The International Chamber of Shipping (ICS) – the principal global trade association for shipowners representing over 80% of the world merchant fleet – met in Limassol, Cyprus last week for its Annual General Meeting (AGM). The meeting was hosted by the Cyprus Shipping Chamber in its 25th anniversary year, and commenced with a gala dinner hosted by the President of the Republic of Cyprus, His Excellency Nicos Anastasiades, at the Presidential Palace in Nicosia.
Representatives of ICS member national shipowners’ associations, from the Americas, Asia and Europe, reviewed the many significant regulatory developments affecting shipping with respect to safety, environmental protection and employment affairs, as well as various legal, insurance and trade policy developments.
The discussions were dominated by the pressing challenges associated with the need for ships trading to Emission Control Areas, in North America and Europe, to switch to low sulphur fuel, and the serious implementation problems that will be created by the eventual entry into force of the IMO Ballast Water Management (BWM) Convention.
Sulphur ECAs – Governments Need to Resolve Critical Implementation Questions
ICS underlines the shipping industry’s commitment to full compliance with the IMO sulphur ECA requirements from January 2015, through the use of low sulphur distillate fuel or alternative compliance mechanisms such as Exhaust Gas Cleaning Systems (scrubbers). However, information collected by ICS members suggests that many governments are not ready to implement the requirements in a uniform manner, in order to ensure the prevention of market distortion.
In particular, ICS members identified an urgent need for the Paris MOU on Port State Control – in co-operation with the European Commission and the United States – to finalise harmonised procedures before implementation begins. It was also agreed that port states need to resolve detailed implementation questions on the use of alternative compliance mechanisms for those companies that have chosen to invest in them, as permitted by the IMO MARPOL Convention.
“The shipping industry is investing billions of dollars in order to ensure compliance. The huge costs involved could have a profound impact on the future structure of the entire shipping industry and the movement of international trade,” said ICS Chairman Masamichi Morooka. “It is therefore incumbent on governments to get the details of implementation right as we enter this brave new world in which fuel costs for many ships will increase overnight by 50% or more. We only have six months to go and we think it vital that governments clarify all of the details of ECA implementation as soon as possible.”
Ballast Water Management Convention – Time is Running Out to Make New Regime Fit for Purpose
ICS members considered the deep flaws in the IMO Ballast Water Management Convention (adopted in 2004 when the technology required to comply had not been widely tested or proven commercially) and possible solutions to these issues.
It is apparent that there is now a greater understanding of these problems amongst IMO Member States which for many seems to be the primary issue impeding ratification. These obstacles include the lack of robustness of the current type-approval process for the very expensive new treatment systems that will be required, doubts about the procedures to be followed during Port State Control, and the need to provide confidence to shipowners that have already installed the new equipment (or are about to do so) that they will be regarded by the authorities as compliant.
ICS supports the objectives of the Convention and recognises that its eventual entry into force is inevitable. “However,” explained Mr Morooka “unless these problems are resolved immediately at IMO there is a considerable risk that the regime will not be fit for purpose.”
ICS is particularly concerned that port state sanctions could impact unfairly on shipowners who, in good faith, have fitted type-approved equipment, only to be told subsequently that it falls short of the required standard. At the next meeting of the IMO Marine Environment Protection Committee (MEPC 67) in October 2014, governments need to take what may be the final opportunity to act by agreeing some relatively simple changes to how the Convention will be implemented. “Time is rapidly running out.” said Mr Morooka.
The ICS AGM agreed in principle to the text of a detailed industry submission that will be made to MEPC 67. This submission will suggest solutions to these complex problems in the form of a draft MEPC Resolution that could be adopted by IMO Member States before the Convention enters into force. This final industry submission will be made in the next few weeks.
Future Regulation of International Shipping
The ICS AGM considered the lessons to be learned with respect to the development of regulations, such as the Ballast Water Convention, that have subsequently turned out to have major problems, as well other technical regulations that have often been taken forward without any consideration of the economic impacts, or of the unintended consequences for regulations that already exist.
For the past 50 years IMO has served the industry very well by providing shipowners with a comprehensive global regulatory framework. But there is growing concern that something is wrong with the quality and quantity of recent regulatory changes. All too often ICS sees regulatory proposals by governments being taken forward without any supporting evidence of compelling need.
Mr Morooka explained “Environmental protection is of the utmost importance, and ICS does not question the objectives or good intentions that are usually behind most government proposals. But in the future we believe there needs to be far more emphasis on proper regulatory impact assessments which also take full account of the economic sustainability of shipping. More attention also needs to be given by IMO Member States to the practicality and timescale allowed for implementation of new regulations. This should happen before the rules are adopted, not several years later when it may be too late.”
The ICS members recognised that making improvements to the process of regulatory development at IMO is a complicated and difficult topic, and that there are no simple solutions. But ICS members agreed that in the year ahead they would seek to develop some firm proposals for discussion with regulators.
Mr Masamichi Morooka (Japan) was elected for a second two-year term of office as ICS Chairman. He will be supported by Mr John C Lyras (Greece), Mrs Karin Orsel (Netherlands), Mr Gerardo Borromeo (Philippines) and Mr Esben Poulsson (Singapore) who continue to serve as ICS Vice Chairmen.