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Cruise Bulletin, November 2014

In this issue: Controlling Ebola; Cyber attacks and the intangible threat to the cruise industry; Cruising on greener seas: the industry’s efforts to reduce emissions and increase efficiency; Recent developments under French law on cruises and carriage of passengers; News; Notice

Controlling Ebola

This article looks at some of the issues which arise from efforts to control the spread of Ebola (Viral Haemorrhagic Fever), including the announcement by the Australian government on 28 October 2014 that it was suspending entry visas for people from countries affected by Ebola, including Liberia, Sierra Leone and Guinea.

This is a serious epidemic. According to the US Centre for Disease Control and Prevention, as of 24 October 2014 there were over 10,100 cases and almost 5,000 deaths. Owners and operators of cruise ships need to have their own procedures in the event of a suspected infected passenger on board.

The recent case of Mr Thomas Duncan (the only fatality in the US from the disease to date) demonstrates the risks if proper measures are not taken. According to press reports, Mr Duncan died at a hospital in Texas and two nurses at the hospital contracted Ebola from him. Those nurses are being treated for the disease, but one was allowed to fly to Ohio to make arrangements for her wedding. As a result, over 100 further people are being monitored for signs of Ebola, and the chief executive of the airline on which the nurse flew has himself taken a flight, sitting in the seat she used, to reassure the public that the airline is safe.

The case then directly affected the cruise industry, as it emerged that a lab technician who had carried a box containing Mr Duncan’s blood samples was on board a cruise ship from Galveston to the Caribbean. The lab technician quarantined herself in her cabin and informed the captain, but the ship was apparently refused entry to ports in Belize and Mexico. Fortunately, blood tests on the lab technician showed that she had not contracted Ebola, but the case shows how important it is that owners and operators have a clear emergency response procedure in place, so that they are prepared in advance for the risk of a suspected infected passenger on board.

The symptoms of Ebola include fever, weakness, muscle pain, headache and sore throat, followed by vomiting, diarrhoea, rash and in some cases bleeding, with infected persons being infectious once they begin to show symptoms. The disease is communicated via direct contact with blood, secretions, organs or other body fluids of infected persons or animals.

Practical measures which can be taken include updating the pre-boarding questionnaire (to find out about possible exposure to Ebola) and careful monitoring of passengers before boarding, so that access to the ship can be refused to anyone who may be infected. Likewise, passengers and crew on board should be monitored and prominent notices should be displayed so that people are aware of the symptoms and can monitor themselves.

According to World Health Organisation guidelines, if an infected person is on board, the following precautions should be applied:

  • They should be placed in an isolation room or a closed cabin.
  • Anyone who will come into contact with them should be made aware of the risks and mechanisms of transmission, and a log should be kept of those people.
  • Anyone who comes into contact with the infected person should wear personal protective equipment (PPE) - and have had training on effecting donning and doffing of PPE - and perform hand hygiene.
  • Waste should be handled as clinical infectious waste.

The infected person should leave the vessel at the next port of call, disembarking in such a way as to avoid contact with healthy people on board.

The Master should of course be informed and, while there is currently no travel ban, the vessel should contact the local coastguard. In some areas, for example in the UK, ships are already being monitored so that vessels which have called at countries where the Ebola virus is present are identified in advance.

Different ports and countries are likely to take different action. For example, according to press reports, the Maltese authorities denied entry to a ship in September 2014 because a Filipino crew member had symptoms similar to Ebola, and Maltese health officials considered that the country did not have adequate facilities to treat Ebola patients.

The French government has published recommendations for ships, including passenger ships, which include general recommendations as well as specific recommendations for when there is a suspected case on board.

Operators should also carry out effective due diligence before embarking, in order to assess the risks of Ebola at ports where the vessel is due to call. If these checks are not carried out and a cruise becomes adversely affected by an Ebola infected passenger or other Ebola incident such that a significant proportion of the services contracted for is not provided, passengers on that cruise might bring a claim under the UK Package Travel, Package Holidays and Package Tours Regulations 1992 (the Regulations) or equivalent. In order to benefit from the defence under the Regulations, the operator will need to be able to demonstrate that it took all reasonable steps and exercised all due diligence to avoid any such disruption.

This is a developing situation, and we will publish further updates in due course.

For more information, please contact Daniel Martin, Partner, on +44 (0) 20 7264 8189 or daniel.martin@hfw.com or your usual contact at HFW.

Cyber attacks and the intangible threat to the cruise industry

Physical risks

The threat of piracy in the high risk area of the Indian Ocean remains real. Despite no major vessel being hijacked by Somali pirates since May 2012, it is still prudent to take precautions including, without limitation, complying with the latest Best Management Practice (BMP) and, if the risk assessment deems it necessary, deploying armed guards from private maritime security companies. However, whilst there is no room for complacency in this region, at this time there is little need for further discussion of the precautions to be taken as they are generally understood by all concerned.

The security situation in the Gulf of Guinea continues to be grave. Here the perpetrators’ tactics and methods differ greatly from those in east Africa and the approach of the littoral states means that vessels operating in this region must adopt alternative security measures, including only using armed guards from local constabulary or military authorities (as applicable) rather than from private maritime security companies. The continued seriousness of the situation has prompted a recent revision to the Guidelines for Owners, Operators and Masters for Protection against Piracy in the Gulf of Guinea Region. However, whilst piracy in the Gulf of Guinea and the precautions to be taken justify their own article, the region is little visited by cruise ships and this must therefore be addressed in another publication.

Increasing numbers of attacks have been reported in South East Asia. Whilst sometimes violent, these are – with a few exceptions – considered maritime crime rather than acts of piracy and appear more opportunist than organised. Although tankers are commonly targeted, those few cruise ships idling in the region should nevertheless be on their guard.

Cyber risk

Like the rest of shipping, the cruise industry faces the intangible but no less serious threat of cyber attack. A number of industries, including the financial services, energy and extractives industries have been aware of the risk for some time and state security services and the private security industry are taking it seriously. The UK’s National Strategy for Maritime Security is aligned with the National Cyber Security Strategy and foresees an attack on UK maritime infrastructure or shipping, including a cyber attack, as a security risk. The cyber risk to shipping might manifest itself in any number of ways.

Cyber vandalism

For example, through an act of cyber vandalism caused by the deliberate or accidental infection of a vessel’s essential systems, the safe operation of a vessel might be jeopardised. Alternatively, an attack on a satellite positioning system, such as caused the disruption to the Russian Global Navigation Satellite System earlier this year might hamper a vessel’s safe navigation.

Either of the above might result in an unseaworthiness claim by charterers or claims by third parties for property damage or personal injury, which from a legal point of view would be treated in much the same way as any other such claim. A shipowner’s defence to an unseaworthiness claim by charterers lies in having exercised due diligence to make its ship seaworthy.

An operator’s duty of care to its passengers is likely to be governed by the terms of the ticket, whilst a third party claim will be subject to the usual tortious principles and likely to require the shipowner/operator to have taken at least reasonable care to guard against an attack and deal with the consequences.

Cyber theft

Notwithstanding the potential seriousness of the above, the most substantial risk currently posed by cyber attack is to business and reputation. Electronically-driven industrial espionage, whether economically or politically motivated may result in a loss of business secrets, competitive advantage and the personal data of employees and clients. Whilst most shipowners hold very little personal data, those in the cruise industry, due to the nature of their business and size of their crews, generally hold large amounts (for example, passenger names, ages, contact details, preferences and health requirements). Serious reputational, regulatory and litigation exposures can flow from such an event. We will focus on the subject of data protection in a later Bulletin, but the sanctions for losing personal data can be substantial.

Strategy to deal with potential attack

Currently there is no applicable case law. Nor have any guidelines been published specifically for shipping to guide shipowners in their due diligence. However, non-industry specific information is available, including from the UK’s Department for Business, Innovation and Skills.

Some have suggested that shipping should consider adopting mandatory standards to deal with the threat. Given the level of regulation affecting the industry, this is unlikely to be welcomed and might be an overreaction. However, it is clear that cyber security should be taken seriously and shipping should consider developing pragmatic and effective plans for dealing with it in much the same way as it did when developing BMP.

In the meantime, all shipowners should develop their own comprehensive cyber security plans and incident response policies and take steps to protect their systems and information, including ensuring that all staff, whether on shore or at sea and at all levels of the business are aware of the risks and the steps to be taken to mitigate them. Any plan should be tested and those required to take action thereunder be aware of their role. Those businesses with such a plan should be in a much stronger position to both defend themselves from and deal with the aftermath of any attack and so mitigate their liability.

If comprehensive cyber security plans are in place, then a business will also be in a stronger position to defend itself against any potential clams that might arise from a cyber attack.

Shipowners should consider whether they have suitable insurance cover in place and should not assume that their commercial general liability policies will automatically answer. The insurance market is increasingly understanding of the risk and some now offer cyber insurance tailored to the shipping industry.

If attacked, a business should implement its plan as soon as it becomes aware of the breach and ensure that senior management are informed immediately. Furthermore, it is prudent to engage lawyers early to help manage the press, assess contractual liabilities and establish legal privilege over the results of any investigation.

For more information, please contact William Maclachlan, Associate, on +44 (0)20 7264 8214, or william.maclachlan@hfw.com or Elinor Dautlich, Partner, on +44 (0)20 7264 8493, or elinor.dautlich@hfw.com, or your usual contact at HFW.

Cruising on greener seas: the industry’s efforts to reduce emissions and increase efficiency

Global regulations have an ever more significant effect on the cruise industry. With increased pressure on lines to run green and fuel efficient vessels at competitive prices, there has been a move across the market towards efficiency initiatives and the use of eco-technology. This article considers a number of ways the cruise industry has adapted to the changing regulatory landscape.

The regulatory background

As many will know, the shipping industry has seen the rise of regulations enforcing increasingly tight limits on emissions of nitrogen oxides (NOx), particulate matter and sulphur oxides (SOx) from fuel oil, combustion equipment and devices on board vessels (discussed in more detail in the last issue of this Bulletin: see “The bleak outlook of reduced sulphur emissions”, http://www.hfw.com/Cruise-Bulletin-June-2014). These emissions have been cited as having a significant negative impact on health and the environment.

To this end, the IMO’s Annex VI to the MARPOL 73/78 Convention (MARPOL Annex VI) has introduced maximum sulphur content limits for bunkers, as well as vessel engine NOx emissions limits. Even tighter emissions regulations are applicable within designated Emission Control Areas (ECAs) in the North Sea, Baltic Sea, North American coastline and US Caribbean, all of which include significant cruise market areas.

In an effort to reduce greenhouse gas emissions, MARPOL Annex VI has also brought vessel efficiency to the forefront of operators’ minds. Since 1 January 2013, all vessels over 400 GT have been obligated to take Ship Energy Efficiency Management Plan (SEEMP) audits, which detail ship-specific energy efficiency measures on board. Newbuilds after 1 January 2013 have also been required to conform to Energy Efficiency Design Index (EEDI) minimum efficiency standards.

Within this background, cruise operators have taken noticeable steps towards meeting, and exceeding, their obligations under global regulations. Several have taken the decision that enhancing their green credentials has both reputational and economic advantages.

Emission reduction technology and environmental awareness

Cruise lines are particularly affected by environmental issues, as the huge volumes of passengers on board combined with high speed cruising can lead to higher waste and emission production than other types of vessel.

Royal Caribbean’s efficiency initiative includes the use of common rail injection engines on two of their newer cruise ships, ALLURE OF THE SEAS and OASIS OF THE SEAS. This enables the vessels to improve their level of fuel efficiency as well as their diesel engine load control. In turn, this modification has also improved these vessels’ NOx emissions.

MSC Cruises have specifically focused on reducing their environmental impact. Each vessel in their fleet has a designated environmental officer, assisted by a shore-based environmental coordinator who is responsible for overseeing all environmental operations throughout the entire fleet1. As with other lines such as Norwegian and Paul Gaugin, this has resulted in more effective waste management on board each vessel, leading to an increase in recycling rates and a decrease in unnecessary waste incineration.

Scrubber technology uptake has increased amongst both cruise and non-cruise vessels, in line with tightening emission limits. Scrubbers, or exhaust gas cleaning systems, are considered one solution to reducing ships’ emissions of SOx, in place of using more expensive low-sulphur bunkers. Carnival have announced their intention to retrofit scrubbers on 32 vessels operating within the North American ECA.

Energy savings

In addition, Carnival are among several operators adopting “cold-ironing” practices while in Long Beach, California on both CARNIVAL INSPIRATION and CARNIVAL MIRACLE. Rather than running engines whilst idle in port, each vessel is connected to a shore-side electrical power source, allowing the vessel to turn off internal power sources and consequently avoid the use of bunkers. Princess Cruises have also taken up the initiative of “cold-ironing” when docking in Seattle, Juneau, Los Angeles and Vancouver, thereby utilising clean, local hydroelectricity. One further positive environmental effect of “cold-ironing” has been a reduction in noise and air pollution around the port.

Another example of lines’ efforts at increasing efficiency is the employment of new types of engines. Disney have introduced a newly-designed inward turning motor and an innovative twisted flap rudder on DISNEY DREAM. The effect of this has been a reduction of demand on the propulsion system, as well as an increase in fuel efficiency. By doing so, Disney have been able to reduce their outlay for bunkers, as well enhancing their brand image as “eco friendly”.

Silversea instead have employed a diesel-electric propulsion design which allows much of the engine power to shut down when power is in less demand, thereby reducing fuel usage and increasing operational efficiency. Fuel conservation has furthermore been increased on several vessels through energy efficient LED lighting, an increasing technology throughout the industry.

The future

The trend towards employing energy- and emissions-efficient cruise vessels is expected to continue. Lines which have invested in recent eco-technologies and practices have benefited from fuel savings, as well as enjoyed a boost to their reputation for corporate responsibility – a key driver for consumer demand. Within the context of rising regulation and the need consistently to improve fuel efficiency – whilst catering for increasingly sophisticated consumer appetites – it appears sensible to expect the uptake of eco-solutions to maintain its upward trajectory.

Imminent application of sulphur emissions regulations in the UK

As we reported in our previous Bulletin, 2015 will see the regulatory regime concerning sulphur emissions tighten significantly in Emissions Control Areas (ECAs).2 Pursuant to MARPOL Annex VI, from 1 January 2015, vessels will be obliged to burn bunkers with maximum 0.1% sulphur content by mass within ECAs, down from the present limit of 1.0% sulphur content by mass. Operators will have the alternative option to fit vessels with emissions abatement technologies (such as scrubbers) in order to comply.

At the time of going to press, legislation detailing the enhanced restrictions has yet to be introduced in the UK. However, we have seen the draft statutory instrument currently tabled for consideration by Parliament.3 In summary, the draft instrument provides for amendments to current emissions and fuel regulations, which include the following new provisions:

  • Duty of Master to inform the vessel’s flag state and the competent authority of the relevant port where it cannot purchase compliant bunkers.
  • Fines for the use of non-approved emissions abatement technology.
  • The obligation on the Secretary of State to review the impact and efficacy of the regulations at least once every five years.
  • Duty of Master to record fuel changeover operations in vessel log books.

Little indication has been given in the text of the new regulations as to the severity of penalties on non-compliant vessels, although we expect there to be a range of fines, as well as the threat of vessel detention. We will continue to monitor the impact of the sulphur emissions regime and provide timely updates.

For more information, please contact Marcus Bowman, Partner, on +44 (0) 20 7264 8551 or marcus.bowman@hfw.com or Max Thompson, Associate, on +44 (0) 20 7264 8230 or max.thompson@hfw.com or your usual contact at HFW.

Footnotes

  1. http://www.msccruises.co.uk/uk_en/About-MSC-Cruises/Social-Responsibility/MSC-Cruises-Environment.aspx
  2. ECAs are presently designated in the Baltic Sea, North Sea, North American coastline and US Caribbean.
  3. Draft Merchant Shipping (Prevention of Air Pollution from Ships) and Motor Fuel (Composition and Content) (Amendment) Regulations 2014

Recent developments under French law on cruises and carriage of passengers

Carriage of passengers and definition of conduct barring limitation under the LLMC (Cour de cassation, 18 June 2014, No 13-11.898)

Whilst on board a vessel in a maritime natural reserve in Corsica (France), a passenger was seriously injured in a fall of more than two metres on the foredeck in rough seas. The passenger and his employer sued the shipowner and its P&I Club for compensation for the damage suffered as a result of the accident.

The accident occurred before the entry into force in France of EC Regulation 392/2009 of 23 April 2009, which implements the Athens Convention amended by the 2002 Protocol, and the claim was brought under the French domestic provisions (the Code des transports).

The Code des transports provides that there are two types of liability: ‘fault’ liability and ‘strict’ liability. A carrier is responsible for the death or injury of a passenger where it is the result of unseaworthiness of the vessel or a fault of her operators. A carrier may also be strictly liable for personal injury or death in the case of a “shipping incident”, even if this was not the carrier’s fault. These “shipping incidents” include shipwreck, capsizing, collision, the stranding of a ship or explosion or fire onboard.

The Supreme Court (Cour de cassation) confirmed that the carrier had breached its safety obligation by not warning the passengers about the harsh conditions (rough sea) and was therefore responsible for the damages suffered by the passenger and his employer.

Despite its rather small value of around €95,000, the claim exceeded the limits of liability pursuant to article 7 of the 1976 Convention on Limitation of Liability for Maritime Claims (LLMC Convention), as enacted by French law at the time1.

The carrier argued that it was entitled to limit its liability because it had not committed any fault which would prevent it from doing so. The LLMC defined such a fault as a “personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result”.

The Cour de cassation held that the carrier’s failure to inform the passengers of the weather conditions or advise them to remain seated or prevent them from going on deck amounted to inexcusable conduct. The court held that this inexcusable conduct should deprive the carrier of the right to limit its liability. The Cour used an objective test to imply that the carrier knew that damage could occur in such circumstances, and that the carrier accepted this risk when failing to advise its passengers.

This decision illustrates the manner in which French courts interpret “conduct barring limitation” in the carriage of passengers.

However, the Cour de cassation has recently taken a different view on carriage of cargo, adopting a stricter application of the terms of the LLMC. The court required the claimant to prove that the owner had actual knowledge that damage would occur in such circumstances, and that he recklessly accepted the likelihood of this damage occurring.

EC Regulation 392/2009 of 23 April 2009 entered into force in December 2012 and applies to most French domestic carriage. There is as yet no case law on its application, and which test the French courts will apply to bar limitation of liability under the Regulation remains to be seen. The courts may follow the decisions where knowledge was implied ‘objectively’, or they might require a claimant to prove that the owner of the vessel had ‘actual’ knowledge.

It is also worth noting that the P&I Club disputed the admissibility of the victim’s direct action before the Court of Appeal. The latter, however, considered that the action was admissible since it was subject to French law, which allows direct action against the liability insurer for any type of claim. The new Regulation 392/2009 specifically authorises a passenger or a relative to bring a direct action against a P&I insurer.

Cour de cassation guidance to distinguish between cruise operator and seller of travel package under French travel package regulations (Cour de cassation, 16 Jan. 2013, No°11-28.881; Court of Appeal of Aix en Provence 11 September 2014)

French courts regularly deal with the issue as to whether French travel package regulations (Code du tourisme), which provide for strict liability in case of non-performance of the contract, should apply to cruise operators and whether cruises should be regarded as package travel holidays. So far, the courts have mostly decided that the combination of a cruise and pre- and post- carriage is a package subject to the package travel regulations.

The decisions in the Cour de cassation on 16 January 2013 and the Court of Appeal on 11 September 2014 specifically dealt with insurance coverage, and whether travel agent insurance could cover a cruise cancellation.

The operator organised travel for around 40 people which included air carriage, a cruise with meals and on-shore excursions, hotel bookings, visits and road transportation. The cruise was cancelled due to the detention of the vessel in Chile. The insurance company denied coverage on the grounds that the operator deliberately refused to obtain additional coverage for cruise operations although it was acting as a cruise operator.

The Cour de cassation held that the operator fulfilled the criteria provided by the French package travel regulations and that the pre-arranged combination of cruise, transport and other tourist services was a package subject to these regulations. Therefore, there was no need for this operator to obtain additional coverage for its liability as cruise operator and the passengers’ claim was therefore covered.

For more information, please contact Stéphanie Schweitzer, Partner, on +33 (0) 144 94 40 50 or stephanie.schweitzer@hfw.com or Jean-Baptiste Charles, Associate, on +33 (0) 144 94 40 50 or jean-baptiste.charles@hfw.com, or your usual contact at HFW.

Footnote

  1. Until 2010 French law interpreted and implemented the LLMC Convention limitation applicable to domestic carriage differently. At that time, the French law imposed a limit of 46,666 SDR (approximately €55,000) per injured passenger. This contrasted with the wording of Article 7 of the LLMC, which set the limit of liability with reference to the number of passengers which a ship is authorized to carry, rather than the number of injured passengers. In 2010 the Code des transports was enacted, and the limit of liability was raised, in line with Article 7 LLMC, to 175,000 SDR multiplied by the number of passengers the ship is authorized to carry (rather than the number of injured passengers).

News

HFW has edited and contributed a number of chapters to the first edition of the Shipping Law Review. Containing a summary of key shipping law provisions in more than 40 countries, the book will be of use for handling disputes in a range of jurisdictions. To find out more or to download a copy of the book, please visit: http://thelawreviews.co.uk/titles/1041/the-shipping-law-review/

HFW Partner Tony Rice and Associate Ian Hughes have contributed the UK chapter in the recently published first edition of Getting the Deal Through – Ship Finance 2014. The report contains international insights into all areas of finance and vessel ownership affecting the international shipping industry. To find out more, please visit: https://gettingthedealthrough.com/area/68/ship-finance-2014/

Notice

HFW has many years of experience serving the cruise industry and we are a member of the Cruise Lines International Association (CLIA). Our capability is extensive in areas of competition/regulatory, litigation, casualty and corporate, finance and transactional work. We have lawyers who can assist clients in Europe, the Middle East, Asia and Australia as well as Brazil. Details of those lawyers in our cruise group can be found on our website along with a full description of all our capabilities in this area.

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