Pedro & Frazer

Shipping 2019: Discussion

Who’s Who Legal brings together Pedro Calmon Filho at Pedro Calmon Filho & Associados and Frazer Hunt at Mills Oakley to discuss issues facing shipping lawyers and their clients in the industry today.

Have there been any major changes to shipping law and practice in your jurisdiction over the past couple of years? If so, how has it impacted the market?

Pedro Calmon Filho: In November 2017, the Brazilian Superior Court of Justice (STJ) unanimously recognised the validity in Brazil of a naval mortgage constituted and registered under the laws of the Republic of Liberia. The decision of the STJ represents a milestone in the legal analysis of the validity of foreign naval mortgages in Brazil. It was the first time the topic was discussed in greater depth by the Brazilian judiciary. The decision is relevant to any existing or future project involving a foreign-flag vessel that will operate in Brazil, including vessels used in the exploration and production of oil and gas offshore.

Frazer Hunt: The relatively recent collapses of some of the world’s largest bunker suppliers and shipping lines have resulted in a significant increase in cross-border insolvency and admiralty matters involving disputes about the recognition or status of maritime liens, the nature of a sale of consumables such as bunkers, and the circumstances in which different legal systems deal with the cross-border complexities of multinational insolvencies. There has also been a significant increase in regulations to address issues such as chain of responsibility and the brown marmorated stink bug, which have significantly increased the compliance requirements across the transport sector, including for shipping lines. Moving forward, autonomous vessels and cybersecurity are likely to present new issues requiring input from shipping lawyers. Unfortunately, the shipping sector has been slow to embrace innovation, with a group of shipping lines and stevedores having only recently signed a ‘declaration of intent’ to create a blockchain-based platform to simplify document processes in shipping management, suggesting that we are a long way off from seeing any real changes in processes.

 

To what extent has the shipping industry recovered from the 2008 financial crisis?

Pedro Calmon Filho: In addition to the crisis of 2008, the Brazilian maritime sector suffered with the crisis triggered by the fall in the price of oil and also with the so-called "car wash operation" in 2014, which caused the interruption of several contracts of the Brazilian public oil company, Petrobras. There are optimistic prospects for the recovery of the offshore sector in 2019. In the meantime, the shipyards are engaged in docking services and in the construction of vessels directed to other sectors. On the other hand, the Brazilian market observed an increase in the cargo movement in the ports in 2018, especially due to the export operations of mineral and agricultural resources, in which it stands out in the international scene.

Frazer Hunt: The shipping sector continues to suffer from overcapacity and fluctuations in freight rates. Following the bankruptcy of Hanjin Shipping in 2016, it was predicted that many other shipping lines would follow. Instead, in 2017, many shipping lines consolidated, which in turn, impacted on the alliances. In Australia, Part X of the Competition and Consumer Act 2010 regulates international liner shipping with the main objective of ensuring that exporters have continued access to outwards liner cargo shipping services of adequate frequency and reliability at freight rates that are internationally competitive. However, the consolidation trend has given some lines considerable market power to the extent that the protections under Part X have become less effective, with rates starting to increase. Increased demand for shipping services has also improved margins for shipping lines. There have been several cycles where shipping lines’ fortunes have waxed and waned since 2008.

 

Have you noticed a change in the volume of shipping disputes in your jurisdiction in the past 12 months? If so, why?

Pedro Calmon Filho: We did not notice a change in the volume of shipping disputes in the past 12 months.

Frazer Hunt: Noting that many disputes are resolved before commencement of proceedings, it is difficult to measure the volume of shipping disputes at any time. However, Australia’s ports have more or less reached capacity and there has been no further investment in infrastructure to cater for the larger ships that have recently entered the market. This suggests constant volumes of cargo imported and exported from Australian ports, so you would expect, on average, a similar level of shipping disputes. 

 

How has globalisation impacted the shipping industry? 

Pedro Calmon Filho: Globalisation and the shipping industry have been connected since the Great Navigations, when international commerce started to take on big dimensions and promote the communication between distant nations. Nowadays, 95% of Brazilian international commerce is operated through the maritime modal. This expressive number is claimed by a safe legal environment and suitable infrastructure to keep our country in a competitive position facing the market. Brazil is a member of several international conventions regarding the maritime sector and makes its national related policies in accordance with them. In this context, globalisation impacts the shipping industry in relation to economic and commercial aspects and in relation to the international cooperation necessary for safety and security in navigation.

Frazer Hunt: Shipping is one of the key elements of globalisation and has a significant impact on the growth of the global economy as it moves most of the world’s food, products and energy between countries. The use of containers introduced in the 1970s significantly increased efficiencies that made outsourcing and offshoring of large manufacturing activities possible and today facilitates international e-commerce transactions for consumers throughout the world. 

 

What are the biggest challenges currently facing shipping lawyers?

Pedro Calmon Filho: The complexity of maritime operations and the growing need for safety, efficiency and savings in the market lead the industry to search for new technologies to supply each of these demands. As a result of this phenomenon, we have a frequent transformation of the sector in its technical aspects, and the law must follow these changes for effective regulation of the industry. It means that the shipping lawyers have to be able to handle new questions day after day and adapt themselves to all possible different conjectures. This scenario shows that the capacity to find solutions in a sector under a rapid pace of change is one of the biggest challenges facing shipping lawyers.

Frazer Hunt: The procurement models used by some insurers have encouraged many marine insurance specialists practising in one state to join general insurance teams within national and international firms who represent insurers nationally across multiple lines. On the other side of the coin, many of the claims previously handled by the P&I Club legal correspondents have moved in-house, rather than being handled externally. Further, contingency fees are still outlawed in Australia, giving recovery agencies some advantage over the Australian legal profession that is mostly tied to time costing and fixed fees. To remain competitive, law firms are exploring innovative ways of delivering legal services to clients. For example, our firm, Mills Oakley, has partnered with Swinburne University’s Legal Futures Lab and is combining practical expertise in areas such as AI, blockchain and design thinking to create ideas to improve the delivery of service to our clients.

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