Trading Straits

In the second installment of our two-part series, international trade lawyer Philippe Heeren is joined by antitrust and competition lawyers Chris Brennan, Natasha Tardif, and Lucile Chneiweiss to discuss practical steps that companies operating in the United States and Europe can take to navigate antitrust risks arising from tariffs. Building on the themes explored in Part 1, this episode offers actionable guidance for in-house counsel, including best practices for information sharing, price adjustments, and implementing compliance safeguards in response to tariff volatility. ----more---- Transcript: Intro: Trading Straits brings legal and business insights at the intersection of the shipping and energy sectors. This podcast series offers trends, developments, challenges and topics of interest from Reed Smith litigation, regulatory and finance laws across our network of global offices. If you have any questions about the topics discussed on this podcast, please do contact our speakers.  Philippe: Hi, everyone, and welcome back to Trading Straits. My name is Philippe Heeren, an international trade partner here at Reed Smith. We know companies are grappling with how best to respond to tariffs and considering price and supply chain adjustments are often part of that process. With antitrust enforcers scrutinizing competitor conduct, I am partnering with our antitrust and competition team to chair a two-part series where we will be discussing the practical impact of recent developments and key priorities for in-house counsel. I hope you had the opportunity to tune in for the first part of this series in which members of our international trade and antitrust teams already discussed broader antitrust risk and tariff developments. For the second episode, we are going to explore best practice in relation to information sharing, price adjustments, and compliance in the context of tariffs. Today, I am very happy to be joined by Chris Brennan, Natasha Tardif, and Lucile Chneiweiss. Chris, Natasha, Lucile, would you mind briefly introducing yourselves?  Natasha: Yes. Hi, everyone. My name is Natasha Tardif. I'm an EU competition and regulatory partner in Reed Smith’s European Group.  Chris: My name is Chris Brennan. I am a litigation partner in the firm's antitrust and competition practice. My practice particularly focuses on the intersection of antitrust and IT.  Lucile: I’m Lucille Schneeweiss. I'm an antitrust, regulatory and litigation counsel based out of the Paris office.  Philippe: Wonderful. Thank you so much. Looking specifically at contracting, what are the antitrust risks do you see in relation to the tariff activity? Or let me phrase it differently, how can companies structure their contracts to address tariff volatility without violating antitrust laws? Chris, can you share your views with us on that?  Chris: Sure. I think the first thing we want to start with is before we take any new steps, you know, what do our existing contracts say? I think this is a great opportunity to pull those out, to look and see, well, what are the clauses protections we have in there that we can leverage? Certainly, this is a potentially unprecedented time in terms of the breadth of tariff activity. So I think most companies will need to be taking additional measures. But can we leverage force majeure clauses? Some of these tariffs have been predicated, at least from the United States, on the basis of asserted national emergencies. There may be options under contracts to change pricing in light of that, as well as potential surcharges that may be coming through due to the specific tariffs on inputs such as aluminum, copper, and steel.  Philippe: Natasha, is there anything you would like to add to that from your experience?  Natasha: I absolutely agree with Chris. It is super important to look into one's contract because one, already have the tools in place. If one doesn't have them, one might want to think of adding tools moving forward, either when your contracts come to an end, when you're renewing them, or even asking for a renegotiation to the other party because of the exceptional circumstances. So, what can you do? Obviously, you can add price adjustment clauses and include tariff-specific adjustment mechanisms. Obviously, that's not going to be an easy one if you're asking for a renegotiation and your contract hasn't come to an end. Also, you can add a cost allocation provision or a change in law or hardship clause. So basically, there are a number of tools that one can include in a contract to deal with volatility tariffs and or other adjustments in regulations or in the economy. While such clauses and strategies can mitigate tariff risks, they must not overlook the antitrust rules and regulations, and one must make sure that while renegotiating those clauses, one is not price-fixing or margin-fixing. Also, another safeguard to bear in mind is resisting the urge to apply those tools too broadly and make them sort of an industry approach. In other words, do not approach your competitors and discuss with them collectively the idea of adjusting your clauses in the same way with your contracting parties and your commercial partners, because even though the economic context may be a complex one and the authorities can understand the need for one to renegotiate, they will still be harsh on any form of collusion when doing so.  Philippe: Right. Thank you so much, Natasha and Chris, for these very helpful insights. Now, switching to a somewhat broader topic, because we just mentioned the fact that sharing information with competitors can be tricky. Lucille, what are the types of information that companies can lawfully share with competitors or more publicly with other companies?  Lucile: To take a step back, we have to remember that antitrust laws and rules will generally prohibit the exchange of competitively sensitive information amongst competitors, especially regarding current or future prices, our costs, output, our business strategies, even most recently our HR practices. And that's going to be the same thing about the way that we take into account the new tariffs, the companies take into account new tariffs and what their reactions are going to be, whether they're going to be absorbing it, passing it on, how they're going to try to adjust either their pricing or their business strategy to address those tariffs. And the ways in which competitors will try to make sure that their behavior is coherent with what the market is ready to accept, or what their own competitors are going to be doing. Is where the line is going to be very fine and where you're going to have to be very careful. Even the appearance of exchanges between competitors, either directly, indirectly, through formal meetings, through informal communications, can lead to regulatory sanctions. So companies can think about entering into joint lobbying efforts or against tariffs or about how to tackle it or how to support governments or even the European Commission and their own reactions to tariffs and any retaliatory tariffs that are governments they want to impose themselves. But any such activity is going to have to be safely guarded, right? So make sure that if you do exchange with other parties on the market about what their own behavior is going to be, or if you ever join any joint or concerted action, it has certain safeguards. It's always the case, like when you're participating in professional associations, trade associations, lobbying efforts, you have to put in place certain safeguards. You have to make sure that you don't go too far or exchange information that's too sensitive. Always be careful about the way that you address such topics. Have an agenda about any type of meeting that you have. Memorialize whatever is being said. It's always helpful to have an anti-trust professional that's there to be sure to pull you back if you ever go too far in whatever topics is addressed at such meetings. And yeah, make sure that you record where the information is coming from to avoid future references or negative inference or interpretation from competition authorities or even plaintiffs in the future.  Philippe: Chris, any thoughts from a U.S. standpoint on that?  Chris: Sure. I mean, Lucille just gave an incredibly comprehensive answer that I agree with completely. Let me just, for purposes of putting that into action, give two examples. One, I think that, you know, you should be exchanging and one that you absolutely shouldn't. Right now, we're in such a period of volatility where I'm hearing from clients on a weekly basis because their tariff posture is changing as the scope of tariffs come on and off and as negotiations with countries, especially the U.S. Negotiations with countries, are changing constantly. I think one of the places where companies can share information is just what tariffs are they facing. What are the tariffs that are being faced? Lobbying the U.S. Agencies that are responsible in terms of seeking clarification. There are processes right now in place in the U.S. Government that are looking to expand certain tariffs to pull more codes in from a customs perspective. So we know the situation has been changing. It's going to continue to change. Just that sort of informational clarity. I think that's a perfect place for a little bit of resource sharing. On the flip side, timing is where everyone gets in trouble here. And we know from past supply and demand shocks, I'm particularly thinking of steel prices that came out of about a decade ago or so, or maybe two decades ago. I'm dating myself. The question wasn't whether companies were going to pass those costs along. That was inevitable. The real concern was when, who was going to be a first mover. And there was this, you know, there was this feeling in companies that they didn't want to get out ahead of the group. And that led to cases in certain industries where there were allegations that

In the first installment of our two-part series, international trade lawyers, Mike Lowell and Justin Angotti, and antitrust lawyers, Ed Schwartz and Michaela Westrup, team up to explore the antitrust risks that companies face related to tariffs. They discuss key themes and issues facing companies operating in the U.S. and Europe, and provide insights on what might be coming down the track on tariffs. ----more---- Transcript: Intro: Trading Straits brings legal and business insights at the intersection of the shipping and energy sectors. This podcast series offers trends, developments, challenges, and topics of interest from Reed Smith litigation, regulatory, and finance laws across our network of global offices. If you have any questions about the topics discussed on this podcast, please do contact our speakers.  Mike: Hey, everyone. Welcome back to Trading Straits. I'm Mike Lowell, an international trade partner here at Reed Smith. We know companies are grappling with how best to respond to tariffs, and considering price and supply chain adjustments are often part of that process. With antitrust enforcers scrutinizing competitor conduct, partnering with our antitrust and competition team to chair a two-part series where we'll be discussing the practical impact of recent developments and key priorities for in-house counsel. For our first episode, we are going to explore the various antitrust risks that companies face related to tariffs and briefly touch on what might be coming down the track on tariffs. I'm joined by Justin Angotti from our trade team, Ed Schwartz and Michaela Westrup from our antitrust competition team. Ed, Michaela, Justin, would you all like to introduce yourself?  Ed: Yeah, sure. Thank you, Mike. This is Ed Schwartz. I'm an antitrust and litigation partner based in the Reed Smith, Washington, D.C. And New York offices, and a pleasure to be speaking with everyone today.  Michaela: Great. Hi, everyone. My name is Michaela Westrup. I'm an antitrust partner in Reed Smith's European group. I'm heading the German office, and the focus of my work is actually dealing with cartels and advising companies on compliance issues in this regard.  Justin: And hey, everyone, my name is Justin Angotti, an attorney here in D.C. And one of the leaders of our tariff practice.  Mike: Well, thanks all. Let's jump right into it. Michaela, can you explain the principal antitrust risks that companies face when responding to tariffs?  Michaela: Yes, of course. Well, when companies are confronted with new tariffs, whether those are imposed by the U or the U.S. Or any other jurisdiction, they will face just increased costs effectively and must therefore decide how to respond. The principal antitrust risk I see is where companies would discuss or coordinate their responses with competitors and this includes any agreement or informal understanding or concerted practice about whether, how or when to pass on tariff costs to customers. The European Commission, which is the main enforcement agency in antitrust in the European Union. Treats any such coordination as serious infringement, on par actually with classic price fixing and cartels. The reason is that tariffs, as any other surcharges or input costs, are an integral component of the final price that has to be paid by the customer. And if competitors agree on how to handle those costs, they effectively eliminate independent pricing decisions, which is a restriction of competition, and that deprives the customers of the benefits of the competitive market. So the bottom line is here that any coordination with competitors on how to respond to tariffs or the introduction of surcharges is highly risky and likely be considered an antitrust infringement under the EU antitrust laws.  Mike: That's really interesting. Under what circumstances would EU antitrust law be applicable?  Michaela: Yeah, that's a good question because we're talking about mainly U.S. Tariffs here, so you'd be questioning that. The applicability of EU antitrust law, including the ban of cartel or anti-competitive agreements, is governed by the so-called effects doctrine, which means that it's not the geographic origin of the cost over which undertakings may cartelize, but what matters is where that agreement or coordination takes effect, and if it's within the European Economic Area, the EA. And competition would there be affected, EU antitrust law would be applicable. So it's effectively in situations where a coordination on the handling of the tariffs or surcharges that affects the pricing or market behavior within the EA would take place, for example, if European companies would agree to uniformly pass on U.S. Import tariffs to their customers in the EU. and this restricts competition in the internal market and that would fall at odds with EU antitrust laws. And the same as the case where agreements are concluded on the introduction amount or timing of any surcharges that are part of the final price in the E. Even if the undertakings do not align on the effective price but just the underlying costs. And even if those costs are external, like foreign tariffs, for example. Any coordination that impacts the market pricing in the EA would be covered. So I will add that an infringement would still only occur in cases where companies have some discretion on how to respond or pass on or include into the price the surcharge or tariff. If companies can't independently decide that, be it for regular reasons, for example, if the law asks them to pass on certain costs to customers, there's no competitive discretion and therefore competition wouldn't be impaired by any such agreement.  Mike: Ed, can I pull you in to talk a little bit about the view from what's the United States?  Ed: Yeah, sure, Mike. So the U.S. enforcement risks are real and very substantial. So, you know, I think as most of the listeners know that the risks arise under Sherman Act Section 1, which broadly prohibits all agreements in restraint of trade. And that's the statutory provision under which price-fixing conspiracies are prosecuted, under which private claims are brought. Typically, the Department of Justice enforces Section 1 against those who are engaged in a cartel or price-fixing conspiracy criminally, criminal investigation, indictments, and that is a very real risk that companies face. And there's a good chance that any such conspiracy is going to come out. The DOJ's leniency program, while somewhat hampered by some policy decisions is still effective. And so, you know, cartels, particularly large cartels, global cartels, they tend to come out and trigger investigations by the DOJ. I think it's also important to bear in mind, Mike, that particularly with respect to consumer products, the agencies, including the DOJ, can be quick to open an investigation into possible price inclusion. Even when market factors and independent decision-making can readily explain price increases across a market. One recent example is the DOJ Antitrust Division's investigation into possible coordination of egg prices following the avian flu outbreak. There's every reason to believe, in my mind, that price increases resulted completely from market factors. But the DOJ opened an investigation anyway. We see that every time retail gasoline prices go up, the FTC investigates a collusion at the bump. You know, it's a political action, honestly. So that's from the government prosecution side. And then you've got potential class actions. And once the existence of an investigation or even before an investigation becomes public, we see the plaintiff's lawyers swoop in and file class actions against those suspected of price fixing. And these class actions are extremely expensive to defend. And the consequences can be devastating. I'll just cite one example of where we saw market factors. Changes in a market, impact suppliers in a market similarly, resulting in not just U.S., but global enforcement actions and class actions. And that was the fuel surcharges that were imposed by air cargo carriers and ultimately other industries in the early 2000s led to there was coordination, led to DOJ criminal investigations. Other investigations around the world, class actions. It was a massive, massive set of investigation and cases for those in the industry who coordinated to deal with. Just one more thing that I'll mention, Mike, and that is that the U.S. Agencies are very, very aware of the risks of coordination arising from the imposition of tariffs in the U.S. We saw FTC Chair Andrew Ferguson make a statement after it became clear that companies were going to be facing sizable tariffs, in which he said that the FTC will be watching closely to make sure American companies are vigorously competing and the tariffs should not be interpreted as a green light for price fixing or other unlawful behavior. And a representative of the DOJ Antitrust Division made a similar comment. So the risks are real and the potential consequences are severe.  Mike: That's really interesting. Just unpacking that a little bit and inviting Michaela also to jump in. Have there been any antitrust agencies in Europe or in the U.S. That have previously challenged company conduct in response to tariffs or other trade regulation activity?  Michaela: So, in the EU, I'm not aware of any cases relating to tariffs directly, but what I can say is the EU Commission has, in many cases, made it very clear that any coordination of any cost component, irrespective of what it actually is, is a very severe competition infringement. And there have been heavy fines in almost every sector in the past. Just a few examples, there's the Windows Fittings Cartel of 2012, where nine producers of window mountings were fined about 86 million euros for operating a price cartel, including on surcharges passed on for raw material costs that has arisen. And that affected the buyers across the European Union and the EA. Similarly,

Reed Smith partners Tallat Hussain and Nick Austin and counsel Julie Vaughan discuss the evolving landscape of emissions trading systems (ETS) and their impact on the maritime sector. Key topics include the EU ETS, the International Maritime Organization’s carbon intensity rating scheme, and the UK government’s proposal to extend its ETS to maritime emissions. They explore the implications for shipping entities and the potential for monetizing emissions reductions in the sector. ----more---- Transcript: Intro: Trading Straits brings legal and business insights at the intersection of the shipping and energy sectors. This podcast series offers trends, developments, challenges and topics of interest from Reed Smith litigation, regulatory and finance laws across our network of global offices. If you have any questions about the topics discussed on this podcast, please do contact our speakers.  Julie: Hello everyone and welcome back to Trading Straits. I'm Julie Vaughan, environmental counsel in the Energy and Natural Resources team at Reed Smith in London. I'm joined today by my colleagues Tallat Hussain, an environmental lawyer, and Nick Austin, a shipping lawyer, both partners based in our London office. In this podcast today, we'll be firstly recapping where things stand with implementing the EU emissions trading system for the maritime sector, including looking ahead to some changes that are approaching, and also touching on the role of the IMO, the International Monetary Organization's Carbon Intensity Rating Scheme and some challenges that it's facing. And then secondly, we're going to talk about the recent proposal by the UK government to extend the UK's emissions trading system that operates in Great Britain post-Brexit to also include maritime emissions. We'll be discussing some of the key features of that proposal and also potential international implications. So Nick, if we could come to you first, perhaps you could give us an overview of the current EU maritime ETS and highlight some of its central points for us.  Nick: Yeah, I mean, last year we were talking on previous episodes of Trading Straits about changes to the EU ETS and its extension to shipping last year during the fourth phase of the EU ETS scheme running until 2030. And by way of recap, what has happened is that the maritime sector has been brought in to the scope of EU ETS, the wider EU ETS from the 1st of January last year, initially for ships, commercial ships of more than 5,000 gross tonnes. And listeners of this podcast will remember that what ETS does is impose obligations on the so-called shipping companies who have needed to set up new compliance procedures, open accounts, and ultimately buy and surrender EU allowances annually to cover emissions from voyages which are caught within the scope of the scheme. So I think my sense is that it remains a really big show in town, and it's having a significant impact in the sector, not the least of which, of course, is cost. And we've been working with clients on all of the mechanics of that, from setting up the accounts, making necessary registrations, negotiating charter clauses to suit the needs of owners and charterers. And I think that will continue throughout 2025, because, in fact, this year heralds a couple of new developments for EU ETS in shipping. First from January of this year, the 1st of January, the scope of EU ETS will expand further to include offshore vessels over 5,000 tonnes, which are calling it EU ports. And I think new challenges are remaining for the vessels which have been subject to the ETS already since 2024 in what I would call the next stage of compliance. And that means that the emissions data for the 2024 year has to be reported on and verified by an accredited verifier by the 31st of March this year, just some weeks away. And ship owners and operators then have a further six months until the 30th of September to submit the correct number, hopefully correct number, of EUAs, the allowances required to cover their emissions so verified for 2024. for. And a failure to do that can, of course, mean potentially hefty financial penalties. And those responsible in companies for ETS compliance will need to make sure that they're obviously well prepared to meet those deadlines. It's also worth remembering, and you touched on this, Julie, in your introduction, that the IMO is plowing its own furrow on decarbonisation quite separately from the EU and indeed the UK. And the CII, the carbon intensity indicator, was introduced now back in 2023. And that's, as we've said before, a rating scheme from A to E for vessels based on their so-called carbon intensity. And that's measured by an equation which, among other things, takes into account the size of a ship, its distance sailed. And 2024 was It's the first year in which ships were given actual ratings from A being the best, obviously, to E being the worst. And I think what's happened in recent months is that the operational realities of shipping have highlighted big challenges with CII, and there have been widespread calls in the industry for revision, most recently at the MEPC 82 meeting at IMO in London in September. And I think some kind of recalibration looks likely, particularly around the issue of idle time, ships sitting around doing nothing. Because one of the central challenges with CII is the impact of waiting on a vessel's CII rating as opposed to being on the move. And ships which frequently spend extended periods at anchor and port or perhaps undergoing maintenance without carrying cargo can be penalized. And I think the IMO and the industry have recognized that that may not be satisfactory. So there's a lot going on there too, and I think that's a space to be keenly watched. Tallat, let me bring you in, if I can. The UK is proposing itself to include maritime shipping emissions in the UK ETS. Can you tell us a bit about the context of that and the proposed new requirements?  Tallat: Sure. Essentially, Nick, the UK is following in the EU's carbon footsteps. The maritime sector is proposed to be brought into the scope of the UK ETS starting in 2026, and this may have potentially significant implications for the industry in terms of cost of compliance, operational changes, and the impact on existing and future contractual arrangements. I'll just set up a bit of further context here. As maritime transport plays a critical role for global trade, whether in goods or commodities, and significantly in transportation of oil and gas, it has now become a target for regulatory change. But it's also because of the fact that it has and is a large and growing source of greenhouse gas emissions. According to the European Commission, if left unaddressed, global maritime greenhouse gas emissions could increase by up to 130% from 2008 levels by 2050. Which would undermine the global climate change initiatives that are being set under agreements like the Paris Agreement. So in the UK, while shipping is generally regarded as a carbon-efficient model for transporting freight, domestic maritime emissions in the UK account for about 5% of the country's total transport carbon emissions. And by way of comparison, that figure is estimated to be more than the domestic rail and bus emissions combined. So shipping emissions include more than carbon dioxide as well. And the proposal expands to maritime methane emissions as well as nitrous oxide emissions. And these are represented as carbon dioxide equivalents. So all of these elements of the maritime shipping sector are being included. And because of this, decarbonizing the UK maritime sector is considered to be even more crucial to the country's wider carbon emissions targets. Plus, as you're aware, 2024 was a busy year for shifting policies in the EU as well as in the UK. The UK government announced its most ambitious target yet to reduce carbon emissions by 81% by 2035. The proposed maritime expansion of the UK emissions trading system feeds into this. With the connection to the UK's international obligations for the expanded cap and trade system, the cap for the UK ETS will need to be adjusted. It's currently proposed to be around 2.4 million allowances per year between 2026 and 2030, but that's just the proposal right now. Of course, including maritime emissions is meant to reflect the government's long-term strategy for UK emissions trading, as well as concerns that the price of maritime fuels does not reflect externalities, like environmental costs. Although it's also intended to incentivize the adoption of fuel-efficient technologies and low-carbon fuels, which should have the co-benefit of growing the UK's low-carbon sector. But this is an ambition that we would have expected. And this, of course, should be encouraging efficiencies in operational practices for ships as well. But all of this, although it sounds like it's easily workable, may have operational and compliance challenges as well as transaction impacts. And you mentioned some consequences, Nick, under this comply or pay approach, allowances will need to be secured for each ton of carbon dioxide emissions from domestic maritime ship activity in the UK, including emissions caused by vessels both while at anchor and while moored as well as by vessels both at sea and at offshore structures. Unlike the UK ETS, currently the obligations are on operators but how to apportion responsibility is more complex when it comes to vessel ownership and chartering arrangements. The UK ETS proposal is that obligations will apply to the registered owner of the ship unless responsibility for the UK ETS compliance is somehow delegated contractually by the owner to the entity that operates the ship. Apportioning rights to green attributes, as we know, like carbon equivalent emissions reductions or obligations that go with them may need to be resolved on a contract-by-contract basis. Also like the EU ETS, the scheme is meant to run by calendar

A new generation of barcodes is enabling faster, safer and more transparent transactions across industries and regions. In this episode, Nicolas Frerejean, director of marketing and digital transformation at GS1, the global standards organization behind barcodes, tells Reed Smith partner Wim Vandenberghe how the next generation of barcodes can offer even more information and benefits to consumers, businesses and regulators. He shares fascinating examples of how barcodes are used in retail, healthcare, food, construction and other sectors. Whether you are a manufacturer, a retailer, a consumer or a policy maker, you will find this podcast insightful and informative. ----more---- Transcript: Intro: Trading Straits brings legal and business insights at the intersection of the shipping and energy sectors. This podcast series offers trends, developments, challenges and topics of interest from Reed Smith litigation, regulatory and finance laws across our network of global offices. If you have any questions about the topics discussed on this podcast, please do contact our speakers.  Wim: Hello and welcome to Trading Straits. My name is Wim Vandenberghe and I am a EU regulatory product lawyer in the Brussels office of Reed Smith. With me on today's podcast we have Nicolas Frerejean who is the Global Director of Marketing and Digital Transformation at GS1. Nicolas, thanks first of all for participating in our podcast on the global supply chain and what the role barcodes in GS1 play in there. Maybe to kick off, could you just please tell us a little bit about yourself and GS1?  Nicolas: Yeah, hello, Wim, and hello to everyone. Thank you for receiving me to this podcast. Really excited to be able to spend a few minutes talking about GS1. Myself, I'm from Belgium. My name is Nicolas Frerejean, and I've been working for the last five years at GS1, managing deployment of all our global marketing initiatives across our local organizations. And what is GS1? That's a great question to start. GS1 is really a global standards organization. We are a neutral, not-for-profit organization, and I guess we are best known for one of our iconic products, which is the barcode. The barcode has been named by the BBC as one of the top 15 inventions that made the world economy. And this is one of the icons that we do behind this. We actually do develop global open standards to facilitate and to help the exchange of data across industries and across trading partners in the supply chain.  Wim: Excellent. We're very happy, you know, that you could carve out some time today with us, Nicolas. And then I think you touched already on, you know, kind of the first question that I had about what the impact of barcodes has been, you know, for the last five decades, because they've been around for quite a while. And you've said it has been an amazing invention and really critical to the global economy. And I'm just wondering how you see that impact from the past, but also looking ahead into the future, what is coming next for barcodes as well?  Nicolas: Yeah, the barcode was actually introduced for the first time 50 years ago. That was in 1974. and the very first product that was count was a chewing gum pack in Ohio in the United States. The barcode really changed the way consumers check out at the point of sale and by enabling to identify a product and connect that product to its digital identity we've been able to connect the product to its price and make sure that we can make supermarket queues a lot shorter make the checkout process faster. And then also over time, we've grown the use of the barcodes to help making supply chain much more efficient and to help the management of inventory, stock the fulfillment at distribution centers. Now, the barcode, as I've said before, has already been around for 50 years. And while it will still be around for many years, we are starting to work on what we call the next-generation barcode. And we are starting to work with industry to transition to the next generation of barcodes, such as, for instance, QR codes powered by GS1 or the GS1 data matrix.  Wim: Right and I mean do you have, I mean you have such you know so much experience, I mean do you have a couple of like use cases for those next generation barcodes you know that just as an example you know what exactly can be done with it.  Nicolas: Of course. The the main difference between the traditional barcode and the next generation barcode like a QR code is that they can carry much more information than traditional barcode and they can also enable consumers to with a simple scan to connect to the web and and as such manufacturers can start having much more information in the next generation barcode such as the batch of the log number such as expiry dates for the product and so on and so forth so that would enable for instance consumers to actually scan a product in the supermarket market and get access to the information which is linked to that specific product. They would be able to know where does it come from? Where was it produced? Was it produced in a sustainable way? What are the ingredients if we're talking about a food product? Does it contain allergens? And all of that, we enable consumers to make better choices and also safer choices for them when it comes, for instance, to food products.  Wim: Right. It's clear that this is really something that applies kind of cross-sectoral you know you've touched on retail and supermarkets I can imagine you know also in kind of let's say energy of commodities it'll play a role as well as in you know healthcare and life science. How do you see that you know that kind of like cross-sectoral application?  Nicolas: Yeah we have expanded over the years across many industries and this next generation barcode can truly play a role across different industries, making sure that in the end we can improve the experience for consumers, the safety also for consumers and patients and even traceability across different industries. Let me maybe give you two examples starting with retail then moving to healthcare. When it comes to retail we have seen with different industry members. Let me mention Woolworths, which is the largest retailer in Australia. They've been able to include in fresh products the expiry date of the product to make sure that products that would get closer to the expiry date would actually benefit from dynamic pricing and be sold faster to consumers. And also that products who would have passed the expiry date would actually be stopped at the checkout. The impact was that Woolworths has been able to reduce food waste by 40% and also enable that products with expiry date, which have passed, would not be sold to consumers, making sure that it would enable a much more safe supply chain for the consumers. In healthcare, actually the next generation barcode has been around already for 20 years. Also enabling in the healthcare industry better traceability, better efficiency of some processes in the industry, and in the end also improving the safety for the patient. Two examples also, nurses in the hospital would actually be able to scan medicines before giving it to the patient to make sure that that would match the right prescription. That the dosing would be correct and preventing possible medical errors. Instruments in the surgery room would also carry a next-generation barcode to make sure that they can be scanned before and after the surgery, making sure that all the equipment would be accounted for, sterilized, and also preventing mistakes. So very, very, very concrete use cases on how that simple next-generation barcode can help safety for consumers and patients. We are now also expanding the use across different industries, construction industry, rail industry. All of that is helping to better trace products across the supply chain, making sure that we know exactly how to use them, and also helping sustainability. Because by knowing exactly what we use and by being able to trace product across the supply chain, that eventually enables to recycle and to move more and more towards a circular economy.  Wim: These are great examples and all those aspects about guaranteeing or safeguarding food safety or traceability of drugs, medicine and devices, and ESG and sustainability requirements, they are so much top of regulations, right? I mean, a lot of that has also been imposed, whether it's the US Drug Supply Act or here in Europe, with ESG requirements and product digital passport coming in in the next couple of years. That kind of brings me a little bit to the next question is that what is the role that regulatory bodies would play in the adoption of those kind of new next generation barcodes? But also like GS1, you know, who is actually kind of doing the work, implementing all of that.  Nicolas: Yeah, this is a great question. We see all over the world a growing trend for more regulations and regulations asking for more transparency about the products, making sure that the products would be safer for consumers and for patients and making sure that they can also make more informed choices about what they buy, what they consume, and what they use. And as such, with GS1, we are working very closely with authorities, with regulations, to understand how we can support the implementation of regulations and support the industry by doing so. One of the main benefits of GS1 is that we develop open standards. And by having open standards, we make sure that anyone across the value chain, across different countries can use them, from very large organizations, but also small organizations. And we make sure also that the processes of data exchange can be made efficient, and that a product which could be produced in Asia can easily be read and introduced into the EU market. So the benefit of global open standards is really to enable also that transparency, which is coming more and more through regulations.  Wim: Right and

Reed Smith partners Nick Austin and Alex Brandt explore today’s challenges faced by the shipping industry and discuss key areas where we are likely to see the most activity in 2025, including sanctions, decarbonisation and legal developments in the courts. ----more---- Transcript:  Intro: Trading Straits brings legal and business insights at the intersection of the shipping and energy sectors. This podcast series offers trends, developments, challenges and topics of interest from Reed Smith litigation, regulatory and finance laws across our network of global offices. If you have any questions about the topics discussed on this podcast, please do contact our speakers. Nick: Hello, everyone, and welcome back to Trading Straits. I'm Nick Austin, a partner in the shipping team at Reed Smith in London. I'm joined today by my friend and colleague, Alex Brandt, who's also a partner in the London shipping team. Alex and I both have the privilege, some would say, of working in an industry, the shipping industry, which is heavily impacted by markets, geopolitics, technological change, decarbonisation, and a raft of legal and regulatory changes, and no more so, I think, than now. So in this podcast, we're going to be looking in broad terms at what 2025 might hold in some of these areas. And with a particular eye on where as lawyers we're likely to see the most activity. We don't have a crystal ball, and we can't possibly cover everything today, but we do think there will be some themes that will continue to emerge throughout the year. So, Alex, if I can come to you first, I mean, I know that you spend, some would say, indecent amounts of time advising clients on sanctions in the maritime and commodities world. Russia has, of course, dominated the headlines in that regard. How do you see 2025 developing? Alex: Yeah, thanks, Nick. And it's nice to be back on Trading Straits. Yeah, well, look, as you say, 2024 was a big year for sanctions. And I think there were a couple of key themes that developed. The G7 really continued to clamp down on the trade and the transport of Russian oil. And I think having come up with a novel scheme, the G7 price cap, which allowed the carriage of Russian oil and support for that trade, albeit under sort of you know attestations and a regulated process what had happened from that was the emergence of the shadow fleet which is obviously dominated not just the trade news but but you know international news and particularly events going on in the baltic at the moment and so really you had this castle mouse game with the regulators concerned with the monster they'd created with the shadow fleet and trying to cut down on circumvention and that that really sort of you saw that in two ways. One is the guidance around the sale of tankers trying to stop vessels going into the shadow fleets. And the second is the increasing sanctioning of. Dark fleet, shadow fleet, parallel fleet actors, vessels, trading houses that have emerged in certain jurisdictions who are seen by the G7 as facilitating breaches of price cap and keeping that Russian oil flowing at levels that the G7 are uncomfortable with. So that's what 2024 was really framed by. 2025 from the sanctions landscape has already started with a bang. We had on the 10th of January, 183 more vessels designated by the US, a significant focus on Middle Eastern trading houses, focus on LNG projects by the US as well, and critically. Two large oil producers in Russia, Gazprom Neft and Surgutneftegas. We were only in the first month of January. Hard to know exactly where we'll end up with the Trump administration, But it's certainly the case, I think, that the first half of 2025 is going to see more of the same, more of a tightening on Russian oil, more of a tightening on circumvention, continued concern with the threat that the parallel fleet poses, not just from a sanctions perspective, but also safety environment. And now with this sort of the suggestion of sabotage of key infrastructure in the Baltic. So I think that will be one of the key themes going forward. I think the other interesting area will be Iran, harking back to 2018 and the first iteration of the Trump administration. Trump was really the architect of the modern sanctions program, particularly when looking at Iran and the withdrawal from the nuclear treaty. And I think we can expect to see what we saw then, which is interference with cargoes on board vessels that are believed to have originated from Iran. So, you know, it's going to be a complicated environment. You know, it's going to be a dynamic environment and we'll have to feel through it day by day, week by week, as we have been doing. So, you know, that's three, four minutes, whatever it was, crystal ball gazing. I know that you've been working with clients on various decarbonisation initiatives. Where do you see the main features of that? And I guess, indeed, the challenges going into 2025? Nick: Yeah, thanks, Alex. And I mean, that's right. As if shipping didn't have enough to think about from sanctions, war risks and other geopolitical developments. Decarbonisation in the sector in terms of new regulation affecting the operation of vessels on a daily voyage-by-voyage basis is really continuing apace. And I think 2025 is set to be no different to the last two or three years we've had in that space. Before I get to the latest regulation, it's worth pointing out that the industry is still having to deal in depth with CII and EUETS. And a quick recap on both of those, a reminder that, of course, CII was introduced by the IMO in 2023 as part of its strategy to achieve net zero emissions in the maritime sector by 2050. And that's a rating scheme under which vessels, a bit like a fridge, get a rating from A to E based on their carbon intensity. And that's measured by an equation, which among other things takes into account the size of a vessel and somewhat controversially its distance sailed as we'll see. And 2024 was the first year, so the year that's just finished, in which ships were actually given ratings, from A being the best to E, the worst. And from a legal perspective, and I know you've been dealing with this too, but clauses in timeshaft parties, which is where tensions most obviously arise with CII. Have tended to be agreed now for a couple of years, usually some version of the BIMCO clause, but very varied around that standard wording. But of course, now that ships have actual CII ratings, the rubber hits the road, and the legal is meeting the commercial, in a sense, in terms of the impact that the rating is going to have on the marketability, the value of a vessel. For example, if it's re-delivered to its owners with a lower rating than it started with. And I think those issues are going to rumble on in 2025, and particularly if a vessel might have been sub-chartered by a time charterer and a rating thereby affected, which the time charterer isn't able really to visit on the voyage charterer under the freight regime. And it's fair to say that CII has come in for widespread criticism from the industry, really, from the moment it was launched, and in fact, before. There is going to be revision, most recently at the MEPC 82 meeting at IMO in September last year in London. That were very loud calls for a complete recalibration of CII, ensuring basically that it better represents true operational efficiency and actual emissions performance. And one of the issues, as I mentioned, in terms of distance sailed, is the so-called idle time, ships waiting around doing nothing, tend to be prejudiced in the calculation of CII ratings. And that has been perhaps the one-off, if not the central challenge. Ships are frequently spending time at anchor, in port, undergoing maintenance, dry dock, during which emissions will continue to accumulate without actually carrying any cargo. And that, rather artificially in the view of many, will give it a poor rating. So changes afoot with CII. The new Secretary-General of IMO has said in recent months that he is listening to the concerns of the industry on CII. And I think we'll see changes perhaps even before the official review date of 2026 so watch this space on that. EU ETS remains another show in town. From the 1st of January last year, shipping came within the already well-established EU ETS regime. As we've discussed on previous podcasts. And that's had really significant implications for the sector, not the least of which, of course, is cost. Again that's an EU concept it imposes obligations on shipping companies as they're defined who need to set up new compliance procedures, open operator accounts within the EU and they need to buy and surrender allowances to cover the emissions from voyages that are caught by the scheme 40% in general terms of this year shipping companies need to surrender after verification And it's this year that, of course, the performance and the compliance of EUETS is really coming into play in terms of the verification in March and surrender later this year of the 2024 allowances. Now again a bit like CII we've been working for a year or two now with almost all our clients in the shipping world on the mechanics of that setting up the accounts making the registrations and of course negotiating charter clauses to suit owners and charters needs and in fact anecdotally just today I heard from a colleague involved in setting up accounts for EUETS that it is taken in the Malta and the Netherlands. Some clients, over a year to establish the necessary accounts for the purposes of compliance. So it has not been easy for businesses to get used to this brave new world. In terms of the clauses, BIMCO is the standard starting point. Again, a big variety we've seen in the clauses that are being negotiated and agreed in the time charter market. Will all of that work out as the compliance of the EUETS really revs up this year? Well, we shall see. And last but not least, on DCARB, I th

Drones can deliver goods faster, cheaper and more sustainably than traditional methods. But how are they shaping the global supply market and what are the benefits and challenges of using them? Reed Smith partners Laura-May Scott and Gregory Speier discuss the current state and future trends of the drone delivery market, the key drivers and barriers of its growth, and the legal and regulatory implications of this emerging industry. This podcast is part of the From A2B: Decoding the global supply chain series, where Reed Smith lawyers share insights on the latest developments and issues affecting the transportation sector.  ----more---- Transcript: Intro: Trading Straits brings legal and business insights at the intersection of the shipping and energy sectors. This podcast series offers trends, developments, challenges and topics of interest from Reed Smith litigation, regulatory and finance laws across our network of global offices. If you have any questions about the topics discussed on this podcast, please do contact our speakers.  Laura-May: Hello and welcome to the Reed Smith podcast channel, Trading Straits. My name is Laura-May Scott, and I'm a disputes partner at Reed Smith, working out of London.  Gregory: And I am Greg Speier, a partner in the transportation industry group at Reed Smith, working out of our Princeton, New Jersey office. Today, we will be exploring how technology and innovation are transforming the world of logistics and transportation. Specifically, we will talk about one of the most exciting and also controversial developments in the delivery industry; drones.  Laura-May: So drones, or unmanned aerial vehicles, are flying machines that can be remotely controlled or programmed to perform certain tasks, such as surveillance, photography, or delivery. In recent years, drones have been increasingly used by couriers and e-commerce companies to deliver goods faster, cheaper, and often more sustainably than traditional methods. Today, we will uncover how drones are shaping the global supply market and what the benefits and challenges are of using them.  Gregory: Yep, that's true. And we definitely have a lot to get through today. And it's really fascinating to see how drones are transforming the delivery industry overall. And, you know, this is all new. You know, the drone delivery market is still very new. It's in its infancy, but it's growing so fast. It's growing rapidly. And according to a 2023 study conducted by market research platform, Markets and Markets, the current state of global drone logistics and transportation is expected to reach $16.1 billion, that's US dollars, by 2030. So in about five years, it's going to be a $16.1 billion industry. And that's up from not even $1 billion last year.  Laura-May: Yeah, I mean, that's a compound annual growth rate of over 50%. It's huge.  Gregory: Yep, absolutely. Huge is right. And so what is the main driver behind this growth? It's cheaper, there's more convenient delivery market options, especially in certain industries. Think about e-commerce, healthcare, agriculture, mining. You have all of these industries that are demanding, you know, cheaper, faster, more convenient delivery market options. And then also that's coupled with technological advancements, the hardware, the software, the infrastructure, and all of the largest players right now, the big ticket retailers, they all want to be delivering products by drone, and many are already doing so.  Laura-May: Exactly that. And as a result of that growth, we're seeing key trends coming out of the market. And I'd have to say that the first and most obvious one to me is the development of more sophisticated and autonomous drones as we see the technology develop in the way that you've described, Greg. There's the integration of other drones with other modes of transportation, such as trucks, trains, or ships working together with drones to deliver things. And obviously, there's also the emergence of new business models and regulations that enable and support drone delivery.  Gregory: Absolutely. And from the customer point of view, also, the drones can deliver products faster, cheaper, more convenient delivery options. And think about all the time sensitive and urgent products that could be delivered to remote areas or much more quickly, medicine, food, electronics, urgent items that customers need. Those could all be delivered by drone.  Laura-May: Yeah, and they offer that flexibility and personalization because customers can choose when and where they want to receive their packages and often can track that delivery in real time. So for the couriers themselves, the companies, obviously drones can offer lower operational costs than some of the other more traditional methods of transportation and delivery. And, you know, they can create higher efficiencies, higher customer satisfaction if obviously the job is done correctly. And they can often reduce fuel consumption, labor costs, vehicle maintenance, and avoid traffic jams and road accidents and theft, et cetera. There are so many benefits.  Gregory: That's so true. And another big issue where there's another benefit of drone operations, sustainability. Delivery can reduce the carbon footprint. I mean, just driving down the highway around where I live, you just see trucks and trucks of big retailers. And so if we're able to reduce some of that traffic or customers driving to and from pharmacies or the big box retailers to have so much less pollution and cars and trucks on the road, the impact is potentially huge.  Laura-May: Totally. They also offer, I guess, something, just stepping back slightly, which is the wider social and environmental benefits. They can save lives by delivering life-saving supplies, as you said, such as medicine, vaccines, to rural health facilities, or even to war zones, where there's a significant issue in accessing the land, and drones can get in there and do that more efficiently and safely than any other mode of transport.  Gregory: Yeah, good point. War zones, very timely as well. So that's definitely a great point. Another benefit of drone operations, they will, from my perspective, create jobs, employing drone operators, technicians, entrepreneurs, all who can leverage drones to offer new services or products. So drones could have a positive impact on many aspects of not only the environment, but society as well.  Laura-May: I totally agree. So we're espousing all the virtues of drones, but we should flag also that there are obviously several challenges and risks that drone delivery face, especially as it's an emerging market. And those can be both technical and non-technical.  Gregory: Yeah, it's really important we discuss that. On the technical side, there are challenges. Reliability, safety, and security. Drones, like any product, it can malfunction, crash, be hacked. There could be damage caused to person, property, injury, theft. There are also airspace concerns to ensure drones are not crashing into other drones or drones are not interfering with the airspace of other operations that are out there. And then the potential of nuisance claims. We've already seen a few filed in the U.S. With the interference of drones and the sound and how they interfere. And if you look up to the sky and all of a sudden there's drones interfering with the ground rights of your property. So these are all things that from the U.S. side, the FAA is considering. They are rolling out different blueprints and regulatory frameworks. And they'll continue to do so as drone operations increase and evolve. And we'll talk about it a little bit later. Technology is constantly improving. So there are solutions in terms of having more robust and resilient drones. And then coupled with the implementation of strict quality and safety standards, I really do think that the drone space is ready to take off.  Laura-May: Yeah, I agree. You mentioned airspace, Greg, which is absolutely a concern. And I guess the key issue there that you touched on is that we have to ensure that drones integrate in the right way with the existing traffic management system, because drones can interfere with other aircraft, planes, helicopters, balloons, and cause collisions or delays. And I think as we see more drones emerge over time, we will have to manage that more carefully.  Gregory: Yeah, no doubt about that. And kind of what I see as some solutions to this are, we need the development of a dedicated and coordinated drone traffic management system, but also the establishment of clear and consistent rules and regulations. And there has to be all along the way collaboration with various stakeholders, obviously the government and regulators, but also the airlines and drone operators. And one thing that is noteworthy and worth mentioning is that over the summer in Dallas, Texas. Zipline International and Wing Aviation, they were permitted by the FAA, the Federal Aviation Administration, to deliver packages to customers via drone beyond visual line of sight. BVLS is how we refer to that. And that means that the operators are able to operate these drones so far that they cannot see them. And that's really incredible and is a huge advancement from the U.S. point of view. And these drones were able to do that due to technology, an advancement known as UTM, or Unmanned Aircraft System Traffic Management. And so with UTM, there's a cooperative interaction between drone operators, service providers, and the FAA to make sure that there's real-time communication. And so despite this technology, I've been in the business for a long time, it is inevitable that, unfortunately, that there probably will be a crash of some kind occur that is significant and noteworthy, causing significant injury to people, property, or both.  Laura-May: Yeah, and I guess those using drones will want to off-board some of that risk, some of that accident risk, and I certainly think that's whe

Reed Smith associates Emma Weeden and Charles Sauvage explore the impact of the Consortia Block Exemption Regulation's (CBER) expiry on the liner shipping industry and evaluate the potential of the Specialization Block Exemption Regulation (SBER) as a replacement. They also discuss the resulting changes, including legal adjustments, compliance considerations and the future landscape for competition, innovation and sustainability. ----more---- Transcript: Intro: Trading Straits brings legal and business insights at the intersection of the shipping and energy sectors. This podcast series offers trends, developments, challenges and topics of interest from Reed Smith litigation, regulatory and finance lawyers across our network of global offices. If you have any questions about the topics discussed on this podcast, please do contact our speakers.  Emma: Welcome to the Trading Straits podcast. Today, me Emma Weeden and my colleague Charles Sauvage from Reed Smith's London and Brussels office will be talking to you about the consortia block exemption regulation. So the Consortia Block Exemption Regulation actually expired in April and it applied to container shipping lines to allow them to collaborate on space and their sailings. Today we're going to be talking about the implications of that law expiring and how shipping consortia will work going forward. So to start off with, we should talk a little bit about what shipping consortia are. These are shipping lines that jointly cooperate in the provision of container services. These cooperations are in respect of sharing space on vessels. This can be done through highly integrated consortia using vessel sharing agreements or simply by slot charter agreements. This is exchanging slots on vessels. The features of consortia are that they share capacity to create regular weekly sailings for each line's clients. Where consortia cooperate across trades, these are known as alliances. It's important to note that these aren't conferences. So shipping conferences were abolished in 2008 and these allowed lines to collaborate on price and capacity. Here we're talking about collaborations in relation to capacity only. Today, the consortia that are often talked about are the large East-West alliances. Here, most of the world's top 10 lines participate in one of three alliances, the Alliance, 2M, and the Ocean Alliance. However, there are a lot more consortia than just these three alliances. These big alliances are famous because they operate on the world's largest trades. However, it's important to remember that there are other small consortia and alliances. They operate north-south and they operate regionally. In the Med, for example, there are lots of smaller lines operating in consortia and they shouldn't be forgotten. So what did the consortia block exemption do? So a good place to start is what are block exemptions? So block exemptions allow businesses to carry out and collaborate on activities that would usually be caught by competition law. So what did the consortia block exemption let lines do? So this regulation was introduced in 1995 and renewed in 2014 and 2020. And it specifically allows shipping liner companies to form consortia and operate a joint service on vessels and share port facilities under certain conditions so the main condition in this was that the lines together wouldn't have a market share of over 30 percent and the period of the agreement and lock-in had to be limited the agreement also had to not have any hardcore restrictions you can't do things like price fix or market share and and it's also worth noting that when the UK left the European Union it adopted the consortia block exemption regulation. The benefits of this law were that it facilitated these consortia by making the competition or assessment easier there was a regulation that laid down what lines could do this created legal certainty reduced risk reduced legal costs it was it's a straightforward assessment for shipping lines do they fit within these rules. The big benefit of this law is that it allowed lines to join up to provide ships and regular services. This has meant that you know if one line buys a big big ship it's got other partners that can fill space on this ship, so with the consortium you can fill the space have a regular sailing. You know the goods that are transported by a container often have to be there you know just just in time it's a different industry to to tramp shipping so being able to collaborate together to have one weekly sailing is a good thing for for shippers. It's also helped with environmental protection so if you've got one ship sailing rather than four ships sailing at the same time you know that reduces carbon emissions. The vessel utilization of a big ship can also be higher so you're not sailing more half empty ships. So Charles it'd be good to know your thoughts on why the consortia block exemption regulation was abolished.  Charles: Thank you, Emma. Yeah, the CBER, in relation to why was the CBER abolished, it's important to note first that the CBER was one of the very few sector-specific block exemption regulations that were adopted in the EU. Unfortunately, the EU Commission has adopted, has moved towards getting rid of these sector-specific exemptions. And even though we continually and regularly advised in favor of maintaining the maritime, the CBER, as the sector-specific block exemption regulation for the shipping sector, we have not been heard, and we had argued that because the shipping sector was, in our view, very specific, was very international by nature, and was very high cost, and therefore needed its own legislation. Fortunately, as I said, and as Emma explained, the sewer was drawn and now the only sector-specific block exemption regulation left in the EU is the one relevant to the motor vehicle sector. This move of the EU Commission was not a given, in particular because other jurisdictions have and continue to have sector-specific block exemption regulation in the maritime sector. For instance, Hong Kong, Singapore, and Israel. And the U.S. Have a slightly different system, but in a way even more constraining because in the U.S. you have even a sector regulator, the U.S. Federal Maritime Commission, to which shipping lines must not only file the agreements they enter into, but also submit information such as their meeting minutes and other documents in order to allow the Federal Maritime Commissions to perform real-time monitoring of the maritime sector. So, yeah, the CBER in the EU was withdrawn and the same in the UK. And this is somewhat confusing, in particular because the market conditions haven't changed drastically since the last time it was renewed. For a while, the Commission considered that the shipping rates had increased, But given that they have now, since the end of the COVID-19 pandemic, fall down again, that was not found to be a good reason. The Commission also thought that the quality and reliability of services have remained since 2014. So really, the reasons for underlying the withdrawal of the CBER are yet to be determined. The Commission also considered that it wasn't clear whether a consortia could deliver sufficient consumer benefits to justify renewal. And it also queried the indispensability of having the consortia for achieving the standards required by Article 101.3 of the Treaty on the Functioning of the European Union, and in particular, the efficiencies bringing consumer benefits. But maybe in order to better understand why the expiry of the CBER will happen, why was it decided, and how it will have negative consequences, it's important to further explore the reasons underlying the EU Commission's decision to withdraw it. Maybe the first one I briefly touched on is the inconsistency in looking at the effects of the COVID-19 pandemic. So as I said, for a while, the Commission, during the pandemic, we could observe that the freight rates had increased, but evidence since suggests that these are now falling. So in its review of the specialization block exemption regulation in 2021, the Commission considered, in line with what I've just said, that the effects of the pandemic were temporary and therefore did not cause reason for concern. And yet, conversely, a year later, during its review of the CBER, the Commission focused on the adverse effects of the pandemic on fright rates and deemed it as a good reason for the CBER to expire as no longer being fit for purpose. This inconsistent approach really is a cause of concern. We also noticed that the Commission for sure underestimated the legal uncertainty and the compliance costs that the expiry of the CBER will entail for carriers. And this, even though we highlighted it several times in the consultations that were carried out in the context of the CBER review. So we'll come back to this, but as a result of the withdrawal of the CBER, carriers will now have to self-assess their cooperation agreements using the specialization block exemption regulation, which, amongst other reasons, which is not sector-specific and which will therefore increase the compliance costs. Not only because the shipper carriers will now have to familiarize themselves with this complex new sectoral new regulation, but because also precisely it is not sector-specific. And there is no, in parallel to the SBER, there is no longer any sector-specific guidance. And finally, another reason is probably is that the commission failed to properly consider the negative impacts of the expiry of the CBER on competition, innovation, and sustainability in the liner shipping sector. Indeed, there's a chance that consortia will be replaced by less efficient and environmentally friendly standalone services, or by more integrated forms of cooperation, such as mergers, which could harm competition by making the market highly concentrated. This may result in competitors outside these mergers and other concent

In part 1 of the series, partner Philip Thomas and associate Voirrey Davies highlighted the importance of cybersecurity in shipping. In part 2, they share tips on how to handle a breach, and provide their thoughts on the future of autonomous shipping. ----more---- Transcript:  Intro: Trading Straits brings legal and business insights at the intersection of the shipping and energy sectors. This podcast series offers trends, developments, challenges and topics of interest from Reed Smith litigation, regulatory and finance lawyers across our network of global offices. If you have any questions about the topics discussed on this podcast, please do contact our speakers. Voirrey: Welcome back to Trading Straits. My name is Voirrey Davies and I am an associate in our transportation industry group based in our London office. I am joined once again today by Philip Thomas, partner in our emerging tech team, also based out of London. And this is our second podcast in our two-part series on shipping and cybersecurity. Just as a brief recap of our last podcast we thought it would be helpful just to go over again the definition of what cybersecurity actually is in the context of what we're talking about so cybersecurity is the steps taken by an organization both with regards to people and technology to prevent cyber attacks from occurring or to minimize their effect and as we talked about in our last podcast this differs from a data breach in various ways which we won't go into again but please feel free to listen to our podcast from last time if you want some more information on that. Our key takeaways from the last podcast were that it's just vital to be prepared ahead of time. You don't want to be dealing with a breach with nothing in place. People are often the weak link in any sector not just within transportation but any industry area and it's not because people seek to act maliciously it's just because hostile parties tend to target people so this is why training and robust policies for everybody in your team which includes people working as we would say at the pointy end so on the ships or driving the planes is of utmost importance and today what we're going to talk about is what happens when, despite all your best efforts, the most robust of policies, there has been a cyber attack and a corresponding cyber breach. I think really what the difficulty is, is trying to think about a cyber attack, because it can have just as big an impact as a physical casualty, like a fire or grounding, but it can be really difficult to envisage how it can actually affect a ship or a port infrastructure or shipping company. I mean, Philip, I don't know about you, but I personally think it's quite difficult to imagine something intangible like a cyber attack. Philip: Absolutely. So I think, I mean, cyber attacks can take very different shapes and forms. In a transportation context, they can have a significant disruptive effect. And as we mentioned on our last podcast, it can even, in some instances, be a matter of life or death, particularly where the attack involves challenges to the safety of personnel. I mean, in terms of real world consequences, there's a raft of things to take into account. First of all, there's the disruption that the incident occurs. There's a cost of remedying it. There's additional management time that could be taken up in trying to resolve it. You've got issues of reputational damage, potentially, because if you're seen to be an organization that suffers or at least is vulnerable to cyber attacks, that can impact your perception in the market. And it can also put you on the radar with regulators for all the wrong reasons. A recent example, although not a cyber attack specifically, was the CrowdStrike outage, which, as many of you will know, exposed the vulnerability of people's IT systems when you're reliant on a single service provider or a limited number of service providers. In that instance, the disruption came as a result of an update that wasn't carried out properly, but it has the same disruptive effect where systems went offline for most of a day. Airline flights were canceled, businesses were disrupted. And so that just gives a bit of a flavor of how bad it can be. Voirrey: Yeah, I mean, I think the CrowdStrike incident was just, it was a really great example of how the world can just grind to a halt. You know with one issue with one company you know it just really got it into the news and I think you know whilst there was a lot of fears that it was a cyber attack you know to find out it was probably a bit of a relief to find out really that it was just an update that had kind of gone wrong and while you were talking there I was kind of having to think about, some more specific cyber attacks that I can think about was related to assets, so to ships or to planes. And there was a well-publicized incident just in March of this year, so only a few months ago. And there was a Royal Air Force plane carrying Grant Shapps, who was then the Defence Secretary of the UK near Russia. And they experienced a GPS-related incident where the GPS of the plane was jammed, which affects the navigation system of the plane. So it was really quite dangerous to kind of find a plane in that kind of position and you have to think about potential effects there on commercial airlines as well and this ties in you know GPS spoofing and GPS jamming are not I wouldn't say they were common instance in the shipping industry but they have definitely been increasing in the amount of attacks that have been happening. and I think we briefly kind of spoke about this in the last episode but you know there's a case that came to us and obviously I'm not going to go into details about you know parties involved but basically the GPS of our vessel, our client's vessel, had been spoofed and that meant that the ship's AIS system which essentially kind of shows where the vessel is and relies upon GPS to provide a position actually showed that the ship was on land. In fact, I think it was in a car rental shop in the middle of the nearest city. And... It resulted ultimately in a collision happening. Now, anyone who's listening to this and knows anything about collision regulations knows very well that relying on AIS for collision avoidance is not acceptable. However, it was a contributory factor to this accident happening. And it was what we would describe in the industry as a “holy cheese” moment where there had been lots of issues that had happened. It had gone through all the holes in the cheese and resulted in this collision and so whilst this incorrect GPS position was not solely causative it was a significant factor and I’d say all of these examples together  we've just been discussing show that a cyber attack has a very real world consequence so you know what do you think? Philip: I agree, I agree and I think the way you should think about cyber breaches in a shipping context is to think about it like any other casualty. I mean, you'll know from your wet shipping work that casualty can involve a grounding, collision between vessels or container fire. And it has parallels to a cyber breach because you often have a sudden dramatic incident that is fast moving. Sometimes the fact pattern changes quickly. And in both instances, you need a responsive team to help you to identify and contain the incident as well as deal with a fallout and so you know I think if  organizations get to a situation where they treat cyber preparedness in the same way as they would casualty prevention then I think you're on the right track. Voirrey: Yeah I think treating a cyber attack in the same way as any other casualty is just it's the best way of looking at it because it is a casualty it's just you know wearing a different hat to the ones that we're used to I know when I  was at sea we did trainings all the time on you how to respond to a fire. You did fire drills, you did lifeboat drills, man overboard you know all those kind of what we would call I guess a “standard”  marine casualties situation and you know now working here at Reed Smith you know I'm part of the casualty and admiralty team and you know the best, most efficient way of dealing with a casualty is the person on the ship, which is usually the master, calls the correct person shoreside, which is normally the designated person ashore. And that person essentially activates a shoreside emergency room. All of their relevant people will come in to start dealing with this situation. But they also call their external people and this is where for example we might get a call to go out and attend to a casualty you know we fly all around the world doing that kind of work and it's not just shipping lawyers or casualty lawyers you know with a cyber breach you need to make sure not only have you got someone that understands shipping but you've got someone that understands in great detail you know what to do with the different regulations around the world because you know my understanding Philip is fairly basic on this one but different countries have different regulations and they all require different things that you need to do as regards to reporting and I think having that expertise to hand is definitely the way to go and I think Philip off the top of my head I can think of this NIS-2 directive that's been going around but maybe you could expand a bit more on these kind of regulatory requirements. Philip: Exactly. I mean, I think the first thing to say is that the cybersecurity regulatory landscape is very fragmented. So as you say, different laws apply in different jurisdictions, although there is some commonality in the EU, for example, and in the UK, when it comes to things like the NIS-2 directive, which will come into force fully in October of this year. You've got the Critical Entities  Resilience directive, which also applies to transportation companies as they're deemed essential services. So you've got a

Partner Philip Thomas and associate Voirrey Davies discuss the importance of cybersecurity in shipping. Some of the topics include the risks, examples of cyberattacks and tips on how to prevent them. ----more---- Transcript: Intro: Trading Straits brings legal and business insights at the intersection of the shipping and energy sectors. This podcast series offers trends, developments, challenges and topics of interest from Reed Smith litigation, regulatory and finance lawyers across our network of global offices. If you have any questions about the topics discussed on this podcast, please do contact our speakers. Voirrey: Welcome back to Trading Straits. My name is Voirrey Davies and I'm an associate in the transportation group based in our London office. I'm joined today by Philip Thomas, who's a partner in our emerging technologies team, also based in London. And we're going to be talking to you today about shipping and cybersecurity, with the key question being, what do I need to know? So Philip, I think we should kick it off with the main part of the podcast, which is what is cybersecurity? Philip: So I think of cybersecurity as being how people, organizations, and even governments protect themselves against cyber attacks, and also how they mitigate the impact of those attacks occurring. To me, cybersecurity is distinct from cyber risk. When I think about cyber risk, I think about the risk of adverse consequences flowing from a cyber breach, so financial loss, business disruption, and so forth. And it's also distinct from data breach. We often find people using cyber breach and data breach interchangeably. A data breach typically has the theft or acquisition of data as its main focus, whereas a cyber breach is broader and may involve the data breach, but may not have data as the main focus. So you're aware of cyber incidents in the shipping sector, do you have any examples of what those cyber incidents look like and any recent examples to share Voirrey: Yeah absolutely. I mean as you said there's a quite big difference really between the data breach and then some sort of cyber attack that has happened. Back in 2017 there was a widely publicized cyber attack on Maersk, which essentially paralyzed their global network. And that was a ransomware attack. So these are things that are happening. And more recently, we've been seeing a lot of GPS spoofing. This is nothing new, but there's definitely been an uptick in those kind of matters, particularly from hostile states. It has a really big impact on the actual navigation system of the vessels that are out at sea. Not only are we seeing things to do with assets at sea, we're also seeing attacks on infrastructure in ports. The advent of kind of these really clever crane systems in container ports means that they are quite susceptible to any type of cyber attack that could render them unable to operate. And, you know, thinking of it on a kind of a wider basis. If you don't take your cyber security seriously in the shipping industry, then you can be very exposed. The impact of a cyber attack in shipping can be much more serious than in other sectors, because it can impact the safety and the seaworthiness of vessels, which essentially could mean life or death situations or significant damage to the asset, to the environment, to the cargo on board. Where we've seen with GPS spoofing, vessels can be led into hostile territory and potentially seized which is you know an absolute nightmare for everybody involved in that sort of situation. With this advent of real-time data to vessels directly into the navigation systems it's yet another access route for you know a hostile entity to try and kind of get into the cyber system of those vessels and as you know some of the examples I've just discussed there, organizations can be held to ransom. Ransomware is called that for that very reason. And unless you pay up, you can't get control of your systems or your vessels. And sometimes even if you do pay up, you don't get the assets back to you. And you've mentioned earlier that it can be very expensive, these kind of mistakes, Philip. So what can companies do to try and prevent these attacks? Philip: I think there's a lot companies can do. The starting point, I think, is to get ahead of the technological risk. And by that, I mean being proactive about using the latest technology to safeguard against attacks and also ensuring that your personnel are appropriately trained in the use of that technology. One of the major weaknesses, I guess, from a cybersecurity risk perspective, is your people, because cybercriminals will often target people in these attacks, perceiving them to be a vulnerability within an organization. And so much of what we read about the cybersecurity attacks are really the product of somebody inadvertently clicking on a link or opening an attachment that they weren't expecting or not taking care. It's far more rare for these incidents to be as a result of an employee doing something willful or intentional. But it only takes one inadvertent mistake for systems to become paralyzed. You may remember recently we had the CrowdStrike incident where IT systems were unavailable for a day. And many people immediately assumed that that was as a result of a cyber attack. In the event it wasn't but that that is the kind of impact a cyber breach can cause which means that you're locked out of your system for a day and as you mentioned in the shipping context it can be very serious, it can cost an awful lot to remedy if you think about supply chains for example. It can impact not only your organization but a lot of linked organizations who are reliant on you. So it is serious and it needs to be taken seriously. And so to answer your question, how best to protect against it, it's really a combination of technological security measures, staff training, awareness programs, maybe even dummy runs. We've seen many organizations run test cyber breaches to see how they would respond in practice. And also having policies in place to make sure that your staff your contractors, your visitors, are all rowing in the same direction and taking a consistent approach to your security. Voirrey: Yeah it's interesting actually what you say there about kind of dummy runs because actually something that from my time at sea we used to do what were called “tabletop exercises” where you would kind of pretend that there was some sort of major disaster that had happened and you would be liaising with the head office and the emergency response team shore side and kind of practicing what you would do. So is that the kind of thing that you think companies could be doing with regards to cyber attacks as well? Philip: I think it's very useful to do that because one of the issues with a cyber attack is that it happens suddenly and you have to make decisions urgently and under pressure and I guess a dummy run is one way to test how you would respond under pressure. The other point to say is that there's a spectrum of reasonable decisions you could take in that scenario and many people would make different decisions but you're not really going to know until you're under some pressure and it's a safe environment to do so because it isn't of course, a real world attack, but it runs you through your responses and also tests your knowledge of the organization's processes and protocols. Voirrey: Yeah, I think really the kind of key issue is training and personnel. And, you know, I know that I used to go off to training centers and do week-long courses on environmental aspects, on ship handling, you know, those kind of things. and where cybersecurity is relatively new, particularly as far as the shipping industry is concerned, you know, the shipping industry traditionally has always been quite slow to react to new things that come out. You know, for example, you know, it took the Titanic before we got SOLAS and other kind of major disasters for key legislation. And that kind of ties in, I think, with this need to kind of get ahead of the game, which you mentioned earlier, and get those kind of training plans out in place. An incident that I know about personally with regards to a cyber breach or attack was definitely going back to what you said about the carelessness over malevolence. So when I was at sea, I heard a story which was about an officer who had, taken a USB stick from the ship to an internet cafe. Now this USB stick was what was being used to provide the updates for the electronic charts on board. So what would usually happen is you plug your USB stick into the bridge computer, you would download the updates from the internet through a specific site and then you would plug the USB stick into your ECDIS, hit update and hope it all went well. Sometimes you had to do that a couple of times, but, you know, generally you would get there. And what he had done is he had taken the ECDIS USB stick, and he'd gone ashore to an internet cafe, where he plugged it in, because he was downloading documents, photographs, you know, whatever he was doing. And he then came back on the ship, and proceeded to use the USB stick to do the next ECDIS update. What he didn't know was that he had not only downloaded the photos and the documents that he had intended to, but he'd also downloaded a computer virus. What then happened was, of course, he uploaded the computer virus not only onto the bridge computer, but also into the ECDIS. And that meant that the entire ECDIS navigation system crashed, couldn't be used. That meant the ship couldn't sail anywhere because it didn't have any navigational charts and that rendered the ship unseaworthy and the vessel was then significantly delayed whilst they then had to try and fix it and you know that just goes to show that people can really be the key to causing, but also preventing, these kind of attacks and after that the ECDIS USBs were often encrypted they also were specifically labe

Alice Colarossi and Julia Norsetter discuss how the Jones Act poses challenges for the development of offshore wind projects in the U.S.  They explain the contents of the Jones Act, provide commentary on its implementation, and discuss solutions that have been used to overcome its restrictions. ----more---- Transcript: Intro: Trading Straits brings legal and business insights at the intersection of the shipping and energy sectors. This podcast series offers trends, developments, challenges, and topics of interest from Reed Smith litigation, regulatory, and finance lawyers across our network of global offices. If you have any questions about the topics discussed on this podcast, please do contact our speakers. Julia: Good afternoon. Welcome back to Trading Straits. My name is Julia Norsetter, and I'm here with Reed Smith council, Alice Colarossi , and we're ready to talk about the Jones Act and offshore wind. Hi, Alice. How are you doing today? Alice: Hi, Julia. I'm doing very well. Thank you. How are you doing? Julia: Hey, I'm doing great. So I was thinking we could just jump right in here. So what's kind of the latest on the U.S. offshore wind market? Where do things currently stand? Alice: Yeah, well, it is a mixed bag. I think we see a lot of uncertainty, but also a lot of potential. So on the one hand, the U.S. offshore wind sector is still very far behind the European and the Asian offshore wind sectors. We're also far behind the goals that the Biden administration had set for the sector back in 2021. So the goal was to have 30 gigawatts of offshore wind capacity in the U.S. by 2030. People refer to it as the 30 by 30 goal. But according to the latest reports that I have seen, the U.S. Should only have about 16 gigawatts of offshore wind capacity by 2030. So that's just a bit more than half of the 30 by 30 goal. I would also mention that the two leading candidates for the U.S. Presidential election have quite opposite views on the significance and the future of the U.S. offshore wind sector. And therefore, there is a lot of uncertainty in the near future, how many federal leases will be available for offshore wind projects in the next few years, and so on. So it is really a challenging environment. But on the other hand, there's a real push among players in that field to try to catch up with the rest of the world and the Biden 30 by 30 goal. So according to recent reports, we could reach that 30 goal as early as 2033. So we may not be that far behind after all. And the Biden administration has approved several major offshore wind projects very recently, perhaps in an effort to achieve as much as possible before the end of the current term. And another significant development that I think we should talk about today is the construction of the very first U.S.-flagged, Jones Act-compliant wind turbine installation vessel by Dominion Energy in Texas. That's a unique, first-of-its-kind vessel. The sea trial just took place in May. That was a major milestone in the construction project. And that Dominion vessel is expected to start installing offshore wind turbines, in Virginia just next year in 2025. Julia: Terrific. Well, thanks for setting the stage there, Alice. I really appreciate it. You mentioned the recent sea trial of the first Jones Act-compliant wind turbine installation vessel. For those of our listeners who may not be familiar with the Jones Act, could you kind of explain what it means for a vessel to be Jones Act-compliant, and in particular, what this means in the U.S. offshore wind sector? Alice: Yes, of course. So the Jones Act is what we call the Merchant Marine Act. It's a U.S. law that dates back to 1920. So the Jones Act requires that all vessels, all ships that carry any type of cargo between points in the United States must be U.S. flagged, so U.S. Registered, as well as U.S. built, U.S. owned, U.S. controlled, and mostly U.S. crewed, subject to some limited exceptions. So when I just say that this will be the first wind turbine Jones Act compliant installation vessel, I mean that that will be a vessel that satisfies all of these U.S. requirements. And the technical term here is that the vessel will be U.S. documented with a Coast West Trade endorsement. The implication is that the vessel will be qualified to engage in the Coast Trust trade and so, I mean, carry goods, merchandise, and passengers between ports in the United States. So the Jones Act, the basic rule is that it applies to ports within three nautical miles of the U.S. coastlines. So when you carry goods between U.S. ports or between ports within three U.S. Nautical miles of the coastlines. However, its application was extended as a result of an amendment to the Outer Continental Shelf Lens Act in 2020. So now the Jones Act also applies to energy projects that are attached to the U.S. Outer continental shelf, including offshore wind farms. And therefore, all vessels that carry wind turbines and equipment, which are really a type of cargo rights, all vessels that carry those wind turbines and equipment from U.S. ports to U.S. Offshore wind farms, those vessels must be Jones Act compliant, meaning U.S. Flagged, U.S. built, U.S. owned, U.S. controlled, and mostly U.S. crewed. And yeah, as I mentioned, that Dominion vessel will be the first Jones Act compliant. Offshore wind turbine installation vessel. As of today, there are no such vessels in the market. So the industry is relying on non-Jones Act, non-U.S. Wind turbine installation vessels to build wind farms in the U.S. But in order to build U.S. Offshore wind farms with non-U.S. vessels, the developers have to be extremely careful in order to avoid violating the Jones Act. So specifically, because these non-US vessels are not allowed to transport any type of cargo, including offshore wind farm components between points in the U.S., what typically happens is that the non-U.S. vessels bring the wind turbines directly from a non-U.S. port to the U.S. installation site. And then they remain completely stationary there at the U.S. Installation site during the entire installation. And they rely on smaller vessels that are Jones-like compliance in order to go back and forth between a closer U.S. port and the installation site to bring all the wind turbine components. And to also bring the offshore workers that will do the installation and so on. So people refer to this system as the feeder solution because the smaller U.S. Vessels essentially feed the non-U.S. installation vessel at the installation site. It's really not an ideal solution, to be honest. I mean, for several reasons. One of them is that it requires a lot of ship-to-ship transfers in offshore waters where the conditions can be quite challenging. Julia: Thanks for that, Alice. lease, there's really quite a few challenges to that feeder solution. I really appreciate you explaining it. So are there other Jones Act offshore wind vessels that are currently being built aside from the Dominion vessels? Alice: Well, in terms of wind turbine installation vessels, the Dominion Vessel is the only ongoing construction project that has been publicly announced as far as I know. There was another project to build another very similar Jones Act compliant wind turbine installation vessel, but that other project was canceled at the beginning of 2020. I believe the reason was that, I mean, basically the high costs of construction made the project not profitable enough. It was for financial reasons that it was canceled. Because in the case of the Dominion vessel, it's probably worth mentioning that the cost of construction is expected to be more than $600 million. And that's about twice what it would cost to build the same vessel in, say, South Korea instead of the U.S. So the Jones Act U.S. build requirements really increase a lot the cost of construction. And because of that higher cost of construction, those Jones Act vessels must then charge higher charter rates. And those rates won't be competitive outside the U.S. And that's a problem because the U.S. offshore wind market is still quite small. And so there's a limited market to keep those vessels busy. So it's possible that the Dominion vessel will be seen as some sort of test case. And if it's successful and the U.S. Offshore wind sector finally really takes off, we may see other investments in other wind turbine installation vessels in the U.S. But as of today, it's the only I'm aware of. But in the meantime, I should mention that there are other investments in other types of U.S. offshore wind vessels, smaller ones. For example, investments in crew transport vessels as well as offshore maintenance vessels. Those are smaller, I mean, they are smaller investments too, and they tend to be more versatile and easier to reconvert for different uses than wind turbine installation vessels, which are extremely specialized. There's also the first Jones Act compliance work placement vessel that is currently being built. It will be used to strengthen the foundations of U.S. Offshore wind projects, as well as some other specialized projects, such as septic cable installations, I believe. And the keel of that first Jones Act replacement vessel was just laid in May. So that's another exciting development for the industry. Julia: Thank you. Is there room for non-U.S. players to invest or otherwise participate in these offshore vessel construction projects, despite the complications posed by the Jones Act? Alice: Well, the scope of what non-U.S. players can do is really limited because of the Jones Act. But there are certainly options for them to get involved in this highly specialized market. So the first thing worth mentioning here is that the Jones Act requires that gross trade qualified vessels must be owned by either U.S. Individuals or entities that are at least 75% U.S. owned at each tier in their ownership chain. So this means that there can be a minority 25% non-U.S. Shareholde

Admiralty & casualty lawyers Richard Gunn (partner) and James Scott (counsel) discuss developments in relation to the 1976 Convention on limitation of liability for maritime claims. Richard provides analysis on the application of Articles 12 and 13 of the Convention and James talks on limitation of liability for indemnity claims for wreck removal costs.    ----more---- Transcript: Intro: Trading Straights brings legal and business insights at the intersection of the shipping and energy sectors. This podcast series offers trends, developments, challenges and topics of interest from Reed Smith, litigation, regulatory and finance lawyers across our network of global offices. If you have any questions about the topics discussed on this podcast, please do contact our speakers.  James: Welcome to the Trading Straights podcast on Global Limitation Developments with your host, Reed Smith Casualty lawyers, Richard Gunn and James Scott. This podcast is a continuation of the presentations given recently by Richard and James in Japan Tokyo at the shipping seminar to the local market. I'm James Scott and my section of the podcast is on the Hong Kong final court of appeal judgment number 20 of 2003 on limitation of liability for indemnity claims for wreck removal. Richard will give a talk on his views on other matters in relation to article 12 of the Limitation Convention, but I'll get started on my bit now. So in January 2019, Antea collided with another vessel called the Star Centurion whilst the latter was anchored in Indonesian waters, Star Centurion became a total loss. The Indonesian Ministry of Transportation issued a wreck removal order to the owners of Star Centurion requiring them to raise and remove the vessel and render her harmless. It was not disputed in this action that the collision was entirely the fault of the Antea. The owners of the Star Centurion commenced proceedings in Hong Kong seeking an indemnity for the costs of complying with the Indonesian order. The owners of Antea commenced their own action in Hong Kong seeking to establish a limitation fund under the 1976 convention. Contrary to their presumptive position in England, the Hong Kong CFA concluded that the owners of Antea could not limit their liability. And before we turn to the reasons for that decision, let's cap the relevant articles of the convention and there's four of them as follows. Article 2.1.A provides for limitation for losses consequential to the direct operation of the ship. Article 2.1.D provides expressly that wreck removal expenses are limitable. Article 2.2 provides that indemnity claims for wreck removal expenses are limitable except for expenses arising from contracts. And fourthly article 18.1 provides that contracting states may reserve the right to exclude article 2.1.D. The effect of exercising that right is that wreck removal expenses cannot be limited under article 2.1.D. So with these articles in mind, let's talk now on how the courts in England and Hong Kong are likely to apply them. The first thing to say is that article 2.1.D does not apply in either England or in Hong Kong. This suggests that the courts in these two countries apply the 1976 convention differently in relation to indemnity claims for wreck removal. Indeed, following the Hong Kong CFA judgment in the Star Centurion, this appears to be the case. So let's take a look at the position in England first. There is yet to be a directly applicable precedent in England. But many believe that the English courts would find that interparty wreck removal claims fall within article 2.1.A that is that they are consequential on the operation of a ship and therefore limitable. It's clear as a matter of English law that consistent construction must be given to international conventions. In the Aegean Sea, Thomas J referred to precedent whereby the limitation convention is to apply to all cases which can reasonably be bought within its language. And it's been suggested that the decision by the legislators in England not to bring article 2.1.D into force arises from the concern not to leave harbor authorities under compensated. However, there is no evidence of any similar intention to prevent limitation for indemnity claims as was established in the 1961 case of Arabic Number 2. Further under article three, the limitation convention excludes salvage costs when incurred directly with a salvor. However, if the party that incurred salvage costs submits an indemnity claim in damages against the other party then that claim would be limitable under article 2.1.A. And this indeed was held by the English Court in the 1992 case of the Braden Merchant. Commentators have therefore suggested that an English Court would likely continue the Arabert approach and be willing to view wreck removal costs in the same way. So let's now compare this to the position taken by the Hong Kong courts in the case of the Star Centurion. At first instance, the court focused on the maxim that general provisions do not overrule specific provisions and reasoned that general provisions of article 2.1.A should not give way to the specific provision for wreck removal claims. In article 2.1.D, the view is taken that any country's position would render article 18-1 and the decision not to implement article 2.1.D as meaningless. The court of appeal agreed with the lower court and noted that there is no distinction between statutory private or consequential wreck removal costs. Then the matter went up to the court of final appeal. And this highest court in Hong Kong also agreed and held that the task of the court in construing the convention is to do so without any English preconceptions. And this included the principles arising from the Arabic Number 2. As to the Braden Merchant arguments, the Hong Kong CFA acknowledged that the case had been decided correctly. However, where that case concerned salvage services, the quarter final of appeal found that the principles do not extend to wreck removal indemnity claims. So in conclusion on this point, the Hong Kong CFA’s judgment makes Hong Kong an attractive jurisdiction for parties seeking to recover wreck removal costs that exceed limitation. And it is not therefore inconceivable that the lower courts of some other convention contracting states might be inclined to follow the Hong Kong CFA judgment and other courts may find it persuasive in general application. Nonetheless, in light of both English precedent and the general presumption to the opposite, it cannot be ruled out that the same question might be determined differently in other courts and particularly in England, The English Court might, for example, find that the Aegean Sea obliges it to interpret the convention so that all cases which can reasonably be brought within its language are so brought. The English Court might also find less reason to distinguish between salvage expenses and wreck removal expenses and so not share the Hong Kong CFA's view on the Braden Merchant. If the question arises before the English Court, the CFA judgment in Hong Kong would nevertheless be a hurdle to overcome as and when the English Court has to consider the question, please look out for further updates on Trading Straits and I'll now hand over to Richard for further views on limitation of liability. Thank you.  Richard: Uh Well, thanks James, the one of the things that we've been discussing in the past was the importance of the cases that you've just been referring to. And, uh, what I'm gonna talk about and it's all about what's in and what's out of the fund and that affects all interests, Really - owners, charterers, cargo, hull, P&I, in fact, the entire industry and the fund has become increasingly important. uh, At a time when, uh, it was thought that after the protocol was introduced, that limitation issues would fall away. That turns out not to have been the case. And the reason for that is that if it's out, then uh that's an additional owner's liability. Uh And if it's in, then obviously, that reduces the owner's liability, but equally reduces the amount that other claimants can take from the fund. And that's why it covers all issues really. Now, the point that I'm gonna look at now is the point that arose from the MSC Flaminia case, which the listeners may recall was a fire on a container ship some years ago. Now these cases take a long time to get through the courts. Uh principally because one has to wait for G/A to be dealt with and the complex issues relating to the size of claims of quantum when it does come through. Uh There was some interesting points interesting for lawyers and uh ultimately, the outcomes are interesting for everybody. The particular case that struck me was the MSC Flaminia and I'll give the citation that was [2022] EWHC 835 heard by Justice Baker. You'll be familiar with the facts, I'm sure. But uh the issues that arose in relation to certain things was in this application by the owners to have a claim brought by one of the charters that their action uh to enforce an arbitration award should be barred under article 13 of the London Limitation Convention. Now, London Limitation Convention provides at article 13 that where a limitation fund has been constituted in accordance with article 11, that's just the basic fund that uh provision that sets out how to it. Any person having made a claim against the fund shall be barred from exercising any rights in respect of such a claim against any other assets of the person by or on behalf of whom the fund has been constituted. So in other words, you can't go after the owner. If it's the owner's fund, you can't go after the owner in any other jurisdiction. You can only go against the fund as I say the charters or had an arbitration award. And it was contemplated that they would enforce uh against MSC uh the subject of the particular case in some other jurisdiction. And uh MSC then applied to an anti suit injunction restraining that party from doing

Partners Nick Austin, Thor Maalouf and Alex Brandt bring us up to date with the latest shipping and trade issues; including sanctions, the geopolitical landscape's influence on the supply chain, and the shifting dynamics of decarbonization regulations. Following the industry panel discussion at the London International Shipping Week event hosted by Reed Smith in September, the three speakers offer insights into the evolving challenges and opportunities shaping the future of the shipping and trade sector.

The demand for large-scale offshore energy – including oil, wind and solar – is presenting opportunities for companies that supply vessels. Transportation lawyers Susan Riitala and Catriona Henderson discuss the unique dynamics of financing vessels for offshore energy operations, the special risks it presents, the importance of having trusted partners, and other solutions to major problems. Tune in for a concise, insightful look at the booming world of offshore energy.

Partners Nick Austin and Brett Hillis and counsel Julie Vaughan explain key features of the European Union Emissions Trading System (EU ETS) and how it is now to be applied to ships entering and leaving EU ports – and those sailing between them. In this podcast, they discuss the implications for charterers, possibilities for trading emissions allowances and the relevance of financial regulation.

Customs has taken on heightened significance with respect to the U.S. Foreign Corrupt Practices Act (FCPA) compliance and risk management for many global businesses. We are tapping the knowledge of two former federal prosecutors from the U.S. Justice Department to help provide useful insights. Regulatory enforcement lawyers Daniel Ahn and Mark Bini discuss their experience in matters involving allegations of bribery and corruption brought by federal and state governments and explain the key issues that companies should look out for at the border. They analyze the FCPA, discuss customs issues, and show how attention to compliance and due diligence help prevent allegations of corruption.

Transportation lawyers Philip Rymer, Thor Maalouf and Romain Farnoux discuss issues arising from the incorporation of new technologies – specifically, ones designed to reduce carbon emissions – in superyachts, including the risks of new designs and their potential impact on construction terms and financing arrangements.

A new EU regulation will come into force on June 29, 2023, imposing onerous due diligence requirements for businesses buying and selling products made from seven common commodities: cocoa, coffee, cattle, soy, rubber, palm oil, and timber, or the raw commodities themselves. For timber, the regulation replaces an earlier law, but for the remaining commodities, it is cutting new ground. In this podcast, Julie Vaughan and Nicolas Walker from our environmental team lead you through how it all works.

Transportation lawyers Mike Adamson and Laura Hyne discuss the use of alternative fuels in the maritime industry, including the potential challenges and benefits of using greener fuels, as well as new regulatory and legislative developments.

Partners Alex Brandt (London) and James Willn (Dubai) discuss how international sanctions against Russia are impacting the shipping and energy sectors. They cover the sanctions’ effects on industry, the situation’s impact on the Middle East, and the challenges of dealing with inconsistencies in the EU, UK, and U.S. approaches.  This episode was recorded on February 14 and does not take into consideration any guidance/updates published after that date.

Partners Kevin Keenan and Antonia Panayides discuss the market for bunkering facilities and vessels. LNG is poised to expand – thanks to technological advances and market demand for cleaner fuel. But that expansion must take into account international commitments to reduce CO2 emissions. Kevin and Antonia explain the latest developments in the space and the key points that shipowners, charterers, and their counsel should consider in order to avoid pitfalls.