Liquefaction - no excuses - SCOL: New, improved and adding value for members Supporting you through sanctions - The Swedish Club
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No.1 | 2022 Liquefaction - no excuses SCOL: New, improved and adding value for members Supporting you through sanctions
Contents
Leader
150 years and counting… ......................................................................................................3
Loss Prevention
A deep dive into the causes of lubrication failure ................................................................4
TELP - tailored loss prevention advice delivers real results ................................................8
Safety scenario: Serious injury during inspection ..............................................................10
Features P4
Supporting you through sanctions ......................................................................................12
Liquefaction - no excuses ....................................................................................................16
ESG
ESG and the life cycle of a ship: Stage one - financing ......................................................20
ESG into 2022 ......................................................................................................................24
P&I and FD&D
Customs fines for cargo shortages ....................................................................................25
P12
Total power outage in Malta: Limitation of liability ............................................................30
Webinar: Launch of new Bills of Lading Guides ................................................................32
Club Insight
Gold Sponsors of the Donsö Shipping Meet 2022 ............................................................33
Making waves in the classroom: Adopt a Ship ..................................................................34
SCOL: New, improved and adding value for members ......................................................36
Helping us to help you ..........................................................................................................38
P25
Club Information
Notice board..........................................................................................................................41
Out and about ......................................................................................................................41
Staff news ............................................................................................................................42
Calendar/Quiz ......................................................................................................................43
P34
The views contained within this publication are those of the respective authors and are not necessarily those of The Swedish Club.
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No.1 | 2022 independent newsletter and opinions expressed by external contributors are not necessarily those of The Swedish Club. Articles
herein are not intended to provide legal advice and the Club does not accept responsibility for errors or omissions or their
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LEADER
150 years and counting…
At the time of writing this leader the to 2020. Such claims have not abated at has been our strength in the long history
geopolitical situation in the world is the beginning of 2022. of the Club.
tense. World leaders do their best to
understand, or not to understand each Recently our staff have been able to The planning for the AGM in June and the
other. We are saddened by the war enjoy meeting members and associates Club’s 150th anniversary is in full swing.
situation in Ukraine following the Russian in real life, where and when possible. We hope to welcome a large audience in
invasion. We cannot but hope that sense That joy has been reciprocated. We have Gothenburg, sharing the moment of
will prevail at the end of the day. The Club always emphasised personal mutual partnership and pride. Our
does its best to protect and give advice relationships and believe trust is best mission has never changed; to provide
to members on the complex issues of generated in person. high quality and efficient advice and
economic sanctions and other measures solutions. Most important for us in the
taken that affect trade and shipping. 2021 was a challenging year financially celebration is however to have the trust
for the Club. We had budgeted for a of members going forward.
The year 2021 was yet another eventful break-even result. The out-turn differed
year for the Club on many fronts. We substantially from expected outcome. Many interesting topics and articles are
believed that the pandemic restrictions in Both Marine and P&I are cyclical featured in this edition of Triton. There
Europe would be over by October, and markets. Whilst Marine seems to be in are never two Tritons alike, and I hope
that was indeed the case, but only to a balance P&I has experienced an increase you enjoy reading your copy.
certain extent. Little did we know that a in claims, and the COVID issue has
new and different mutation of the virus aggravated the picture. Having said this,
would appear in November leading to insurance is there to afford cover and to
new constraints. Now we start to see respond. P&I is dynamic arrangement.
country after country easing restrictions,
at least for the most part. I am aware The Club enjoyed strong support from
that many counties in Asia take a much members at the P&I renewals. Whilst
stricter approach, not least in China and premium increases are not always Lars Rhodin
Hong Kong where zero-tolerance policies welcome, there is an understanding that Managing Director
still apply. COVID-19 related claims the claims environment has changed in
however have really escalated in 2021 in the last four years. The Swedish Club has
the wake of these restrictions, compared always moved with the times. This ability
Triton 1 2022 \ 3
LOSS PREVENTION
A deep dive
into the causes
of lubrication
failure
It is well known that lubrication oil related failure is the most common cause of main
engine damage and a major contributing factor to auxiliary engine breakdowns. To
gain a clearer picture of the situation The Swedish Club recently carried out an
investigation into engine damage claims. Over one hundred* claims between 2009
and 2020 were reviewed to gain an insight into why lubrication failures occur, and to
better understand how they can be prevented.
Peter Stålberg, Andreas Olsson
Senior Technical Advisor MSc student,
Maritime Management
at Chalmers University, Gothenburg
4 / Triton 1 2022 * To limit the extent of the investigation, the claims for damage exclusively to turbochargers were excluded.
LOSS PREVENTION
Lubrication failures were commonly severe maintenance procedures provided by the water leaks, and defective diaphragm
and often required replacement of the engine manufacturer. In total, 12% of the seals connecting the engine crankcase
engine’s crankshafts or major overhauls. investigated failures where a cause of with the sump tank. What was common
The average cost of H&M claims damage could be identified were caused for failures caused by water
investigated was around USD 550,000, by incorrect maintenance procedures. contamination is that they were often the
without including the costs of downtime This could for example, be the use of result of neglected maintenance.
and loss of hire. It is therefore easy to see incorrect tightening torques, missing
how reducing the frequency of these type parts/seals, defective/worn out parts or The high occurrence of engine damage
of failures is in everyone’s interest. parts being incorrectly fitted during caused by water contamination is
assembly. influenced mainly by two factors:
Maintenance
The issue of engines sustaining damage Effect of water on lubrication
The Club identified that the vast majority shortly after overhaul is nothing new. Water contamination has the potential to
of the failures that were investigated in According to statistics from The severely impact a lubricant’s ability to
the research were in some way Swedish Club, 55% of damage to lubricate. The load bearing capacity of
connected with the maintenance auxiliary engines occurs within 10% of the lubricant will decrease and in severe
process. In fact, approximately half of all the TBO recommended by the engine cases of contamination, water will
failures could be traced back to a simple manufacturer. The only way to prevent displace the lubricant film. This will
lack of maintenance. This includes such failures from occurring is to strictly promote conditions where excessive
maintenance to the engine itself, but follow the maintenance procedures and wear can occur, which can, depending on
also to auxiliary components such as to use parts (and tolerances) approved the severity of contamination, quickly
lubricating oil filters, oil and scavenge air by the engine manufacturer. The result in engine failure.
coolers, pumps, and separators. This investigation also revealed that it was
high occurrence of neglected not unusual for failure to occur after an To illustrate this, a bearing’s expected
maintenance in relation to costly engine overhaul carried out by an lifetime can be reduced by as much as
lubrication failures undoubtedly external contractor, proving that it is not 75% with a water-in-oil content of 0.1%.
highlights the need not only to carry out only engine crews that need to pay more Even if a contamination does not directly
maintenance, but also to do this attention to the maintenance manual. result in failure, the engine might already
punctually. have sustained damage from excessive
Water contamination wear, and failure might occur weeks or
Auxiliary systems even months after the contamination
In most cases, engine maintenance was Engine damage caused by water- has been rectified.
carried out within the time between contaminated lubricating oil accounts
maintenance (TBO) recommended by for 18% of the investigated failures.* For this reason, it is probable that
the engine manufacturer. However, failures that were not identified to have
maintenance on auxiliary systems and Several sources of water contamination been caused by water, were in fact
components was found to be neglected were identified; these included ingress caused by previous, but unreported or
more often. It is therefore probable that from purifiers, coolers, internal cooling undetected, water contamination. On top
many failures could have been prevented
if maintenance had been carried out on
all engine-related systems. Whether
maintenance on auxiliary components
was deliberately neglected, or if it was
simply missed when setting up the
planned maintenance system (PMS) of
vessels is hard to tell. It is wise,
therefore, to revise the PMS to ensure
that maintenance is carried out
according to equipment manufacturers’
recommendations, with emphasis on
auxiliary engine components such as
filters, pumps, coolers, and engine safety
systems.
Failure to follow procedures
The investigation also revealed that
almost one third of lubrication failures of
both main and auxiliary engines occur
shortly after maintenance. This was
Damaged candle elements for automatic oil filters
often the result of a failure to follow
* When unknown causes are discounted Triton 1 2022 \ 5
LOSS PREVENTION
of this, water in the engine lubricating oil water contamination can be reduced wrong type, damaged filter elements that
will promote corrosion and oil from months to days. were put back into operation after
degradation, which will further maintenance, or filters that were
deteriorate a lubricant’s properties. (ii) Another option is to install sensors bypassed in other ways.
capable of detecting water in oil. When
Problems with detecting water installed in the main lubricating oil Damage and reusing parts
In most cases, crews relied on ordinary stream, these will continuously monitor Lubricating oil filters protect the engine
oil analyses sent to a laboratory for the water-in-oil content and will instantly from abrasive particles and debris.
detection of water contamination. Such alert the crew if the content exceeds a Should there be any damage to filter
analyses were, in the best-case pre-set limit. While such sensors may elements, or if seals are not working as
scenarios, carried out every three not be as accurate as analyses or on- intended, unfiltered oil will be able to
months, while in other cases this was board test kits, they will provide an bypass the filter. This will enable
done even less frequently. indication of water contamination and abrasive impurities to enter the engine
will enable the crew to instantly take freely where they can cause severe
While carrying out lubricant analyses further action. These should be damage to bearings and other
many times a year can be considered considered as a part of the engine components, with catastrophic engine
good practice, it is not a suitable method package when ordering new vessels. failure as a result. Reusing damaged or
for monitoring the lubricant condition in heavily worn filter elements also comes
terms of water contamination, as this Filter failure with the risk of pieces of filter mesh
will allow any potential contamination to breaking free and making their way into
remain undetected for prolonged Another cause of damage frequently the engine, where they may become
periods. There are however relatively occurring was identified as faulty embedded in bearing surfaces or block
easy solutions for detecting water-in-oil. lubricating oil filters, which, the lubricating oil supply.
unsurprisingly, could be traced back to
(i) Test kits for testing the water-in-oil neglected or incorrectly performed Ultrasonic cleaning
content are readily available and can be maintenance. This type of damage It was also found that damage to filter
carried out on board in a matter of accounted for 13% of failures.* The usual elements can occur during ultrasonic
minutes. By introducing routines for problems with filters were identified as cleaning if the elements are not properly
weekly onboard analysis of water-in-oil being seals either missing or being of the separated. The process of cleaning the
content, the potential of undetected
While carrying out lubricant analyses many
times a year can be considered good
practice, it is not a suitable method for
monitoring the lubricant condition in terms
of water contamination.
LOSS PREVENTION
filters can also introduce dirt or particles analyses varied. In 61% of the Separators
on the clean side of filters. It is therefore investigated failures, previous lubricating In terms of maintaining the lubricant
highly recommended that attention is analysis results were available. Whether condition, separators are very effective.
paid to the manufacturer’s instructions the remainder had not carried out This became evident in situations where
when cleaning filter parts. analyses or if they were simply missed separators were either taken out of
during the investigation, we will leave service or when these did not function as
The importance of spare parts unsaid. intended. In those cases, the likely cause
To reduce the risk of operating engines of failure was severely degraded
with faulty lubricating oil filters, there By examining the available analysis lubricating oil, which would likely have
should always be spare parts for the results, we can see that in roughly 40% been in better condition if the separators
filters on board. If not, it is likely that the of cases, there were indications that were in working order. For instance, on
crew will reuse parts which may not be something was not right with either the many occasions it was found that
suitable for further service, or they will fit engine or the lubricant. This could for separators were operating way below the
makeshift parts or seals in the absence example be signs of excessive wear, oil recommended separation temperature
of the proper spares. degradation or contamination by fuel, of 95°C. This will negatively impact
water or soot. separation efficiency.
Maintain and monitor
lubricant condition Investigate warnings Not running any separation even if the
Such information should alert the crew possibility exists is not recommended.
To minimise the risk of costly failures and measures to identify and rectify the Naturally, this requires separators to be
from faulty lubrication, it is essential to underlying problem should be taken. installed, which is not always the case on
monitor the condition of the engine This was however not always the case, smaller engines. Despite having
lubricant. This is usually done by carrying since signs of problems could often be separators available, some will argue that
out frequent lubricating oil analyses. detected in consecutive analyses carried frequent renewal of the engine lubricant
These will provide useful insights into out months apart. This shows that there can substitute the operation of
the lubricant condition and its suitability are improvements to be made in how the separators. In such situations, monitoring
for further use and will show any results are treated once received by the the engine lubricant condition becomes
potential issues with the engine or vessel. It is hard to tell whether the crew even more important. With no means to
lubricating oil. Carrying out such neglected the warnings or if information separate contaminants from the engine
analyses was found to be a widely used went missing along the line. However, oil, any issues resulting in contamination
approach, even if the frequency of there is no point in carrying out analyses may otherwise quickly escalate, and
if the recommendations and warnings result in engine failure.
provided are not investigated.
LOSS PREVENTION
ESSENTIALS
Carry out maintenance on engines and equipment according to the
manufacturer’s recommendations
•
Introduce routines for frequently testing water-in-oil content on board
•
Consider installing water-in-oil sensors
•
Ensure availability of important spare parts for filters, replace if
damaged
•
Monitor the lubricant’s condition by frequently sending samples for
analysis and act on the results
•
Make sure that separators are always operating when applicable and
ensure sufficient preheating of lubricating oil
Triton 1 2022 \ 7
LOSS PREVENTION
TELP - tailored loss
prevention advice
delivers real results
If you want to minimise your risks, the first thing you
need is information about what those risks are. It
sounds simple! But when when The Swedish Club
created the Trade Enabling Loss Prevention (TELP)
system nearly three years ago, we were ourselves on
By Ellinor Borén ,
uncharted territory.
Claims & Loss Prevention Controller
The concept of using AIS technology to Excellent take up absolutely on the right track. The
track members’ vessels and matching statistics demonstrate that TELP works,
this with our own claims analysis to By the end of 2021, nearly 60 per cent of that the information is getting through to
provide tailored advice to specific our H&M members were using TELP, with the right places, and that our members –
vessels, represented an entirely new the level at 40 per cent for follow and crews – are not just glancing at the
strand of proactive loss prevention members. At the same time, in P&I, this guidance we provide but paying real
support for our members. figure was 60% of gross tonnage. attention and acting accordingly. I
should add that this reduction in claims
We are delighted to say that the concept There has been positive, proactive and was despite the booming freight market.
has been more than proven. Take-up has valuable feedback and information from
been remarkable, the breadth and correspondents, technical experts, Expanding TELP
content of TELP has increased, and we business partners and members, all of
have seen clear indications that claims which enabled us to feed more These results gave us the impetus to
have fallen in some of the areas of high information into TELP for the benefit of expand the reach of TELP and also to
risk that we have identified. our members. add new features and types of advice.
Learning from experience Real results During 2021, we added advice on third
party injuries and fines in various
When TELP was launched, we had There are real results, too. We set jurisdictions to our Claims Alerts, and we
analysed years of claims information to ourselves a target of reducing claims ended the year with a portfolio
create a fact-based list of 30 high-risk frequency in areas of high risk by 10 per comprising Claim Alerts,
destinations around the world, refining cent in three years and started Correspondent’s Advice, Piracy Alerts
and matching this with AIS routes to measuring the benefits as part of the and Bunker Alerts. This year we will
warn members’ ships of the risks ahead project. extend the number of high risk areas
– from tricky approach channels to identified, based on feedback
frequent groundings, for example. We compared navigational claims both highlighting issues or situations that
Additional layers of information and pre-TELP and post-TELP and between require extra caution. In addition to
timely updates are provided by 2017 and 2021 we found a reduction in refining TELP to make it even more user
correspondents – anything from the the frequency of claims of 13 per cent in friendly, we are also looking at using
latest COVID-19 situation to issues these high risk areas. That is really TELP to direct important Member Alerts
around strikes or port closures. encouraging and shows we are to shore based offices.
8 / Triton 1 2022
LOSS PREVENTION
often require different types of
information at different times.
Improving safety at sea
TELP is a free service for all vessels
entered with the Club and we are
delighted that more and more members
are taking up the opportunity to be
forewarned of potential risks ahead.
TELP is a fantastic and unique way to
distribute information. If we can extend
its benefits and reach beyond our own
membership, what better way to help
improve safety at sea?
New TELP home page on SCOL
We will continue to feed the system with
TELP and SCOL Whereas we previously requested more and more information, while taking
contact details in order to send out care to ensure that the guidance issued
TELP now has its own area within the alerts, users can now log in to SCOL and via TELP is always tailored to the
new SCOL (Swedish Club OnLine) identify specific vessels or individuals to vessel’s planned route. We are grateful
platform, which was launched to whom TELP messages should be sent. for all the feedback from from members
members early in April. (See page 36 for Ultimately, we are planning to divide the and correspondents – and, indeed, TELP
more details.) TELP system into two sites – one has also created even closer cooperation
designed for Masters and the other for between Club and members. We are just
shore-based staff, recognising that they getting started!
Triton 1 2022 \ 9
LOSS PREVENTION
Safety
scenario
Serious injury during
inspection
By Joakim Enström, Loss Prevention Officer
Each month the Club’s Loss Prevention team issues a new safety
scenario to assist members in their efforts to comply with international
safety regulations and to follow best practice. Visit Swedish Club
OnLine (SCOL) for more examples.
CASE STUDY The engineers decided that this was a Suddenly the shaft was
routine job that required neither a work
permit nor risk assessment. unscrewed from the
It was morning, the weather was good
with a northerly wind, force 3-4 Beaufort. The engineers started to remove the
eyebolt, and the edge of
shaft and impeller from the ballast the shaft landed heavily
A vessel was proceeding in calm seas at pump. They secured the shaft in a
14 knots. During the ten o’clock coffee threaded hole with a chain to an eyebolt.
on the Third Engineer’s
break, the Chief Engineer informed the The engineers used a five-tonne safe hand.
First Engineer that the ballast pump, working load (SWL) chain block, which
which had been out of commission for was secured in a monorail, and the shaft
some time, needed to be repaired before was raised so the engineers could work Third Engineer’s hand, which was
they arrived at the next port on the on it more easily. The chain block was severed. The First Engineer was also
following evening. The First Engineer undamaged, certified and approved for seriously injured by the shaft, and his
said he would inspect the pump after the lifted weight. hand was crushed.
the break, with assistance from the Third
Engineer and an oiler. It was decided that the shaft had to be The vessel diverted to the nearest
moved to a larger workbench. To be able harbour. Medical assistance was
The previous day, the pump had been to do this, another chain block needed to established with the Joint Rescue
moved to the engine workshop and an be attached. The oiler left to find a Coordination Centre (JRCC) and a
oiler had removed the nuts on the pump suitable chain block. While waiting for helicopter was dispatched, which arrived
case. The engineers were wearing the chain block, the engineers started to a couple of hours later. Both engineers’
safety shoes, gloves, boiler suits and inspect the shaft and rotated it a couple lives were saved, but unfortunately, they
helmets when they started to dismantle of times when it was hanging over the could not return to their careers at
the pump. No work permit or risk workbench. Suddenly the shaft became sea.
assessment had been completed or unscrewed from the eyebolt, and the
checked before the job commenced. edge of the shaft landed heavily on the
10 / Triton 1 2022LOSS PREVENTION
Questions
When discussing this case, please consider that the actions taken at the time made sense for all
involved. Do not only judge but also ask why you think these actions were taken and if this could
happen on your vessel?
Ask yourself:
• What were the immediate causes of this accident? • Are all the relevant crew trained on how to use the
• Is there a risk that this kind of accident could equipment?
happen on our vessel? • Is there any training that we should do that
• How could this accident have been prevented? addresses these issues?
• Do we have a risk assessment for this kind of job? • What sections of our SMS would have been
• If we do, could this risk assessment be improved? breached, if any?
• Is a work permit required? • Does our SMS address these risks?
• Would a risk assessment or work permit have • How could we improve our SMS to address these
identified the risk of the shaft being secured in this issues?
manner on our vessel? • What do you think was the root cause of this
accident?
Triton 1 2022 \ 11FEATURE
Supporting our
members through
sanctions
By Malin Högberg,
Director, Corporate Legal
No one needs reminding of Unique to the sanctions landscape contract or considering trading into a
the sanctions story in 2022. concerning Russia is the wide number of particular region, for example,” she says.
states issuing their own, and differing,
Sweeping sanctions against sanctions regimes against Russia and However, while the Club will explain what
Russia in response to the Russian interests. This adds a whole sanctions are in place and advise
war in Ukraine were new layer of complexity to international members to be careful, it cannot provide
shipping. specific legal advice on the legality of a
introduced with scarcely particular trade, so as not to create a
any warning or time for Here to help conflict of interest between the member
shipowners to prepare or and the Club. Members are always
adjust operations. Shipowners need to abide by the rules, encouraged to seek external advice each
however challenging and complex, says time they plan to call in contentious
Malin Högberg. “The Swedish Club is here regions, particularly because the rules
But to some extent shipowners were not to help. We play a vital role in supporting change continuously.
facing the situation unprepared. The new and advising members as they get to
restrictions followed a turbulent 2021 grips with a very complicated sanctions Correct procedures
when, despite speculation that sanctions landscape. The team is diligent in keeping
might ease after President Trump left members informed about the changes The Club’s Guidance for Owners and
office, in fact the reverse was the case. that can come almost daily, work that Charterers on Sanctions Compliance
Last year brought more complexity for also includes keeping the Club’s website Practice is available on the website and
shipowners and operators as more sanctions section up to date. highlights what needs to be considered –
sanctions were put in place by the United such as checking that the documentation
States and the European Union (EU), as “The Club is not a regulator, but it does is genuine, establishing exactly who is
well as by the United Kingdom as it have an obligation to members and the operating the ship, and so on.
developed its own regulatory regime membership as a whole – and within
outside the EU. this, our role is to explain what should be “All members must have procedures in
considered when drawing up a new place to recognise the ‘warning signs’
12 / Triton 1 2022FEATURE
“We are hearing of
increasing
incidences of AIS
spoofing, painting
false names on ships
or stealing the
identity of another
ship in order to cover
up illegal
operations.”
Warning signs
The Club’s underwriters assess every
new vessel seeking entry, to establish
where the ship trades and where it has
traded. Malin’s role is to help the
underwriters to understand the risks.
“What are the warning signs? Most
potential new members welcome our
enquiries and provide all the information
we ask for. When someone says ‘I don’t
want to give you that’, that’s a clear red
flag – either they don’t understand the
risk or they could be involved in
something that is in breach of the rules”,
“The Swedish Club is scenario but what will protect you, if
your company does find itself under
she says. “Incidentally, an added value of
these investigations is that they help us
here to help. We play investigation or gets into difficulties, is to understand the overall risk appetite of
a vital role in being able to show you have worked
with a consistent and transparent
a potential member.”
supporting and compliance programme, with The Club also monitors AIS for any gaps.
advising members as assessments and processes in place
and fully documented,” she says.
“That would definitely ring alarm bells,”
says Högberg. “We believe that
they get to grips with “It is about having a system that detects
members who are in the business for the
long-term wish to look after their crews
a very complicated the warning signs; do the due diligence and their ships – they are not normally in
sanctions in each and every case and work
proactively to improve your routines.
business for a ‘quick buck’. However, we
remain clear-eyed – a tanker might be
landscape.” able to earn a quick and profitable return
Take responsibility by ‘disappearing’ from AIS for a number
of hours in order to ship a cargo to or
that something might be amiss, and “What will not protect you is imagining from a sanctioned state. We are hearing
have processes to deal with such a that you can’t be held responsible for of increasing incidences of AIS spoofing,
situation,” says Malin. what someone else has done. You are painting false names on ships or stealing
held responsible – and it is the same for the identity of another ship in order to
She explains that innocent or The Swedish Club as an insurance cover up illegal operations.”
unintentional breaches of sanctions do company. We insure 6,000 vessels in
happen – perhaps there is a hidden total across all classes and we cannot Maintaining dialogue
transaction or the paperwork looks know what each and every one of them
perfect but is a cover for something carries each and every day. You need to For The Swedish Club, it is a case of
else. “No company can protect have a risk-based approach.” continuous follow up, ensuring
themselves 100% against such a documentation is correct and up to date,
Triton 1 2022 \ 13FEATURE
and maintaining conversations with its
members.
There are clear expectations on all P&I
clubs in this regard. For a start, explains
Malin, “the members of the International
Group have a 90% market share when it
comes to liability insurance, so it is very
effective for us to understand the risk.”
The Swedish Club has chosen to apply
this approach to all of its insurance
classes, on the basis that they are all in
some way assisting a shipowner to
trade. “It is also valuable assurance for
all our members that we are prudent and
doing the right thing – and mostly a
welcome approach, because they have
nothing to hide,” says Malin.
Additional complexity
Something that is often forgotten
amongst the headlines is that there are
some counter sanctions that must also Something that is often forgotten amongst
be considered – for example, imposed
by China and Russia to counter EU and
the headlines is that there are some counter
US sanctions. sanctions that must also be considered –
“The way to look at this issue is to
for example, imposed by China and Russia
accept its complexity and understand to counter EU and US sanctions.
14 / Triton 1 2022FEATURE
“The regulators have Taking a positive view “The regulators have their role to play
and their requirements often drive us to
their role to play and Sanctions remain an efficient way for improve even more in terms of
their requirements states to regulate activities and deter
certain behaviours and that is not going
transparency and really ‘thinking through’
and refining our processes and business
often drive us to to change. Malin says: “From The practices,” she adds.
improve even more Swedish Club’s point of view, compliance
with regulation, whether the Solvency II “With all regulation, whether
in terms of regime and money laundering or the environmental, financial or sanctions-
transparency.” latest sanctions, is all about doing
prudent business, showing that we are
related, the Club will continue to support
our members as best we can, and not
here for the long journey, and supporting burden them.”
and serving our members.
that adhering to sanctions regulations
places high demands on all of our
operations,” says Malin. “For the clubs, it Offering a helping hand
presents an opportunity to support and
advise our members and provide much- The Swedish Club has worked in conjunction with law firm Reed Smith LLP to
welcome added value.” produce Guidance for Owners and Charterers on Sanctions Compliance
Practices, which sets out standards and procedures for sanctions
Time for reflection compliance that ship operators should follow.
A clear ‘upside’ to the COVID-19 travel The Guidance aims to assist members in understanding and complying with
restrictions during the past two years applicable sanctions, and the Club encourages members to share the
has been having more time available to content of the publication with colleagues and business partners. It explains
analyse legislation and regulations, the purpose of sanctions and looks in detail at the sanctions applicable to
refresh advice and documentation and the maritime industry.
gather new perspectives on legislation,
sanctions and compliance. Although written prior to the situation in Ukraine, the Guidelines have been
designed to apply to all situations the shipowner may encounter. They
explain the different types of sanctions that exist and to whom they apply.
The publication also provides advice on ‘red flags’ to look for, followed by
comprehensive guidance on taking a risk based approach to sanctions
compliance. This includes running an effective Sanctions Compliance
Programme (SCP), carrying out due diligence, ongoing monitoring, and
recognising the need to seek advice from the professionals where necessary.
To download your copy of Guidance for Owners and Charterers on Sanctions
Compliance Practices, please visit https://www.swedishclub.com/loss-
prevention/legal/sanctions/
“With all regulation, whether environmental,
financial or sanctions-related, the Club will
continue to support our members as best
we can, and not burden them.”
Triton 1 2022 \ 15FEATURE
Liquefaction
- no excuses
Liquefaction can be sudden, and it
can lead to devastating loss of life.
But it can also be prevented. More
needs to be done, says Ed Wroe,
Technical Manager at INTERCARGO.
Liquefaction – it’s a term used as a ‘catch-
all’ phrase to describe at least two
moisture-related cargo failure mechanisms.
The results, however, are the same – vessel
instability and ultimately the vessel sinking.
How often these incidents occur isn’t clear,
says Ed Wroe, Technical Manager at
INTERCARGO. While there is increasing
awareness of the dangers, near-misses are
often not reported.
“We usually only hear about cases when
there has actually been a casualty and it
has been reported in the maritime press.
But speaking to contacts, I do hear there are
a lot of near-misses.”
Sobering statistics
INTERCARGO (the International Association
of Dry Cargo Shipowners) produces a rolling
ten-year bulk carrier casualty report – and
it’s worth drilling down into the figures. In
the ten years to 2021, 27 bulk carrier were
lost for various reasons, and 92 seafarers
lost their lives. However, of these, five
16 / Triton 1 2022FEATURE
casualties were due to liquefaction – liquid sloshing around. This can cause came from is also a factor and could be
and these accounted for 70 of the the cargo to shift, with vessel instability more important.
seafarers who died. As Wroe says, the and potential capsize.”
situation may even be worse – we don’t “For example, nickel ore probably causes
hear about all the cases around the Little warning most of the cases – but nickel ore from
world. Canada has a low risk, whereas nickel
It is quite possible there are other ore from South East Asia has a much
“Once the liquefaction process is liquefaction mechanisms we don’t know larger risk profile.”
happening, the only thing the crew can about yet, which are moisture related,
do – assuming the vessel hasn’t says Wroe. Having said that, even nickel ores mined
capsized – is to find a place of refuge,” from the same area in South East Asia
he says. But in any case, the impact can be can have differing levels of risk –
sudden. “You will see that compared to as the mining operation
Classical liquefaction the number of vessels lost, there is a progresses deeper or
very high disproportion of seafarers sideways, the
He explains the two mechanisms. killed, because it can be very quick.” geology of the
Classical liquefaction occurs when material can
moisture between the cargo particles In cases of dynamic separation, a sign change
becomes sufficiently pressurised, for the crew that things are going wrong
causing the particles to separate. “Then is when the vessel ‘wobbles’, he says.
the cargo – imagine water between the Sometimes the vessel lists, giving time
particles – starts acting like a liquid, in a to abandon ship – but often there is
ship designed to carry solid bulk scarcely any warning.
cargoes. That has a negative impact on
stability and can cause the ship to Types of cargoes
capsize.”
Most cases of liquefaction involve
Dynamic separation cargoes of nickel ore, iron ore
fines and bauxite, but Wroe
The second mechanism, dynamic says it is a simplification to
separation, has only been discussed or say that those cargoes are
recognised in more recent years. necessarily bad.
“Dynamic separation happens when the The geology of the
larger particles move because of gravity materials and
to the bottom of the cargo hold and start where they
compacting, and the smaller/finer
particles become saturated and start
moving to the top. This causes a free
surface effect, of liquid on top of the
cargo. Again, in a ship designed to
carry solid cargoes you have this
“Once the liquefaction process is
happening, the only thing the crew
can do – assuming the vessel
hasn’t capsized – is to find a place
of refuge.”
Triton 1 2022 \ 17FEATURE
“The cargo has to
comply with
certain
regulations at the
point of loading
and prior to
loading – and
Nickel ore loaded onto barges from the stockpile at a jetty, and transported
onto an mother vessel for export aboard. Southeast Sulawesi, Indonesia. the local
and that changes the risk profile, says It is the shipper’s responsibility to carry
enforcement or
Wroe. Of course, as he notes, we can
hardly expect a ship’s crew to be geology
out this testing and the local authority
should ensure that it is done, says Wroe.
local government
experts. That responsibility lies
elsewhere. He says the problem is the general
officials are not
Responsibilities
practices of the miner/shipper, rather really enforcing
these as they
than individual people, and the problems
are particularly obvious in South East
should.”
What makes the situation worse, he Asia and in West Africa, with lack of
says, is that the people involved – from transparency and enforcement being
the cargo owners/shippers/miners to the frequent issues.
regulators – are often not doing what
they should be doing. “Investment is needed – it takes money, certification, so that they can make a
time, knowledge and laboratories to do judgement. “They should monitor cargo
“The cargo has to comply with certain the necessary testing. What’s clear is loading and ensure the correct
regulations at the point of loading and that if everybody stuck to the rules, it documentation is in place,” he says.
prior to loading – and the local would definitely help – although of
enforcement or local government course sometimes you have accidents.” However, information can be inaccurate
officials are not really enforcing these as – whether deliberately falsified or due to
they should.” Ships’ crews lack of competence.
The loading and carriage requirements While the most obvious improvement
for carrying this type of cargo are would be for shippers to accurately
covered by the International Maritime sample and test cargoes pre shipment,
Solid Bulk Cargoes (IMSBC) Code, which and provide safe cargoes, Wroe says
links into SOLAS – as he says, “if you are that ships’ crews – “unfortunately the
a country that is a signatory of SOLAS, last line of defence” – should be
you should be implementing this”. provided with all the necessary
information and understand
The regulations stipulate are set times the requirements of
prior to loading when the cargo must be transportable
sampled and tested for its moisture moisture
content; the implications of not doing limit
this properly are obvious, especially if
the cargo has been sitting outside in
the rain.
18 / Triton 1 2022FEATURE
“Crew cannot be expected to be experts Working in partnership The future
in this field, especially taking into
account the diverse range of cargoes “Some administrations have improved Is enough being done? Wroe says it is
they can carry from port to port,” says and that has had an effect,” says Wroe. not. “One life lost is too many,” he says.
Wroe. “If the crew are given inaccurate “We also work with other stakeholders, Eliminating liquefaction entirely is
information by the shipper, it becomes such as the International Group of P&I unlikely because there are cases of
very difficult to relate the cargo to the Clubs and various consultants, and we water entering the hold in very bad
condition – and they come under a lot of engage with shippers too. We have a weather, although this is uncommon, he
pressure to accept cargoes. When you cargo panel within INTERCARGO where says: “But there is no reason why the
read accident reports, often the crew are liquefaction is one of the topics situation should not be massively
blamed – and that is really unfair, considered, and we issue press releases improved. It simply requires everybody to
because in the end the shipper should be highlighting the risks. We also believe do what they are meant to do.”
providing safe cargoes and proper there could be ways to improve the
documentation.” IMSBC Code.” In short, the solution is clear: “Shippers
must provide accurate information, from
Awareness of the problem The main way to learn lessons is from accurate sampling and testing, and
the accident investigation reports, he administrations must fulfil their
There is definitely more awareness of says – “but often the national obligations. Usually, liquefaction
the risk of liquefaction but it is difficult to administrations drag their feet when it happens because the cargo itself should
say whether the situation has improved, comes to producing these reports. never have been shipped.”
he says. “We don’t hear about the near-
misses unless by word-of-mouth. There “When we compare with our bulk carrier INTERCARGO represents the interests of
are various liquefaction-related projects casualty report for the past ten years, quality dry cargo shipowners. Convened
being undertaken and it does seem there only 70% of the related accident for the first time in 1980 in London, it has
is a willingness among some investigation reports have been had consultative status at the IMO since
administrations to improve.” submitted – and we still have reports 1993.
missing from ten years ago.”
From INTERCARGO’s point of view, the The Association provides a forum where
casualty report produced every year The P&I Clubs will often hear about near- dry bulk ship owners, managers and
highlights liquefaction, hence raising misses, says Wroe, and it would be operators are informed about, discuss
awareness. The organisation has worked helpful for INTERCARGO to have an idea and share concerns on key topics and
with the International Maritime of the total number – with cases kept regulatory challenges, especially in
Organization (IMO) to deliver workshops anonymous – to raise awareness relation to safety, the environment and
and works with national administrations, generally. operational excellence.
to encourage and help them to
implement the IMSBC Code.
Triton 1 2022 \ 19ESG
ESG and the life
cycle of a ship
Stage one:
financing
Diana Syziu,
Partner in the corporate and ship finance team, Hill Dickinson
Traditionally lenders have
of world goods move by sea. In the
concerned themselves with current turbulent times, the cost of
the value of the ship, its operating in the industry has risen Despite rising costs, it
operational income and the dramatically with hire and fuel prices
going up significantly and key sea is nonetheless a legal
borrower's ability to keep up
repayments.
corridors of the shipping world being cut
off, out of reach, or simply too risky to
and social
sail into, in view of sanctions and trade responsibility of the
Lenders would usually be looking at five- uncertainties.
to seven- year lending at its shortest, and lenders, borrowers
a loan for up to 15 years for newbuild Taking responsibility and operators alike
vessels, although always with an
expectation of re-financing two to three Despite rising costs, it is nonetheless a that the carbon
years in. The famous ‘shipping cycle’ legal and social responsibility of
followed on rotation almost like lenders, borrowers and operators alike footprint of each of
clockwork. However, times have that the carbon footprint of each of
changed, and stability and sustainability these vessels is reduced to the
these vessels is
have become the new targets for both
lenders and borrowers. Pursuant to the
absolute minimum (and over the next
two to three decades reduced to zero).
reduced to the
ever-growing awareness campaigns, Lenders always prefer stability and absolute minimum.
preserving our planet and our resources sustainability long-term and one of the
are now the priority in every walk of life, main ways of achieving this is through
ship financing included. careful borrower selection: selecting
borrowers whose fleet or vessel(s)
Shipping has often been accused of meet certain emission targets, whose
being a ‘harsh on the planet’ industry, vessels have or are about to upgrade
albeit an essential one as more than 90% into greener technology, and, most
20 / Triton 1 2022ESG
importantly, borrowers who have, We are now seeing a growing number of
through behaviour and operations,
embraced the social and governance technological advances crossing over into
responsibilities of ‘togetherness’.
shipping and its operations and infrastructure,
Below, we look at some of the areas in ranging from newbuilds to vessels already
which lenders have exerted influence to
effect change: sailing.
Legal documentation and
approach specialise in assessing ship operational management of its charterer.
performance, data analysis and the The chartering documentation should
We are seeing an increased number of ships' technological advancements. It is mirror the loan documentation so that
lenders revising their lending naturally an added cost to the lenders, there is perpetuity in the chain and
documentation, which now incorporates however, it creates certainty in relation to lenders are confident of the
tailored ESG (environmental, social and the continuing monitoring and quality effectiveness of documentation and
governance) covenants and assurance which the lenders require for commitment by all concerned.
undertakings that repeat themselves on their ship lending portfolio, as well as for
each drawdown date and other key dates the borrowers who can report directly to Technology and finance
in the loan documentation. the lender without having to incur
additional costs on independent The importance of green financing
Borrowers embrace lender support and assessments. (including the most recent blue financing
in fact, they work closely with the initiative) has established itself and is
lender's technical and commercial teams Parties in the chain here to stay — it is no longer a mere
to put in place and agree on realistic aspiration. Various forms of similar ESG
covenant thresholds. Co-operation and Each party in the lender-borrower- covenants and targets are set by lenders
transparency in the context of ESG are operator chain needs to be aligned in in syndicated lending for project and
key components to the successful their approach to ensure consistency; structure finance. There is an increasing
relationship between borrowers and this is particularly important in interest in investing in green projects
lenders. A number of lenders who chartering arrangements where often the that will protect the environment.
already subscribe to and follow the owner (borrower) is obliged to give Lenders want to play their part by using
Poseidon Principles have put together covenants and undertakings which the powerful tool of credit lines, which
internal commercial teams that depend heavily upon the behaviour and will come with ESG strings attached.
Triton 1 2022 \ 21ESG
According to UBS sustainability group
reports over the last two years, a
majority of European countries are
falling considerably behind, with the US
leading the green finance investment.
This could partially be due to the
limitations of local fiscal policies
concerning the cash being made
available for investment. This limits the
possibility of there being enough
liquidity to support ship finance, which
requires substantial sums to enable
fleet innovation and allow newer and
more efficient technology to be
installed on ships.
Technology will be
key in transforming
shipping operations,
and like in other
industries, automation
and software
developments in
artificial intelligence
will push the
boundaries in
shipping.
There are many green projects using
innovative technology that may not be
well understood or are emanating from
a start-up that are viewed as high risk
and are therefore having difficulties
navigating the financing world and
gaining access to lending channels.
More needs to be done to raise
awareness of these.
Banks are working very hard to keep up
with technology, as are borrowers,
collaborating in efforts to marry up the
two and provide access to platforms
for document checks, data input
analysis and reporting results in real
time. COVID-19 certainly brought a halt
to the flow of connecting channels and
business innovations.
However, we are now seeing a growing
number of technological advances
crossing over into shipping and its
22 / Triton 1 2022ESG
operations and infrastructure, ranging ensure effectiveness in employment it may appear intrusive, the assessment
from newbuilds to vessels already arrangements and better working is a helpful tool to lenders in accepting
sailing. These include remote satellite conditions. borrowers for the long-term, and with a
emission measurement on moving ships particular focus on sustainability.
and on those calling into ports (for Operators throughout the supply chain Carrying out a compliance assessment
example the EU ports). This is similar in have a duty of care to their process is considerably costly and
principle to the technology measuring counterparties. They must comply with lengthy, and lenders have to bear these
car emissions, which introduced the the anti-slavery provisions of the costs with no initial recovery. With this
preventive measure of the Ultra Low Maritime Labour Convention, the Modern added cost comes a requirement on the
Emission Zones in London. Buyers have Slavery Act and similar legislation lenders to ensure they provide finance to
embraced the concept of virtual ship applicable to the shipping trade. Long sustainable projects only, i.e. projects
inspections prior to making an offer, gone are the days when the crew could that are green, cost-effective and run
which is a considerable step forward only rely on their rights to arrest the long-term on terms providing certainty
already in cost savings on manpower vessel (as a maritime lien), and regarding the lenders' return, whilst
and reporting in real time. operators have come to recognise the keeping the finance costs for borrowers
difficult conditions under which some of to reasonable and affordable levels.
Technology will be key in transforming their vessels operate (for example, in war
shipping operations, and like in other zones or dangerous territorial waters). A Shipping is a dynamic industry with
industries, automation and software recognition of this sort has transformed many moving parts, which makes
developments in artificial intelligence will the circumstances of the workforce in sustainability a slightly more challenging
push the boundaries in shipping. Fully shipping for the better, and part of that criteria to satisfy in green finance and
automated ships are most likely a thing of transformation is attributed to the related projects. International politics,
the future, however, in the meanwhile, financiers of the green projects and the pandemics, global warming etc., are all
smaller autonomous components within pressure they put on compliance and factors which have a direct impact.
the essential operations of a vessel will governance of the operators. However, responsible operators are
increase efficiency and cut emissions. Even showing more and more proactivity in
though there will only be minor changes, Compliance their efforts to improve the efficiency of
everyone plays a role in our greener planet their fleets, which has resulted in a
and cleaner seas and oceans. A borrower's compliance has become an number of operators seeking fleet
essential component of the early upgrades, putting them, slowly but
Social and governance valuation of borrower's governance and surely, on the right trajectory of eligible
business capabilities. As part of borrowers of green finance.
Borrowers have always had an obligation assessing compliance, the borrower
to review their crews’ employment (and its group and business partners in Investing in sustainable green projects
agreements and labour conditions. project finance) undergoes extensive matters, and we must all play our part
However, it is noticeable that all parties checks and assessments, including their across all industries, shipping
in a chain now work closely together to business plan and operations. Although included.
Shipping is a dynamic industry with many
moving parts, which makes sustainability a
slightly more challenging criteria to satisfy in
green finance and related projects.
Triton 1 2022 \ 23You can also read
