Interview for "Yurudychna Gazeta"

• Shipping

1. Under the Law Gazette rating results, Interlegal ranked a place of honour in the maritime and transport law practice 2016. How did you manage to achieve such results?

- From the very beginning our practice was aimed at development of activity in maritime and transport law. For over 20 years we have been practicing in transport, in particular, maritime law. From one hand, it was quite natural and obvious choice, since our principal office is located in Odessa, the sea capital of Ukraine. From the other hand, we are very lucky to get engaged in maritime law – especially interesting and complex law industry full of law materials. It serves as a good basis for wide development. In fact we did not think of ratings, we only tried to work fairly and effectively, to perform our work upon maritime case legal support – both disputes and undisputed cases, for example, drafting shipping contracts. (N.)

2. Which issues related to maritime law do clients often stated in their applications to Interlegal?

- It is quite difficult to detach certain special category of questions. In the maritime law practice, maybe, we have faced lately the issued concerning shipping trade, freight non-payment, demurrage and ship arrest due to shipowners’ debts. One more resonant issues concern cargo arrest at sea ports and delay in vessel loading at ports at the request of law enforcement bodies. (M.)

3. What are the main trends of the Ukrainian maritime law service market development?

- We work at the service market being strongly dependant on shipping markets. The main shipping activities are shipping trade and sea carriage of cargos. These markets are very sensitive to international conjuncture. They shrink quite easily in case of decrease in trade of the goods carried by sea, but they renovate quickly due to renovation in global goods conjuncture. Of course, such correlation is ambiguous. For instance, in case of crisis phenomena in the international trade the number of breaches of supply contracts increases. It causes increase in the number of disputes which facilitates recovery at the legal service market. Such market is very competitive. (N.)

4. Which law nuances and collisions are the most widespread in sea carriage practice?

- We often deal with law conflicts in the international maritime, in particular, grain trade. It is quite a delicious commodity which may be damaged and spoilt. Quality of goods in the international trade – that is the issue we often deal with. We often face problem related to incorrect settlements for goods supply or full rejection of payment. As stated above, ship arrest and release and the relevant collisions belong to majority of cases we support. Recently, at one of the Mediterranean ports we managed to prevent ship arrest. Maritime agent stated that the shipowner did not pay for its services in full, so we had to join negotiations. In the process of negotiations we found out that the agent increase the invoice amount threefold. Our lawyers who led this case drafted and applied a successful strategy of defending the shipowner’s interests and provided success in quite difficult negotiations. Issues concerning demurrage calculation also arise. Maritime law practice is tightly correlated with ship and yacht registration practice. In such activity we face numerous issues concerning taxation and corporate law. (N.)

5. Today international commercial institutional arbitration is a leading institute of settling the disputes arising in the international, in particular, shipping trade. What are the general trends of today maritime commercial arbitration?

- Court and arbitration practice is one of our main activities. We monitor attentively the trends in arbitration proceedings. In fact, today international commercial arbitration is a very important mechanism of dispute settlement in the international shipping trade, including in grain and oilseeds trade. We participate in operation of the leading arbitration institutes, both Ukrainian and foreign, so we have an opportunity to monitor everything which occurs in this industry. In particular, there is a trend in increasing specialization of arbitration institutions and expanding the international special maritime arbitration. Among the dynamically developing European arbitration institutions, there is the German Maritime Arbitrators Association (GMAA) based in Hamburg. Maritime arbitration has been developed intensively in the East, as shown brightly by the Singapore Chamber of Maritime Arbitration (SCMA). Competition between arbitration institutions for consumers of dispute settlement services increases. To accept disputes for consideration, arbitration institutes simplify their procedures as much as possible. The English maritime arbitration still remains an undisputed leader. The London Maritime Arbitrators Association (LMAA) settles more maritime disputes than all the other global maritime arbitrations. We proceed LMAA cases at out Odessa office. (M.)

6. What is the impact of political and military crisis in the Eastern Ukraine and the Crimea on maritime law service market?

- Political conflicts have an extreme impact on legal service market, including the Ukrainian one. (N.)

7. How did military conflicts impact on port infrastructure, chartering, changes in routes and rates?

- Military crisis has the largest impact, since war is a policy-making by other means. Military crisis in the Eastern Ukraine is no exception. Of course such impact is quite negative, since life goes on when it does not cease. For instance, closing the Crimean ports facilitated increase in cargo turnover at the Ukrainian continental ports. Military risks are taken into consideration by all the sea carriage market players, especially by insurers who increase insurance premium due to expansion of risk nomenclature and increase of risk level in merchant shipping. Today tension of military conflict has been reduced, as compared to the previous year, since risks related to absent or weak reforms in the Ukrainian maritime economy dominate. Proper law security is a necessary prerequisite to improve competitiveness of our state. (M.)

8. Despite certain difficulties for the last years, Ukraine still has a powerful ship repair productive basis. Tell me please on the principal legal aspects of ship repair activity.

- Yes, it is one more theme which may show the importance of law security concerning economic activity. Shipbuilding and ship repair in Ukraine have been lately accelerated. The significant factor was the Law of Ukraine “On measures aimed at state support of shipbuilding industry in Ukraine” dd. 18.11.1999. Of course its stimulating effect did not act immediately, but somewhere since 2005 working capacity of the Ukrainian shipbuilding and ship repair enterprises started increasing. Privatization played an essential role. (М.)

9. To which aspects of ship repair contract would you recommend to pay attention?

- Of course ship repair activity is based on tender contracts. BIMCO drafted two proformas: REPAIRCON – BIMCO Standard Ship Repair Contract and MINREPCON – BIMCO Standard Minor Repair Work Contract. We drafted our own contract proforma on the basis thereof. All the contract aspects are essential. First, we should make sure that representatives of shipowner (the customer) and ship repair enterprise (the contractor) are duly authorized to conclude the contract. The shipowner, under its sole discretion, shall provide its own right to control over the work process and to perform certain works by itself. In general the parties shall set forth in the contract their arrangements achieved in the process of negotiations, as clearly as possible. Special attention shall be drawn to terms of vessel acceptance in repair and return from repair. Financial provisions are especially important. It is often impossible to determine the contract price beforehand, so it is necessary to fix the price forming and arranging procedure, jointly with settlement procedure. Quality assessment criteria for performed works, terms of eliminating defects, guarantees and liabilities, terms of the contract cancellation – all of them shall have a large importance. (М.)

10. Almost all the jurisdictions quite often face the vessel forced sale, irrespective of shipowner’s will, usually preceded by ship arrest. How much is the Ukrainian legislation adapted to the vessel forced sale?

- It is another vital issue. Vessel forced sale is quite a large problem, in particular, in respect of vessel sale recognition at other jurisdictions, different from the jurisdiction of vessel sale at the public tender. The International Maritime Committee drafted the International Convention concerning relationship in vessel forced sale, irrespective of shipowner’s will. This Convention is aimed at codification of vessel forced sale regulations. Since Ukraine is a member to the International Convention on Maritime Liens and Mortgages dd. 1993 and the International Convention Relating to the Arrest of Sea-Going Ships dd. 1952, it facilitates ship arrest and forced sale of the vessel encumbered by such liens and mortgages. Otherwise the vessel forced sale may be quite problematic. But in fact the Ukrainian law provisions under which ship arrest is treated as maritime claim security may facilitate forced sale of the vessel arrested under the court decision for the purpose of claim security. By the way, Georgia has recently approved the law which makes the Georgian jurisdiction the most convenient in the Black Sea Region with regards to the vessel forced sale. (N.)

11. Which difficulties do the Ukrainian courts face in respect of ship arrest dispute settlement?

- Today we see stabilization at the Ukrainian court practice on sea-going ship arrest. But there are some cases of rejecting consideration of the application on ship arrest, since the agreement between the parties to the dispute contains an arbitration clause, although the parties do not object the court consideration of the relevant application. Sometimes the applicant is required provide a counterclaim without sufficient grounds. Such cases can be treated as rejection of impedance of justice. It should be noted that today the Ukrainian court practice is more compliant with the Ukrainian legislation and international duties. (М.)

12. What are the peculiarities of concluding the charter-party?

- Vessel charter-party and its conclusion process is an inexhaustible theme. Today the Recap charter party may be concluded within one hour or less, if the further counteragent know and trust each other. Otherwise, such process may take several days or even weeks. It may take much time for one party to study the received offer, to perform economic calculations and to make a decision. The offer requires for detailed study, since it is an exhaustive draft of the further charter-party. It contains provisions upon the vessel, cargo, voyage and all the other necessary and sufficient terms for concluding the charter-party. When the party agrees with the offer terms it shall answer yes. If an offer is not rejected but the reply contains some clauses or other terms and conditions, such reply shall be deemed as an offer. Such cycle may be repeated for many times, but in practice the above offer exchange may be enough to settle the issue on reasonability to conclude the vessel charter-party. (N.)

13. How much is the Merchant Shipping Code of Ukraine perfect?

- At the moment of its approval, the Merchant Shipping Code was quite progressive and displayed the merchant shipping aspects, though at that time it was not treated as the perfect one. Further it faced amendments which displayed the relevant changes in merchant shipping industries. In general the Merchant Shipping Code sets forth provisions compliant with actual relationship in the merchant shipping, but some innovations in the Ukrainian maritime law are not properly displayed in the Merchant Shipping Code, in particular, law provisions stipulated by the above International Convention on Maritime Liens and Mortgages. In order to clarify which regulations are valid, law professionalism is required. Of course our tasks would simplify if the appropriate amendments and additions would be made in the Merchant Shipping Code. (N.)

14. Which more regulatory acts in maritime law require for amendments and additions?

- It is impossible to list all the regulatory acts which require for amendments. Maritime law is quite complex and has a lot of regulatory materials. For instance, recently we made a conclusion that the law on concessions at the Ukrainian sea ports should be modified. There was a poor attempt to make such amendments by means of the Law of Ukraine “On the Ukrainian sea ports” dd. 17.05.2012. But the proposed amendments may have a larger scale and may concern the concessions in general, so they may be made by means of the Law of Ukraine “On concessions” dd. 16.07.1999. Therefore they will concern concessions at sea ports too. In the first case, they are, no doubt, the maritime law innovations. And what about the second case? Maybe no. Because the effect for relationship upon concession at sea ports would remain the same. (N.)

15. Recently amendments to the Maritime Code of Georgia have been made, as discussed actively by the law society. What is your position concerning this document?

- Yes, our Georgian colleagues from Batumi regularly notify us on all the Georgian law innovations. We spread such information with great pleasure, since we have not only the associated office in Georgia. We united with our Georgian friends to establish joint business. So we monitor attentively all the amendments in the Georgian legislation. It should be noted that it is very dynamic. It is pleasant t see that the native law society got interested in such innovations. Interlegal acts solely for the practical purpose. Of course we draw much attention to our practice generalization and to some theoretic researches tightly correlated with practice. When there is no need, we do not make detailed analysis of law innovations; a superficial look is enough to make sure that numerous amendments to the Maritime Code of Georgia dd. the 11^th of December 2015 will facilitate regulation of shipping activity. (M.)

16. In 2015 Interlegal launched a new practice – yachting. What is it essence?

- This practice commenced in 2004. It has been developed rapidly and now we make sure that we provide a full set of services for yachtsmen. We support yacht construction and repair agreements, yacht registration, in particular, under convenient flag, sale and purchase, insurance, small craft operation and provide consulting upon taxation, labour law, yacht club foundation and activity, dispute settlement. We usually establish a certain company for effective yacht, small craft and other vessel operation – mainly in offshore or low tax jurisdiction. (M.)

17. Which questions do clients ask to Interlegal yachting experts?

- Our experts always have a lot to do. They lead many cases regarding vessel sale and purchase, construction and repair, registration, insurance etc. Every day they obtain various requests from their regular and potential clients, since yachtsmen have lots of various questions: what is the difference between sale and purchase of a new yacht and a second-hand yacht; what is the most convenient flag for yacht registration; how to pay VAT in Europe; how to open the customs regime of temporary import and many others. (M.)

18. How would you comment the York-Antwerp Rules new version?

- Indeed, the York-Antwerp Rules new version (YAR 2016) was approved on the 6^th of May 2016. It governs the general average relationship. It is a very complex private maritime law institute. For nearly each decade, the Rules have been amended. We will see how essential they will be. There are already positive comments and we keep monitoring them. We may already say that the dispatch drafting procedure will get simplified and accelerated. Detailed analysis without court or arbitration practice regarding YAR 2016 innovation will not be large enough. (N.)

19. In your opinion, is it possible to unify the maritime law regulations for establishment of the global shipping single law regime?

- It is a very interesting question. Of course it would be better to implement the single rules worldwide. Why physics and chemistry are homogeneous both in America, Europe and Asia, while law regulations are different? International maritime cooperation under the supervision of IMO (International Maritime Organization) draws much attention to unification of maritime law provisions, while objective terms of performing maritime activity and social standards are specific for various continents and countries. An essential subjective element is also important for law regulation. So the answer to your question is quite ambiguous. Maritime law unification is a stable today trend, but it is too far for establishment of the global shipping single law regime. (N.)

20. What are the methods of financing maritime industry and port sector in the Ukrainian maritime economy?

- One more vital theme. Lack of maritime industry financing in Ukraine is not a secret. It is especially vital for the port sector. (N.)

21. What is your opinion regarding privatization of the Ukrainian sea port infrastructure?

- We do not conceal our optimistic opinion that privatization is a key way to improvement of the Ukrainian port economy investment attractiveness. Meantime we understand that it is quite a risky way bearing a lot of hazards. Like maritime law unification, privatization is good but the today situation in Ukraine makes its own corrections. We published, for several times and in details, our opinions concerning privatization in the Ukrainian port economy. Maybe privatization is a future of port reform. (N.)

22. What are the ways to improve economic activity at the sea ports just today?

- Yes, we need to develop just today. As we mentioned, concession requires for large improvement of law security. Now lease, as the worked-out law mechanism, may be widely used for engaging investments in the Ukrainian sea ports. We need to start from the least! (M.)

23. In your opinion, how effectively can private investments be engaged in sea ports? How to avoid choosing the wrong investor?

- There are many law mechanisms to engage private investments including foreign ones. In Ukraine investment climate is getting better. We recommend to use all the methods and mechanisms, depending on certain goals and circumstances of their achievement. The key issue concerns selection of investors. No law and economic mechanisms will operate in the absence of real investor being interested in port activity. In our opinion, based on our practical experience, investor shall have a business for development of which it could get interested in port infrastructure as its business expansion and diversification. (N.)

24. From your practice, how often do you succeed in pretrial settlement of maritime disputes?

- It is better to settle both maritime and other international disputes in private law without applying to the court or arbitration. It is one of the basic principles in our policy. Everybody understands that such way of settlement is cheaper and quicker. I believe that the most half of disputes we support are settled amicably. (M.)