter 15 recognition of the Korean debtor’s rehabilitation, applying New York law, the court upheld the enforcement of an ipso facto (“by the fact itself”) clause against the Korean debtor, thereby allowing termination of a license with SunEdison that was essential to the debtor’s business. Continue reading “Enforcing Ipso Facto Clauses in International Transactions and the Importance of Being Proactive in Dealings with Troubled and Insolvent Entities”