30 Sep 2020
New office will allow carrier to maintain access to EU markets after Brexit transition period
This article describes the preliminary results of an ongoing project at the University of Southampton outlining some of the issues identified as being posed by Brexit. These are the available choices concerning the UK flag, the problem of “gold-plated” EU shipping regulations and finally, the potential impact of Brexit on contracts and dispute resolution.
Brexit negotiations will focus on the major issues that need to be resolved between the UK and the EU. The first step in this process will be the Great Repeal Bill, which is expected to preserve EU law by converting it into domestic law as far as practicable.
Within the shipping context, European legislation has regularly been the funnel through which international obligations, mainly those adopted by the International Maritime Organization (IMO), were uniformly implemented across the EU. The EU legislature has in several instances gold-plated international regulation, providing for higher standards for UK vessels than those adopted by the IMO. The UK Chamber of Shipping has already suggested that Brexit is the opportunity to go back to implementing the IMO standards rather than those currently applicable through the EU.
The Bill will preserve UK shipping regulation as it currently applies; therefore no immediate change is expected. However, two types of problems need to be dealt with: first, problems related to immediate management issues of the British fleet and existing commercial and shipping contracts; and secondly, longer-term policy directions for future UK shipping policy.
The UK flag
Currently, EEA nationals, EEA corporate bodies and European Economic Interest Groupings are eligible to register UK ships. Although the Merchant Shipping Act 1995 allows restrictions to be imposed on ownership of UK vessels as regards nationality, the Court of Justice of the European Union ruled against such restrictions, leading the UK to amend its legislation in 1998. These rights refer to both commercial ships and fishing vessels, thus linking the issue with the discussion of fishing rights in UK waters and fishing rights for UK vessels in EU member states’ waters after Brexit. Following legislative interventions in the UK tax system (introduction of the tonnage tax system by the Finance Act 2000) the UK flag has grown in numbers and was 19th globally by share of dead-weight tonnage for 2016. After Brexit, the UK is free to develop the tonnage tax system further without reference to EU guidelines.
Atmospheric pollution is not caused by ships alone but by all combustion engines. Attributing pollution to sources is particularly difficult. The rational reaction is to reduce emissions from all sources and it is uncontested that ship engines use much dirtier fuel than corresponding engines on land. Removing the EU gold-plating would mean that any reduction of atmospheric pollution must come from other sources and that there is an increased health risk for vulnerable groups in the UK, especially in port areas.
Ship recycling poses a difficult problem for the legal order because, in practice, shipowners simply avoid their legal obligations by changing flags. Brexit will permit a rational appraisal of how the system can be optimised so that the legal requirements of environmentally safe recycling and the commercial incentives provided to shipowners to recycle are preserved.
The approach that the UK will take as regards shipping regulation has direct links to trade. First, EU regulation invariably requires foreign ships calling at EU ports to comply with EU standards. Hence, discharging UK ships from EU requirements will make no difference to those that wish to continue trading to EU ports. UK ships that operate to EU ports will have to remain under more stringent requirements or stop trading in the EU.
Effect on shipping contracts
Brexit does have the potential of affecting commercial and shipping contracts. Terms describing the goods in shipment sale contracts as “goods of EU origin”, provisions for loading/discharge at “any EU port” or similarly phrased provisions on trading limits could lead to problems in the performance of the contract, and they may provide incentives for terminating a contract when suitable financial conditions exist for one or the other party. Brexit may even justify frustration of the contract in extreme circumstances.
Perhaps the biggest risk from Brexit concerns the enforceability of English jurisdiction clauses and the position of London as a primary centre for legal services and dispute resolution. It will be important that measures are put in place to maintain recognition of jurisdiction agreements and recognition and enforcement of judgments.
Shipping policy will be significantly affected by Brexit. Shipping policies and supportive law development, regional in character for over 40 years, will now become national as far as the UK is concerned. This means that economic, social and environmental interests will engage in dialogue and perhaps in conflict because a new equilibrium needs to be found.
This is an extract of the full article by Sofia Syreloglou, Mikis T Tsimplis, Yvonne Baatz, Andrew Serdy, Jenny Zhang, Simon Quinn, Dominic A Hudson and Robert Veal, University of Southampton.
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