Lexology GTDT Market Intelligence offers a singular perspective on evolving authorized and regulatory landscapes. This interview is taken from the Transport quantity discussing subjects together with sources of finance, compliance initiatives and overseas court docket selections inside key jurisdictions worldwide.

1 What’s the present state of the transport business in your nation?

Norway stays a number one nation throughout the transport business. The Norwegian transport business employed roughly 82,500 individuals and contributed to the worth creation of 144 billion krone in 2020.

The composition of the Norwegian-controlled fleet reveals that offshore service vessels represent the most important section by way of the variety of vessels, carefully adopted by the dry cargo section. Norwegian transport corporations are additionally world leaders and have strong market shares throughout the automotive freight, LNG and chemical segments. Norway has in 2021 the fourth most beneficial fleet on the earth, solely surpassed by China, Japan and Greece.

Norway affords a extremely steady and beneficial regulatory framework. The Norwegian Worldwide Ship Registry and the Norwegian tonnage tax regime are among the many decisive components that make Norway a favoured transport nation.

The Norwegian-controlled fleet has seen continued development lately, each in ships and tonnage, with a slight decline in 2020. As at 1 January 2020, the fleet counted 1,783 ships with a complete tonnage of 51.1 million deadweight tonnes. From 2019 to 2020, the fleet grew by nearly 9 per cent measured in gross tonnage. The typical age of the Norwegian fleet continues to drop, and usually, the Norwegian shipowners have a robust give attention to growing environmentally pleasant options and autonomous navigation techniques. Governmental methods assist such incentives, and it’s a robust perception available in the market that the emphasis on expertise improvement will give Norway as a transport nation a sturdy aggressive benefit throughout the worldwide sphere.

The Norwegian maritime business consists of a cluster of internationally main corporations that design, construct, function and promote ships and provide gear and providers. Moreover, this business extends to incorporate enterprise providers, the place a number of Norwegian corporations are leaders in maritime monetary, authorized and engineering providers. Throughout the ship finance business, DNB and Nordea are the important thing debt-finance offers. DNV has a world-leading place as a classification society and advisors. Moreover, Norway additionally hosts key marine insurers equivalent to Gard, Skuld, Norwegian Hull Membership and the Norwegian Shipowners’ Mutual Struggle Threat Insurance coverage Affiliation.

2 What are the prevailing transport market developments affecting your nation? What has been the affect of the covid-19 pandemic?

The prevailing transport market developments give attention to emission discount, digital instruments and autonomy, and the work regarding cybersecurity. For the reason that emission discount might be handled under, the main target right here is restricted to digitalisation and cybersecurity.

Norwegian corporations have been on the forefront of offering digital options for transport, specializing in autonomous docking operations to autonomous vessels. It’s proposed to incorporate digital registration of vessels and encumbrances within the Norwegian Ship Registry. We’re not conscious of some other ship registries that at present have applied such digital registration, giving the Norwegian Ship Registry a aggressive benefit.

The Norwegian business can also be purposefully engaged on enhancing safety in each techniques and infrastructure. Essentially the most important funding made as much as immediately is the institution of a cyber-security centre, NORMA Cyber.

The affect of the covid-19 pandemic has had a extreme impact globally and on the Norwegian transport market. Based on an evaluation carried out by the dealer and consulting agency Lorentzen & Stemoco, the demand for maritime transport fell 1.8 per cent on an annual foundation as a result of covid-19 pandemic. This decline was extra important than through the monetary disaster when the demand decreased by 0.2 per cent. The worldwide decline skilled in 2019-2020 was the primary decline in demand for tonnage since 2009, probably constituting essentially the most important decline in transport in trendy instances.

In Norway, all segments skilled lowered demand via 2020. The deep sea section skilled a discount of about six per cent. The brief sea section noticed essentially the most important decline however important variations inside every of its segments. The toughest hit was the passenger section, which fell by roughly 46 per cent. In distinction, the transport section grew by eight per cent. The offshore service and rig corporations skilled a decline in turnover of 5 per cent.

The decline can also be seen by the numerous variety of ships in lay-up. At first of 2021, a complete of 204 vessels and rigs had been laid up. The variety of vessels in lay-up attributable to the 2020 decline resulted in the next variety of vessels laid-up in Norway than we skilled through the offshore disaster in 2016–2017.

Based on a report printed by the Norwegian Shipowners’ Affiliation from March 2021, there may be some elevated optimism for 2021 and onwards. The transport corporations state that they anticipate a rise in turnover in 2021 of three per cent. There’s a somewhat important distinction in expectations between the varied segments, with the best expectations being pushed by the transport section and passenger ships.

3 Are there any latest home or worldwide political or legislative developments that will have an effect in your nation’s transport market?

Whereas Norway will not be a member of the EU, the political and legislative improvement of the EU has a big affect on Norway.

An instance of that is the EU’s taxonomy Regulation (Regulation (EU) 2020/852). Briefly, the EU Taxonomy is a classification system for sustainable financial actions with a give attention to local weather change mitigation and local weather change adoption. As a consequence of this regulation, the transport business should meet new necessities to qualify as ‘sustainable’. In June 2021, the Norwegian authorities submitted to parliament a legislative proposal to include the Sustainable Finance Disclosure Regulation and the Taxonomy Regulation into Norwegian regulation.

As a consequence of Brexit, Norway and the UK signed a free commerce settlement in June 2021. This settlement is important for transport because the UK stays one of the vital markets for Norwegian transport corporations. In 2019, Norwegian vessels referred to as ports within the UK greater than 11,000 instances.

There’s additionally a big focus in Norway in direction of the inexperienced condemnation of ships. The Norwegian authorities helps a condemnation scheme for brief sea transport to contribute to the fleet renewal and elevated uptake of maritime low- and zero-emission options in new transport segments. Work can also be ongoing for putting in a condemnation scheme for offshore vessels. Norway additionally adopted the EU regulation on ship recycling (No. 1257/2013) on the finish of 2018.

4 What are the important thing regulatory and compliance points to your nation’s transport market? What’s arising within the close to future?

The transport market is considerably impacted by the elevated give attention to environmental regulation. Particularly over latest years, each the IMO and EU have had a big give attention to environmental regulation, hereunder lowering emissions from ships and air pollution to the marine surroundings. Newly up to date amendments to worldwide devices equivalent to SOLAR, MARPOL and BWMS Code are examples of the fixed evolution of the regulatory framework to develop a sustainable maritime business.

The preliminary greenhouse fuel (GHG) technique from the IMO in 2018 envisaged a discount within the carbon depth of worldwide transport to scale back CO2 emissions per transport work, as a median throughout worldwide transport, by not less than 40 per cent by 2030, and 70 per cent by 2050, in comparison with 2008. The IMO additionally set a goal that complete annual GHG emissions from worldwide transport needs to be lowered by not less than 50 per cent by 2050 in comparison with 2008. The short-term measures to fulfill the technique are supposed to be seat into pressure by 2023, and the IMO has determined to introduce a mixture of technical and operational measures. Whereas the Power Effectivity Current Ship Index is the technical measures, simply wanting on the design of the ship in a comparable approach as Power Effectivity Design Index, the Carbon Depth Indicator is the in response to operational measure contemplating the precise consumption and distance travelled for every ship.

In response to the IMO necessities, the Norwegian shipowners took motion through the spring of 2020, adopting 4 bold local weather targets, now a part of the Norwegian Shipowners’ Affiliation local weather technique. The 4 targets entail that members will reduce their local weather emissions by 50 per cent per transported unit by 2030, in contrast with 2008. From 2030, Norwegian transport corporations will solely order ships based mostly on zero-emission expertise, and by 2050, the Norwegian transport corporations intention to be local weather impartial. The technique additionally entails a global ban on non-climate impartial fuels from 2050.

In July 2021, the European Fee additionally adopted a bundle of proposals to make the EU’s local weather, power, land use, transportation and taxation insurance policies match for lowering web GHG by not less than 55 per cent by 2030, in comparison with 1990. For the transport business, it’s primarily the EU’s Emission Buying and selling Scheme and the necessities for brand spanking new different fuels (FuelEU) that can have an effect.

The potential for an elevated quantity of vessel site visitors within the Arctic Ocean immediately pertains to Norway as a polar coastal state, with all of the obligations that move from this. The expectation of elevated transport and fishing site visitors within the Excessive North will probably lead to growing port state controls aimed to hinder substandard vessels from coming into the harmful and weak water that’s the Arctic Ocean. Conserving ships in control on the necessary sections of the Polar Code will due to this fact be of elevated significance.

Norway can also be obliged beneath worldwide regulation to implement sanctions adopted by the UN Safety Council. As well as, Norway additionally implements a lot of restrictive measures adopted by the EU and OSCE arms embargoes. It’s price noting that each UN and EU sanction measures have to be applied in Norwegian laws earlier than they’re made binding on personal authorized entities in Norway. Norway is at present sustaining sanctions towards 26 totally different nations, geographical areas or terrorist organisations.

On 10 June 2021, the Act regarding enterprises transparency and work on elementary human rights and first rate working situations (the Transparency Act) was handed. The Act has not but entered into pressure however is anticipated to be applied shortly. The regulation applies to bigger corporations in Norway that provide items and providers overseas and overseas corporations that present items and providers in Norway, which turns into taxable within the nation. The Act will demand an obligation to carry out due diligence assessments, make a public evaluate of the due diligence evaluation, and offers ‘everybody’ the appropriate to data from an organization on how an organization offers with precise and adverse penalties for human rights and dealing situations. As a result of important transport market, hereunder a substantial quantity of import and export, this regulation will considerably affect transport corporations working in Norway.

5 What are the transport business’s present sources of finance? How do you expect they’ll develop, and what are the benefits and challenges to financing a vessel in your nation?

Throughout the ship finance business, DNB and Nordea are the principle debt finance offers. A number of area of interest gamers have additionally develop into energetic available in the market, and new banks are being established with a specific give attention to the maritime sector. Moreover, a number of overseas banks are additionally current and energetic throughout the Norwegian market, notably regarding syndicated loans.

Throughout latest years, the Norwegian bond market has seen a rise in issuance throughout the transport sector. These bonds have been an unlimited success. Bond points – via the Nordic Trustee – are an obtainable and extremely liquid supply of finance.

The Norwegian syndicated transport venture market, specializing in sale and leaseback transactions, organized by gamers equivalent to NRP, Clarksons Platou, Arctic, Fernley, Pareto and others, can also be a well-functioning liquid supply of financing.

On 1 July 2021, Export Credit score Norway and the Norwegian Export Credit score Assure Company (GIEK) merged and adjusted their title to Eksfin – Export Finance Norway. Eksfin offers a variety of merchandise and financing options that assists Norwegian shipyards, maritime suppliers and transport corporations to be aggressive and succeed within the worldwide market.

The sharp decline within the oil worth in 2014 has a big ripple impact within the maritime business, leading to an amazing discount in oil and fuel actions. This has had a considerable affect on Norwegian transport corporations entry to capital, which additional weakened from 2015 and onwards. Based on the Norwegian Shipowners’ Affiliation’s Financial Report from March 2021, the proportion of their members who assessed the entry to capital nearly as good has – since 2015 – been round 15 to 25 per cent. Correspondingly, the proportion who’ve skilled tight entry to capital has been about 40 to 60 per cent. The report now confirms that 20 per cent of 10 transport corporations expertise good entry to capital, and as many as 60 per cent will expertise tight entry to capital. Just one per cent of the membership state that they expertise superb entry to capital. In abstract, the entry to capital has been on the identical demanding degree as throughout essentially the most difficult interval of the offshore disaster.

Underneath Norwegian regulation, mortgages over ships might be established and perfected by registration in both NOR or NIS (as relevant). Such registration will give the mortgagee safety from third events, together with the shipowning entity’s collectors or the chapter property. Mortgages may also be established on ships throughout building by registration within the Norwegian Shipbuilding Registry. Ship mortgages and different registered rights within the ship rank behind maritime strains in response to the Norwegian Maritime Code, which is predicated on the provisions of the 1967 Brussels Conference on Maritime Liens and Mortgages.

Aside from the registered mortgage, ship finance is usually secured via an task of earnings and insurance coverage, account pledges and (if the shipowning firm is a particular goal automobile), a share pledge, to say just a few.

Project of charterparty can also be widespread in ship finance. Nevertheless, Norwegian regulation doesn’t permit task of contract as safety for financing. It stays unsure whether or not such a safety proper established pursuant to overseas regulation might be enforceable if enforcement is initiated earlier than Norwegian courts. To our information, this has not been examined by the Norwegian courts as of immediately.

6 Have there been any latest important home or overseas court docket selections or arbitration awards that affect in your nation’s transport market?

With a big variety of transport and insurance coverage corporations domiciled in Norway, there’s a sizeable variety of court docket circumstances and arbitrations carried out beneath Norwegian regulation.

The under listing offers an outline of a number of the most important case regulation that the Norwegian courts have generated, however will not be an exhaustive listing.

Stolt Dedication I and II: Having reached the Norwegian Supreme Court docket twice, the Stolt Dedication case has clarified questions associated to the entry of direct claims towards P&I insurers in Norway. The case arose following the collision of the cargo ship Thorco Cloud and the chemical tanker Stolt Dedication within the Singapore strait in 2015. By means of a string of circumstances, the Norwegian courts have made vital clarifications regarding the interpretation of the Lugano Conference. It confirmed that the Norwegian courts ought to settle for circumstances regarding direct claims towards P&I insurers via the conventions article 11 No. 2, ref article 9, with out truly having examined whether or not the alleged injured occasion was bancrupt. Insolvency of the tortfeasor is an exception from commonplace contractual clauses that deny entry to direct claims towards insurers in response to the Norwegian Insurance coverage Contracts Act.

In December 2020, the court docket of enchantment dominated that the joinder of the tort declare towards Stolt Dedication shipowner from the Netherlands may very well be accepted within the direct declare towards the Norwegian P&I insurer. The ruling was appealed to the Supreme Court docket for a possible third spherical however was rejected in April 2021. The direct declare towards the insurer and tort declare towards the shipowner remains to be within the arms of the Norwegian court docket system.

Mineral Libin: Clarifications had been additionally made by the Norwegian Supreme Court docket relating to the limitation interval for maritime claims. The Supreme Court docket made vital clarification regarding the legality of contracting out of the in any other case necessary guidelines of the Norwegian Insurance coverage Contracts Act, particularly as regards to the limitation interval of maritime claims.

Bergen Bunker: A extra common ruling within the area of obligations and property that affected the transport market got here within the case of Bergen Bunkers in April 2020. The case sprang from the chapter of the bunker provider OW Bunker & Buying and selling, which was at a while the world’s largest provider of bunker oil. The corporate had mortgaged present and future accounts receivable to ING Financial institution. The Supreme Court docket dominated that such mortgages have to be registered to have safety towards third events. It was not enough with a common prior discover to prospects. The ruling made readability to present uncertainties relating to attaining safety from third events for a kind of mortgage that’s incessantly used within the provider finish of the transport market.

With reference to shipbuilding, the Supreme Court docket of Norway got here with an vital ruling in November 2020. The case involved an ordinary highway building settlement based mostly on an identical contract as these utilized in shipbuilding. The court docket dominated that notification being made too late relating to contractual deficiencies may very well be with out authorized penalties if the counterpart behaves passively as regards the notification. The late notification was given by the counterpart three years after the (late) notification had been made. This ruling will in all probability scale back the time that counterparts act in direction of late notification of contractual deficiencies in shipbuilding contracts to keep away from shedding this defence angle on account of passivity.

Whereas arbitration awards in Norway as a default usually are not confidential, many of the awards are made confidential by the events by settlement. Thus, there’s a limitation on obtainable arbitration awards beneath Norwegian regulation. Additionally, only a few arbitration awards find yourself being appealed to the Norwegian courts. It would even be attention-grabbing to see if there is a rise within the variety of arbitrations in Norway following the institution of the Nordic Offshore and Maritime Arbitration Affiliation. Whereas Norwegian arbitration predominantly has been advert hoc, the Nordic international locations have labored collectively to ascertain a typical method to Nordic arbitration, selling transparency and cost-effective arbitrations.

7 What’s the outlook to your nation’s transport market? Which sectors are prone to develop, and which not?

Whereas the Norwegian transport market has been closely affected by the downturn in 2020, the outlook for the market stays optimistic. Specifically, a number of sectors are prone to develop over the following decade domestically.

The Norwegian-based offshore wind business is estimated to doubtlessly have a turnover of near 85 billion krone by 2050. With the federal government opening up Utsira Nord and Sørlige Norgsjø II for offshore wind initiatives from 1 January 2021, there’s a potential for a house market. A number of shipowners have began to make important investments into specialised offshore wind vessels for set up and upkeep.

Norway is immediately additionally one of many largest producers of meals from the ocean, and maritime providers associated to fishing and seafood has considerably elevated over the latest years.

Mineral actions on the seabed may additionally develop into an business that can contribute to new native demand for transport corporations. A brand new regulation on mineral actions on the continental shelf got here into pressure on 1 July 2019.

In Norway, there’s a robust give attention to lowering general carbon emissions. The world’s first full-scale carbon seize and storage facility is beneath building (Challenge Langskip (Longship)), and there may be an elevated give attention to the electrification of heavy business and the usage of environmentally-friendly hydrogen and different power carriers with low carbon footprints. Whereas there might be a small demand for vessels to hold liquid Co2, there may be doubtlessly a extra important demand ought to the venture achieve success.

The Inside Observe

What are the actual abilities that purchasers are searching for in an efficient transport lawyer?

An efficient transport lawyer want strong information of the regulation, mixed with business understanding of the enterprise and technical problems with the transport business.

Shoppers require and anticipate transport legal professionals to be responsive and obtainable. The power to behave swiftly and successfully is heightened in transport follow given the business’s high-pace nature and sometimes tight deadlines, with excessive prices ensuing from delays.

What are the important thing concerns for purchasers and their legal professionals when arranging finance for a transport transaction?

From ship-owning purchasers’ perspective, a key consideration is to strike a steadiness between varied forms of lenders’ requirement for strong safety, and the ship-owner’s want for freedom to function in a commercially viable method. This has develop into more and more vital, as bonds and sale-leaseback preparations have develop into extra obtainable alternate options to financial institution financing. For a transport lawyer so as to add worth to his or her shopper, she or he would want each expertise with varied forms of finance transactions, in addition to expertise with operational points inside transport.

What are essentially the most attention-grabbing and difficult circumstances you could have handled previously 12 months?

It was each attention-grabbing and difficult when advising Bourbon Offshore Norway on its monetary restructuring. The matter concerned negotiations with lenders and counterparts in sale and leaseback preparations, in addition to intragroup reorganisation, together with vessel gross sales. We managed to seek out good options, leading to discount of debt by greater than €300 million.

We additionally suggested Maersk Drilling on its divestment of Maersk Inspirer in a US$373 million transaction. It was a fancy tripartite transaction, involving switch of enterprise, change of relevant service agreements, and alter of occasion chargeable for day-to-day administration of the manufacturing unit on the Yme area.

In one more matter, we’ve got represented a bareboat charterer in an arbitration dispute regarding the possession of the vessel following expiry of the constitution, leading to an award in favour of our shopper because the rightful proprietor of the vessel.