With a broad commercial shipping, superyacht and marine insurance practice, Kevin Cooper’s clients include major international shipowners and builders, charterers, cargo owners, salvors and shipyards, and their respective insurers. After Oxford University, Kevin served in the British Navy for 10 years. Having previously worked at another firm in its London, Shanghai and Monaco offices, he joined MFB in June 2018.

Kevin’s admiralty practice involves high-value multi-jurisdictional cases such as the collision between the container vessel MSC Joanna and the hopper dredger W D Fairway in Tianjin, the grounding and subsequent collision of the Khalijia 3 in Mumbai, the Altantik Confidence sinking and the Norman Atlantic ferry fire. He also handles a wide range of charter party, cargo claim and shipbuilding matters.

Kevin’s earlier experience as a criminal court advocate in the navy is now employed acting as an advocate in arbitration and mediation proceedings. He also advises on corporate ethics, crime and regulatory matters, especially anti-corruption policies and procedures.

Kevin is dual-qualified as a solicitor and a barrister, regularly chairs and speaks at shipping sector events and has particular industry contacts in the passenger vessel sector and, regionally, in Norway, Italy, Spain, Portugal, Turkey and the Americas. He speaks French, German, Swedish and Mandarin Chinese.

Each year, the shipping industry faces new challenges and 2020 is no exception. In the form of covid-19, shipping operators are facing what is probably the most disruptive event of our generation, resulting in potentially long-lasting changes to shipping operations and economies.

Covid-19

Although, at the time of writing, it is only a few months since covid-19 caught global attention, the impact on the shipping and insurance industries has already been significant. A report published by the World Trade Organization states that world trade is expected to fall by about a third in the near future and the International Monetary Fund expects overall losses to exceed the combined economies of Germany and Japan.

Car carriers are expected to be the hardest hit, due a drop in demand for road vehicles, but all sectors have felt the effects of reduced travel and trade. The passenger vessel sector has been particularly affected, with ferry companies suffering significantly decreased demand and often receiving state support in order to keep important routes running.

The cruise sector has been particularly badly affected. Outbreaks onboard cruise vessels have led to them becoming an emblem of the disease and a sector of shipping that has experienced some of the most impressive growth over recent years has seen sailings being successively delayed. As an industry that relies on consumer choice, the outlook is difficult.

The container and bulk vessel sectors have also suffered significant decreases in demand and, while some types of tankers saw a jump in rates as a result of low oil prices leading to stockpiling of oil, at the time of writing that phenomenon seems to have run its course.

Restrictions imposed in relation to covid-19 have also led to disruption to crew changes, with many seafarers being unable to leave their vessels as planned, often causing significant personal distress and increased risk of illnesses. Many flag states have responded to the impact on certification by extending their validity.

Shipbuilding and refits have been delayed, the ship sale and purchase and bunker sales market have been very quiet and the ship recycling market is almost at a standstill.

Only time will tell how long it will take the shipping industry to recover from the crisis.

Political uncertainties

Global relations between countries always play a significant role in market changes. The trend towards globalisation, which dominated economics and trade for decades, has arguably peaked. Major political shifts towards inward-looking, protectionist sentiment, such as the US Trump administration and Brexit, have resulted in less predictable geopolitical, economic and trade policies being adopted, creating uncertainty in the global trade environment that fuels the shipping industry.

The economic insecurities and disruptions to supply chains arising from the covid-19 outbreak could see further nationalistic and protectionist attitudes, increasing cultural polarisation.

The fluctuating international sanctions landscape is a case in point, particularly under the US Trump administration. Although international sanctions are designed to aid international law and foreign policy objectives in matters such as terrorism and human rights abuses, it is clear they are becoming increasingly politicised. As a result, shipping nations, businesses and insurers face tougher challenges to manage their exposures to risks in markets affected by sanctions.

For example, at the time of writing, the US is facing mounting pressure to ease its sanctions against Iran amid the covid-19 outbreak. The US reinstated its sanctions against Iran in 2018 on the oil industry and other key sectors of the economy, and this has generally been regarded as an attempt to apply pressure on Iran to renegotiate nuclear deals, but Iran has refused to do so.

The sanctions have not only affected Iranian oil exports – a key pillar of Iran’s economy – but have also seen international shipping companies, banks and insurers pulling out of business relations with Iran in order to avoid penalties. The US’s hard-line approach to Iran may have led to increased tensions in the Strait of Hormuz area during the summer of 2019, when vessels transiting were attacked and it was considered necessary to return to a multi-national convoy system.

Now, with Iran being one of the countries hardest hit by the pandemic, a war of words has broken out over the impact of US sanctions limiting Iran’s ability to import medical supplies and humanitarian aid to fight the spread of covid-19.

Brexit also looms large. The United Kingdom officially left the European Union in January 2020 and must now decide whether and how to extend the transition period, currently set to expire at the end of 2020. Whether the UK manages to negotiate a whole new trade deal in less than a year, with covid-19 adding further delays on top of what was already a formidable political task, remains to be seen. However it plays out, it should continue to shape how shipping stakeholders operate and manage trade in Europe.

Environmental measures

Efforts to curb the carbon footprint and improve the environmental performance of international shipping have remained a priority over the past year. In particular, the International Maritime Organization (IMO) has pushed forward with its ambitious objective of imposing a global cap on sulphur emissions. The cap requiring all ships to use fuels with a maximum of 0.5 per cent sulphur content entered into force on 1 January 2020. That said, it has been reported that the covid-19 crisis has significantly impacted their enforcement.

Despite concerns over implementation issues, transitional costs, sufficient availability of compliant fuels and the likely high cost of such fuels, many shipping operators and oil refiners have been able to adopt strategies to ensure that compliance becomes a core focus. Strategies include using low sulphur fuel, installing exhaust gas cleaning systems (scrubbers) or changing over to alternative fuels such as liquefied natural gas.

In the IMO’s Marine Environment Protection Committee’s (MEPC) last meeting before the global cap took effect, the MEPC approved and adopted a comprehensive set of guidance to assist with consistent implementation. The MEPC also addressed other key environmental topics, including the reduction of greenhouse gas emissions from ships and the reduction of marine plastic litter.

A key area of interest for shipowners is fuel oil non-availability reporting (FONAR), which is necessary if, despite best efforts, a ship is unable to obtain compliant fuel. While FONAR does not result in an exemption from compliance, it will be key evidence in assessing whether the non-availability of compliant fuel is sufficient reason for a ship not having it. Tension can arise under time charterparties in complying with the requirements of FONAR. Unlike a voyage charterparty, where owners are responsible for fuel, it is the charterers who supply fuel to the ship under a time charterparty but the owners still remain responsible for compliance with the sulphur regulations. In that case, the evidence required for FONAR will be under the control of the charterers, as it is the charterers who are in communication with bunker suppliers and brokers. Therefore, owners are dependent on charterers to provide the paper trail to demonstrate that ‘best efforts’ have been made to find compliant fuel.

Among other notable areas of international legislation is the IMO’s Hong Kong Convention for the Safe and Environmentally Sound Recycling of Ships, which has not yet come into force but is aimed at ensuring that ships, when being recycled after reaching the end of their operational lives, do not pose any unnecessary risks to human health, safety or the environment. The early implementation of its principles by the EU has thrown up a number of practical issues that are still being resolved, such as the availability of suitable recycling yards. In an effort to overcome this, in January 2020, the European Commission published its latest list of suitable ship-recycling facilities that are considered to be compliant under its regulations, up to a total 41 facilities. The list includes 34 facilities located in 12 EU member states and in Norway, with a further six located in Turkey and one in the US.

New technologies

Interest in autonomous and remotely-controlled vessels continues to gather pace, with the first commercial projects already underway. From completely unmanned vessels, to vessels remote-controlled from land, to vessels with automated processes and decision support systems, the field is wide. According to Rolls- Royce Marine, by 2030 autonomous ships will be a common sight on the oceans.

The potential benefits of autonomous vessels are attractive to the marine industry. Crewless vessels not only reduce crew wages and expenses but can also eliminate systems once needed to make the vessel liveable for the crew, simplifying vessel design and creating more space for cargo. Autonomy can also offer the potential for reducing human error, thereby reducing costs related to accidents and insurance. Also, by enabling operations that do not put human lives at risk, the number of human tragedies would decrease.

Nonetheless, there are many challenges that will need to be addressed before this technology can be put fully into operation. For example, although the risk of human error is reduced, new risk factors will emerge, such as possible technological failures and inadequacies. Cyberthreats could also present new forms of ‘piracy’. While the changing risk picture affects existing market players such as shipowners, charterers, banks and insurers, new parties will enter the picture, including suppliers of autonomous systems and onshore operators controlling or supervising vessels.

Continued development of digitalisation and e-commerce are likely to have major implications for shipping logistics. For example, blockchain technology is touted to replace the current practice of physical bills of lading and transactional documents. Blockchain systems are based on an open-source, decentralised, peer-to-peer structure, supposedly making it inherently impossible for any one entity to gain control of the systems. In any shipping transaction, all manual and paper-based operations (certificates issuance or validation, bills of lading, cross border payments, among others) could be digitised onto the platform and authorised parties would be able access the platform securely and easily.

Although the technology is still at an early stage in the maritime industry, big shipping players have been looking to invest and adopt it in recent years. For example, in November 2018, five shipping lines and four terminal operators formed a consortium – the Global Shipping Business Network – to develop a blockchain platform to digitise the industry and transform documentation transfers. It will be very interesting to see how this new technology affects the industry over the coming years.

Anti-corruption

Following global support expressed by countries and international organisations, the IMO’s Facilitation Committee agreed to include marine corruption in its work programme. The Maritime Anti-Corruption Network (MACN), together with leading maritime associations, has engaged the IMO on the consequences and risks facing the maritime industry regarding maritime corruption.

There have, however, been reports that covid-19 has increased the possibility of corrupt practices increasing.

During the 43rd meeting of IMO’s Facilitation Committee in April 2019, a paper on this topic was presented by the Marshall Islands, with numerous countries and international organisations expressing their support for a proposal to develop guidelines to assist all shipping stakeholders in embracing and implementing anti-corruption practices and procedures. As a result, the IMO has agreed to start work on an official guidance document that addresses maritime corruption. The document is expected to be completed by 2021.

Cybersecurity

Cybersecurity practices have also gained prominence in recent years, as there is increasing concern that as the maritime industry becomes more reliant on technology, the exposure to cyberattacks will increase, leading to potential business disruption and financial loss.

In 2017, the IMO Maritime Safety Committee approved various measures intended to enhance maritime security, including adopting a resolution that requires shipowners and operators to incorporate cyber-risk management into in their ships’ safety management systems by January 2021. This was followed by the third edition of BIMCO’s Guidelines on Cyber Security Onboard Ships in 2018, which provides additional guidance for shipping companies in carrying out appropriate risk assessments, and suggests appropriate measures.

Shipping organisations have been investing to implement cyber-risk management systems pursuant to the IMO’s measures and guidelines but this has coincided, of course, with the covid-19 outbreak. With shipping operators shifting priorities to tackle the challenges posed by the pandemic, including new ways of operating, less pressing aspects of day-to-day operations, such as cybersecurity, may be seen as less of a priority, potentially increasing the risk of cyberattacks.