SumSummermer 20 202017 COMMITTEECOMMITEE NEWS NEWS AdmiraltyCorporate Counsel and Maritime Committee Law The purpose of a newsletter is to provide specialized information to a tar- geted audience. Newsletters can be a great way to market your product or “Customer quotes, Steeringservice, and also Through create credibility the and Coronavirus build awareness for Crisis: you and the called “pull quotes,” are Aservices Beginner’s you provide. UseGander positive customer at Assessing pull-quotes as the eye-catching an excellent way to Strategicbut subtle marketing. Importance of Maritime-Lien Law in Potential Cruise-Line Bankruptcies demonstrate your suc- Tips for Producing a Newsletter cess and put emphasis I.Every Introduction time you produce your newsletter, ask yourself: on your values. They The accelerating coronavirus crisis has upended major industries across the also add visual interest globe,Q: Who but are none our more readers? so than the cruise industry.1 In the early days of the unfolding internationalA: Existing customerscatastrophe, and the potential Diamond customers, Princess became a global topic of to your newsletter...” Pierce Smith conversation as the locus of one of the first major outbreaks outside of mainland Q: What will our readers want to know about our business? China.2 In the following weeks, this crisis for the cruise industry has only intensified, The University of Texas- Carlos School Vivanco of A: Timely, helpful, problem solving information. Law Class of 2020. Pierce can be and the ultimate fate of the passengers and crew of the MS Westerdam, Grand contacted at Piercesmith6790@ Princess, MSC Meraviglia, MS Zaandam, and other possibly affected cruise ships utexas.edu. remainsAdd Value largely unknown. to Your Newsletter Keep your content as current as possible. If you publish a monthly letter, Editor’s Note: Pierce’s article was Coronavirus outbreaks aboard cruise ships have raised many legal questions that selected as the winner of the 2020 areensure likely you to be include of great content consequence from only for allthe the last stakeholders month. Also, involved. use photo- The potential ABA TIPS AMLC law student writing graphs and other visuals to add interest and enable the reader to scan competition held in conjunction with Read more on page 18 quickly for information. Gard N.A.
In This Issue • InSteering This Through Issue the Coronavirus Crisis:... 1 • • ChairAdvantages Message 4 of a • EditorNewsletter Message 7 • Trade Talk: James Andrew • BlackAdd 9Value to Your • OnNewsletter Thin Ice: National and Homeland Security Implications... 12 • • InSecond Search of StoryJust and Reasonable Practices for • DemurrageAnother andStory... 13 • Damages Recoverable in Maritime Matters, Second • EditionBack Page14 Story
UnitingUniting Plaintiff, Plaintiff, Defense, Defense, Insurance, Insurance, and and Corporate Corporate CounselCounsel toto Advance Advance the the Civil Civil Justice Justice System System Admiralty and Maritime Law Summer 2020
Leadership Roster
Chair Membership Peter Black Grady Hurley Aaron Greenbaum Vice-Chair Mills Black LLP Jones Walker LLP 1215 19th St NW, 201 Saint Charles Ave, 48th Fl Pusateri Johnston Guillot & Chase Jansson Greenbaum Washington, DC 20036 New Orleans, LA 70170-1000 Campbell Johnston Clark LLP (562) 548-8978 (504) 582-8224 1100 Poydras St, Ste 2250 2600 Douglas Road, Ste 508 New Orleans, LA 70163-2300 [email protected] Fax: (504) 589-8224 Miami, FL 33134 [email protected] (504) 620-2500 (503) 866-9699 [email protected] [email protected] David Boyajian Schwabe Williamson & Wyatt James Koelzer Chair-Elect 1211 SW 5th Ave, Ste 1900 Clyde & Co LLP Plaintiff Portland, OR 97204 355 S Grand Ave, Ste 1400 Juliette McCullough Vice-Chair (503) 796-2943 Los Angeles, CA 90071 Cox Wootton Lerner Fax: (415) 227-4255 (317) 413-8158 900 Front St, Ste 350 Jessica Ibert Lewis Kullman Sterbcow [email protected] Fax: (310) 229-5800 San Francisco, CA 94111-1427 [email protected] (415) 398-6000 & Abramson [email protected] 601 Poydras Street, Ste 2615 Philip Brickman New Orleans, LA 70130 Degan Blanchard & Nash Max Malvin (504) 262-8345 400 Poydras St, Fl 26 643 Magazine St, Ste 405 Immediate Fax: (504) 588-1514 New Orleans, LA 70130-3245 New Orleans, LA 70130-3433 Past Chair [email protected] (504) 529-3333 (504) 323-5885 Stephanie Penninger Fax: (504) 529-3337 [email protected] XPO Logistics Inc Social Media [email protected] 11215 N Cmnity Hse Rd, Fl 9 Vice-Chair, Jessica Martyn Charlotte, NC 28277-4960 Michael Daly Link Martyn PLLC (704) 323-7647 Technology Pierce Atwood LLP 1407 S Leithgow Terrace Fax: (312) 767-9192 Vice-Chair 1 Financial Plz, Fl 16 Philadelphia, PA 19147 [email protected] Allison Skopec Providence, RI 02903-2485 (757) 6154753 Winston & Strawn LLP (401) 588-5113 [email protected] Council 200 Park Ave, #40 Representative, New York, NY 10166-0005 Robert Gardana David McNeal (212) 294-3278 Robert L Gardana PA McNeal Law Group PLLC Newsletter Editor [email protected] 12350 SW 132nd Ct, Ste 204 2950 North Loop W, Ste 500 Christopher Nolan Miami, FL 33186-6458 Houston, TX 77092--8830 Holland & Knight LLP Vice-Chairs (562) 544-0168 (832) 819-3281 31 W 52nd St, Fl 11 Fax: (305) 358-1680 [email protected] New York, NY 10019-6111 Kirby Aarsheim [email protected] (212) 513-3307 Farrell Smith O’Connell LLP 27 Congress Street, Ste 109 Matthew Moeller Fax: (212) 341-7237 Danielle Gauer Moeller Firm LLC [email protected] Salem, MA 01970 (617) 508-9891 M G & M Law Firm 650 Poydras St, Ste 1207 [email protected] 600 Brickell Ave, Ste 1400 New Orleans, LA 70130-7215 Diversity Miami, FL 33131-3068 (571) 882-0472 Vice-Chair (305) 537-3422 [email protected] Yaakov Adler [email protected] Jeanne Amy Freehill Hogan & Mahar Llp Jones Walker LLP 80 Pine Street, 25 Fl Jeanne Noonan 201 Saint Charles Ave, Fl 48 New York, NY 10005-1759 Sarah Gayer Willcox & Savage New Orleans, LA 70170-1000 (832) 236-6109 Thompson Bowie & Hatch LLC 440 Monticello Ave, Ste 2200 (713) 283-2484 Fax: (212) 425-1901 PO Box 4630 Norfolk, VA 23510 [email protected] [email protected] Portland, ME 04112-4630 (757) 628-5554 (207) 774-2500 [email protected] Fax: (207) 774-3591 Law Student Daniel Bentson [email protected] Vice-Chair Bullivant Houser Bailey PC Scott Olson 925 4th Ave, Ste 3800 Markel Surety Holli Packer Seattle, WA 98104-1129 Christopher Hamilton 9737 Great Hills Trl, Ste 320 2301 Joseph St, (206) 292-8930 Shutts & Bowen Austin, TX 78759-6418 New Orleans, LA 70115-6513 [email protected] 4301 W Boy Scout Blvd, Ste 300 (512) 732-0099 (201) 873-4244 Tampa, FL 33607 Fax: (512) 732-8398 [email protected] (813) 229-8900 [email protected] Fax: (813) 227-8211 [email protected] *Former Chairs of TIPS AMLC
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Leadership Roster | continued
Pamela Palmer Catherine Saylor Sarah Sweet Christine Walker Clark Hill PLC Munch & Munch, P.A. Borden Ladner Gervais LLP Fowler White Burnett PA 1055 W 7th St, Ste 2400 600 S Magnolia Ave, Ste 325 Bay Adelaide Centre, East Tower 1395 Brickell Ave, Floor 14 Los Angeles, CA 90017-2550 Tampa, FL 33606-2764 22 Adelaide St. W Miami, FL 33131 (312) 316-9359 (813) 2541557 Toronto, ON M5H 4E3 (305) 789-9217 Fax: (213) 488-1178 [email protected] (416) 367-6590 [email protected] [email protected] [email protected] Kelly Scalise *Former Chairs of TIPS AMLC Stephanie Propsom Liskow & Lewis Douglas Truxillo Fincantieri Bay Shipbuilding 701 Poydras St, Ste 5000 Onebane Law Firm 826 N Duluth Pl 1 Shell Sq PO Box 3507 Sturgeon Bay, WI 54235-2959 New Orleans, LA 70139 Lafayette, LA 70502 (920) 743-5020 (504) 299-6110 (337) 2372660 [email protected] Fax: (504) 556-4108 Fax: (337) 266-1232 [email protected] [email protected] Ann-Marie Roach Gard (North America) Inc. Katriel Statman Raymond Waid 40 Fulton St, 16th Fl Baker Donelson Liskow & Lewis New York, NY 10038 1301 McKinney St, Ste 3700 701 Poydras St, Ste 5000 (646) 8125644 Houston, TX 77010 New Orleans, LA 70139-5000 [email protected] (713) 210-7443 (504) 581-7979 [email protected] [email protected]
©2020 American Bar Association, Tort Trial & Insurance Practice Section, 321 North Clark Street, Chicago, Illinois 60654; (312) 988-5607. All rights reserved. The opinions herein are the authors’ and do not necessarily represent the views or policies of the ABA, TIPS or the Admiralty and Maritime Law Committee. Articles should not be reproduced without written permission from the Copyrights & Contracts office copyright@ ( Connect with americanbar.org). Admiralty & Maritime Law Editorial Policy: This Newsletter publishes information of interest to website members of the Admiralty and Maritime Law Committee of the Tort Trial & Insurance Practice Section of the American Bar Association — including reports, personal opinions, practice Stay Connected news, developing law and practice tips by the membership, as well as contributions with TIPS of interest by nonmembers. Neither the ABA, the Section, the Committee, nor the We encourage you to stay up-to-date on important Section news, TIPS meetings Editors endorse the content or accuracy of any specific legal, personal, or other and events and important topics in your area of practice by following TIPS on opinion, proposal or authority. Twitter @ABATIPS, joining our groups on LinkedIn, following us on Instagram, Copies may be requested by contacting and visiting our YouTube page! In addition, you can easily connect with TIPS the ABA at the address and telephone substantive committees on these various social media outlets by clicking on any number listed above. of the links. americanbar.org/tips 3 Admiralty and Maritime Law Summer 2020
Chair Message
AMLC Unanimity in Remaining Loud About the Things That Matter
When I became Chair of the Admiralty & Maritime Law Committee (AMLC), I never imagined the tumultuous time that lay ahead. Instead, I traveled to the October 2019 ABA TIPS Fall Leadership meeting in Wailea, Hawaii excited to embark on another year of robust educational programming and networking with fellow maritime and admiralty law practitioners throughout the country. Stephanie S. Penninger XPO Logistics At that time, we were in the final stages of the publication of our Committee’s first maritime practice book in many years, Damages Recoverable in Maritime Matters Sr. Director, Legal Counsel, XPO (2nd Edition), a compilation of substantive chapters co-authored by too many Logistics, Charlotte, NC talented AMLC members to name, and spearheaded by our immediate past Chair, Miami-based maritime lawyer, Robert Gardana. This grand feat also provided the backdrop for our Damages by the Bay programming during the August 2019 ABA Annual Meeting in San Francisco.
I had packed the perfect Hawaiian-inspired outfit for witnessing past-Chair and ABA TIPS Secretary (not to mention prominent Holland & Knight maritime lawyer-die- hard-Mets fan extraordinaire) Chris Nolan’s marriage atop a volcano (no longer active of course), surrounded by many longtime ABA friends, and awoke much earlier for the ABA couple’s marital celebration than I ever would have for anything else – ok, may be a first class seat on a United flight. There, in Maui, as the ocean waves crashed against the rocks where I snorkeled with a family of sea turtles (some might consider worthy of an AMLC mascot) and accompanied past Chair, Sarah Gayer and her family down the resort’s fastest water slides, we met, we feasted on poke at the AMLC group dinner, and we “luaued”, including with incoming AMLC Chair, Aaron Greenbaum and his family from NOLA and the ABA TIPS members at large in between programming sessions. We accepted the AMCL’s Overall Excellence award (which took up a bit of souvenir space in my suitcase) and brainstormed our 2020 programming.
5 months later the world and some of those close to our AMLC members became embroiled in battling COVID-19. Everything shut down, and we were amassed with uncertainty. But AMLC members did what we do best – we connected, exchanged information and ideas and worked to expand and diversify our membership. This salty bunch’s accomplishments thus far (despite a pandemic, mind you) include:
• Holding a successful Passenger & Crew Claims Seminar event on February 7, 2020 in Miami Florida, which was spearheaded by Robert L. Gardana, maritime counsel in Miami Florida
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• Sponsoring the infamous November 16, 2019 Tulane Maritime Law Journal’s ABA IPS Admiralty and Maritime Law Committee Student Presentations at Liskow & Lewis in New Orleans, Louisiana thanks to fearless event leader and master of ceremonies (not to mention past AMLC Chair) Ray Waid
• In November 2019, during our Committee meeting, Chris Nolan presented on the recent U.S. Supreme Court ruling in the Athos I safe berth case, and Membership Chair, Juliette McCullough, with Cox Wootton Lerner in San Francisco, led the charge to extend membership invitations to the multitude of participants in last year’s Admiralty Disruption conference
• In January 2020, Jeanne Amy, based out of Jones Walker’s New Orleans office, submitted the AMLC’s annual Recent Developments contribution to the ABA Tort Trial & Insurance Practice Law Journal
• In February 2020, Sarah Gayer with Thompson Bowie & Hatch LLC out of Portland, Maine submitted the AMCL’s The Brief Editorial Board profile for publication in the Spring 2020 issue of the magazine. Sarah also kept members apprised of or involved with the 27th Annual John Brown Admiralty Moot Court Competition which took place remotely in early April 2020
• On April 16, 2020, the AMLC held its first virtual Zoom videoconference meeting during which we discussed the use and effectiveness of force majeure provisions, what Zoom depositions, hearings and mediations were like, which courts were closed or operational and the extent to which COVID-19 has changed the way in which companies have been conducting business within the maritime industry.
• May 1, 2020 sparked the virtual Nashville Virtual Section Conference AMLC hospitality suite happy hour bonding session during which we battled at trivia and posed in our best Western getups (or as a cow) for a group photo with Country Music Hall of Fame and dude ranch backgrounds invoking the would be spirit of the originally planned in-person conference
• On May 21, 2020 the AMLC and fearless competition Queen, Allison Skopec, from Winston & Strawn in NYC proudly announced the winners of our annual Student Writing Competition. Then, past AMLC Chair extraordinaire, Jessica Martyn, with Link Martyn PLLC in Philly, presented: “FMC Interprets Reasonableness of Demurrage and Detention Practices in Final Rule”, based upon her recently published article
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• As part of the AMLC’s membership expansion efforts, the Committee has featured its newest in-house counsel member, James Andrew Black, Legal Counsel, Moran Shipping Agencies, Inc., based out of Providence, RI in this newsletter’s edition of Trade Talks
In the wake of Pride month, with some stay-at-home orders now relaxed and amidst Black Lives Matter initiatives, I am reminded of two quotes from two inspirational leaders. At the heels of “Bloody Sunday”, during a sermon in Selma, Alabama on March 8, 1965 Dr. Martin Luther King said: “A man dies when he refuses to stand up for that which is right. A man dies when he refuses to stand up for justice. A man dies when he refuses to take a stand for that which is true.” And in the words of, James Baldwin, whose puissant tones of sexuality, race and social inequality, woven into his novels, has always resonated with me: “Not everything that is faced can be changed, but nothing can be changed until it is faced.”
While we are amidst one of the toughest times some of us have faced in our lifetimes – from pandemics to grappling with how to end discrimination, I am proud to be a member of a committee that faces challenges head on, draws from the strength in its numbers, our friendship, our dedication to bringing communities together to learn and support one another and, of course, our ardent love of the rule of law, boats, and anything that touches the sea. I look forward to, through our togetherness and servitude, continuing to face adversity, being inclusive – so that our membership reflects the makeup of the external world, standing up for what is right . . . for justice and that which is true, and leading as we do – by example.
AMLC celebrates Nashville virtual TIPS Section Conference social hour toast
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Editor Message
It is our pleasure to present the TIPS AMLC Spring / Summer 2020 Newsletter. This is a double issue due to the packed content we have. The law student writing competition winner and runner-up pieces are worthy of your time. Separately, an important FMC ruling on demurrage and detention is addressed. Our Trade Talk piece features James Andrew Black, at Moran Shipping Agencies for a wide ranging discussion.
We are currently looking for submissions for the next newsletter, and encourage Chris Nolan committee members and non-members alike to submit article proposals directly to Managing Editor us at [email protected]; [email protected]; and Laura B. Knoll LKnoll@ amrl.com. Thank you to the authors who have contributed to this newsletter, and to Holland & Knight LLP the section members for their ongoing efforts in supporting this publication. Phone 212.513.3307 www.hklaw.com
Chris Hamilton Laura Beck Knoll Associate Editors
AMLC on a lobster boat in New York during non-socially distancing 2017
americanbar.org/tips 7 Admiralty and Maritime Law Summer 2020 The Tort Trial & Insurance Practice Section Introduces a New Advertising Opportunity!
The rates for advertising in this publication are:
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Additional information and print/online advertisement opportunities including discount options and complete media kits can be found by reaching out to Staff Liaison Norma Campos at [email protected]
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TRADETALK
Our Trade Talk piece features James Andrew Black, Legal Counsel at Moran Shipping Agencies, Inc.
Q. Andrew, tell us what prompted on current ballast water and you to get into the maritime legal bunker fuel regulations, helped industry? a client avoid major fines for a potential Jones Act violation, and R. I worked as a Ship Agent in Houston, TX my first summer home incorporated a new subsidiary from college, and was immediately company. Overall, both the pace charmed by the maritime industry. I and diversity of work have been spent the next 10 years working in extremely rewarding. vessel operations across the U.S. Very often, this required me to research shipping regulations to Q. What are your views on hiring outside counsel? resolve incidents and disputes on behalf of ship owners R. Moran provides agency, security, and pollution safety and charterers. Maritime attorneys always seemed to services in more than 100 ports with only two attorneys be involved in the most difficult of these situations, so I on staff. It’s simply not possible for us to become chose to pursue a law degree to take part in a greater competent subject matter experts on every issue that variety of the complex issues that arise when competing arises in those 20+ jurisdictions. Because of this, we stakeholders interact at sea. try to establish long term relationships with experienced and knowledgeable maritime practitioners across the Q. Can you describe your experience of working at U.S. before the need for their service ever arises. This Moran Shipping Agencies, Inc. as Legal Counsel? allows us to provide timely and accurate risk analysis to our clients, and better facilitates maritime business R. Every day has been a new challenge since joining Moran Shipping as Legal Counsel in January 2020. In a transactions where we are involved. short time I’ve mitigated CBP penalties, provided guidance
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Q. What legal issues are coming across your desk with some frequency these days? R. We are seeing a lot of issues involving crewmembers caused by the COVID-19 travel restrictions, and have been working closely with local CBP offices to facilitate crew changes in as safe a manner as possible. In addition, the ongoing tank space shortage has sparked a lot of interesting queries regarding the extent of Jones Act limitations imposed on foreign vessel cargo movements.
Q. For our practitioners, which industry organization(s) do you get the most out of? R. As a company, Moran participates in local safety and advisory in many U.S. ports. These are a tremendous resource for learning what issues keep key stakeholders up at night, and how they plan to address them moving forward. Personally, and most recently, I was fortunate to attend the 28th annual Tulane Admiralty Law Institute prior to the COVID-19 shutdowns. The conference was very informative and provided a great opportunity to genuinely connect with a diverse set of maritime attorneys.
Q. In addition to the AMLC newsletter, of course, which industry publication do you find most useful? R. I gain a lot from subscribing to “Bryant’s Maritime Blog,” which provides regular summaries on recent develops of interest to the maritime industry. I also keep up to date with Tradewinds, INTERTANKO’s weekly newsletter, and the Norton Rose Fulbright legal updates.
Q. Thank you for taking time to speak with us today. As a final question, living in Boston, MA, when we reemerge from this Covid-19 shelter which sporting event do you hope to attend the most? R. I really hope to make it to a Red Sox game at Fenway Park this summer. Not sure how good the home team will be this year, but nothing beats the atmosphere at Fenway on a warm New England evening.
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Benefits of AMLC Membership
Opportunities To Become Involved
■ Publication in the AMLC Newsletter ■ Leadership Positions or TIPS Law Journal ■ Mentoring Relationships ■ Networking Opportunities ■ Young Lawyers and Law Student Writing ■ CLE and Webinar Opportunities Competition
Additional Information For more information regarding the benefits that membership in theAMLC can provide to you, check out our webpage at http://ambar.org/tipsadmiralty and join our group on LinkedIn. The Committee is open to all, including non-lawyer maritime professionals, law students and lawyers in every practice area who want to keep abreast of developments in the field.
FIND YOUR COMMUNITY
ambar.org/tipsconnect
ambar.org/tipsconnect
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On Thin Ice: National and Homeland Security Implications of Warming Arctic Waters for U.S. Naval Forces
Homeland security implications for an enhanced U.S. naval force presence “…[A]ll action must, to a certain extent, be planned in a mere twilight…” –Carl von Clausewitz1
The U.S. Coast Guard and Navy must be prepared to protect increased national Kathryn A. Kulaga, Ph.D. interests in the Arctic2 as the maritime domain expands due to melting sea ice as Carpenter, LLP a result of global climate change. Guided by U.S. policy and strategy documents, these naval forces3 each have developed an Arctic strategy and implementation plan Kathryn is a May 2020 graduate of Roger Williams University School for operating in this dynamically and dramatically changing environment. However, of Law. She holds a B.S. in Biology resource constraints and competing mission requirements hinder both the Coast and English, an M.S. in Conservation Guard and Navy from fully achieving their strategic objectives to meet climate change Biology, and a Ph.D. in Environmental adaptation demands in this region. Moreover, unpredictability in the changing rate and Science and Policy. She also is a U.S. Coast Guard veteran. Kathryn extent of diminishing sea ice makes planning for Arctic investments challenging.4 will sit for the September 2020 D.C. Uniform Bar Exam. She may be As an Arctic nation,5 the United States has national interests in the region that the contacted at kkulaga984@barrister. 6 Coast Guard and Navy must protect and defend. Melting sea ice has created an rwu.edu. even greater strategic significance for the United States, as Arctic waters open to increased economic, environmental, and geopolitical concerns.7 Accomplishing such an imperative requires heavy polar icebreaking capability.8 However, the maritime Editor’s Note: Kathryn’s article was services currently are experiencing a shortfall in this instrument of national and selected as the second-place winner of the 2020 Gard / ABA TIPS AMLC homeland security.9 Using a case study approach, this paper is divided into parts and law student writing competition held will explain that the national and homeland security implications of warming Arctic in conjunction with Gard NA. waters require that the Coast Guard and Navy make a major investment in acquiring heavy polar icebreakers.10 All research was conducted using unclassified materials.
I. The U.S. military is concerned about climate change as a “threat multiplier” to national security “Among the future trends that will impact our national security is climate change. [It] will intensify the challenges of global instability, hunger, poverty, and conflict.” – Secretary of Defense Chuck Hagel11
The mission of the U.S. military is to protect the Nation from threats to its security.12 The defense and homeland security communities have recognized that climate change poses both direct and indirect threats to national security and have Read more on page 29
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In Search of Just and Reasonable Practices for Demurrage and Detention Charges
All actors of the international ocean supply chain are confronted with the issue of demurrage and detention charges. The handling, processing, and billing of demurrage and detention charges is often as confusing as the terminology for demurrage and detention. Generally speaking, demurrage charges refer to charges incurred while the container is using terminal space at a marine terminal, after discharge from the vessel, while detention charges refer to charges associated with the use of the container, but the definitions may vary among ocean carriers and marine terminal operators. Carole Rouffet Nicoletti, Hornig & Sweeney The interests between parties to the supply chain are not always aligned and their complex contractual and operational relationships create significant risk exposure Carole is an attorney at Nicoletti, for shippers, consignees, and cargo owners, as well as for ocean intermediaries Hornig & Sweeney and can be reached at crouffet@nicolettihornig. such as freight forwarders, logistics providers, and non-vessel owning common com. carriers (NVOCCs) for demurrage and detention charges.
Frustration with the amount of demurrage and detention charges often arises after events outside of the control of a shipper or consignee, such as port closures, port congestion, weather, insufficient equipment and chassis, or governmental inspection of a container, prevent the pick-up of a container from a terminal within a reasonable time and/or the return of a container within the free time allowed by a carrier.
The lack of transparency and clarity is also a cause of frustration when attempting to negotiate with ocean carriers and marine terminals to obtain release of a container from a port. Marine terminal operators and ocean carriers may have their own contractual relationships setting up certain costs for demurrage. However, shippers may be bound by the ocean carrier tariffs providing container demurrage rates ten or twenty times higher than what a marine terminal would charge. In certain circumstances, the demurrage charges to be paid by a shipper may greatly exceed the value of the actual cargo and result in significant commercial loss.
Ocean intermediaries such as NVOCCs may also be liable for high charges. When the ultimate consignee fails to pick up a container at the port of destination, carriers may seek indemnification from the NVOCC that issued a house bill of lading, and therefore appeared as a “shipper” or “consignee” in the master bill of lading. Although NVOCCs have no interest in the cargo itself and no control over the movements of the container, courts in the U.S. have held NVOCCs liable for all demurrage and detention costs.1 Read more on page 46
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Damages Recoverable in Maritime Matters, Second Edition
Written by icons of maritime law, members of the Admiralty and Maritime Law Committee of the ABA Tort Trial and Insurance Practice Section, (TIPS) have authored the latest addition to ABA Publishing shelves. Soon to be the echelon of maritime texts, the 2020 release of Damages Recoverable in Maritime Matters, Second Edition, represents the culmination of a year’s dedication of its contributing authors, editors, and peer reviewers and provides a comprehensive view of the intricacies of the maritime damages recoverable in all aspects of admiralty and maritime law. Robert L Gardana Robert L Gardana PA A hands-on guide for maritime law practitioners, Damages Recoverable in Maritime Matters, Second Edition, provides an in-depth analysis of the damages recoverable Editor: Robert L. Gardana, Past in all areas of admiralty and maritime matters, both from a prosecution and defense Chair Admiralty and Maritime Law Committee of the ABA Tort Trial and perspective, including references to hundreds of Federal and State decisions Insurance Practice Section, (TIPS). decided under the General Maritime Law Of the United State, federal statutes, state statutory remedies, and maritime law cases and rules, including the Supplemental Rules of Admiralty.
Damages Recoverable in Maritime Matters, Second Edition, includes all aspects of available damages in this complex specialized field. The breadth of the book’s coverage is clear from a review of the Chapter titles below. • Preface: David Sharpe • Chapter 1: Damages Recoverable in Collisions, Allisions, and Other Maritime Incidents - Jeanne L. Amy and Michael T. Amy • Chapter 2: Damages Recoverable by Seafarers (Jones Act and General Maritime Law) - Chase A. Jansson • Chapter 3: Damages Available to Passengers Under Maritime Law - Donald A. Mau • Chapter 4: Damages Recoverable Under the Death on the High Seas Act (DOHSA) and Its Interplay of State Wrongful Death Statutes - Captain Robert L. Gardana and Ashley S. Gardana Arrarás • Chapter 5: The Longshore and Harbor Workers’ Compensation Act 33 U.S.C. §§ 901–950 - Angie Fredrickson, Nina Mitchell, and Nina H. Sellers • Chapter 6: Damages in Cargo Cases and General Average - Chris Nolan and Sean T. Pribyl
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• Chapter 7: Salvage Awards, Towage, and Quantum Meruit Recovery - Eleni Melekou • Chapter 8: Contracts, Charter Parties, Towing, and Pilotage - Douglas W. Truxillo • Chapter 9: Maritime Toxic Exposure Claims - Danielle T. Gauer and Mark Newcomb • Chapter 10: Rule B Attachment and Rule C Arrest - Philip C. Brickman, Michael J. Daly, and Aaron B. Greenbaum • Chapter 11: Marine Insurance — Coverages Available for Maritime Risks - Attilio M. Costabel and Pamela A. Palmer • Chapter 12: Punitive Damage Awards Under General Maritime Law and Ancillary State Claims - Sarah Yantakosol Gayer • Chapter 13: Defending Damages, Apportionment of Fault, Causation, and Limitation Actions - Jessica L. Martyn and Matthew A. Moeller • Chapter 14: Maritime Whistleblowers - Danielle Gauer and Mark Newcomb • Chapter 15: Recreational Boating Remedies - B. Otis Felder
Given the complexity of the law of maritime damages, this expanded new edition is an essential resource for practitioners worldwide. While covering traditional notions and well entrenched principles of recovery, including the 30 percent for seaman status, what constitutes a “vessel,” the respondeat superior liability against a cruise liner for the medical negligence of a ship’s physician, it includes the Supreme Court recent decisions involving the unavailability of punitive damages for unseaworthiness under Dutra Group v. Batterton. The intricacies of the Longshore and Harbor Workers’ Compensation Act is thoroughly covered and the text is filled with relevant maritime citations providing thorough and well thought arguments supporting both sides of maritime cases. Regardless of whether you practice on the plaintiff or defense side of the bench, Damage Recoverable in Maritime Matters, Second Edition, is a resourceful addition to your desk arsenal of hands-on maritime materials.
The book was peer reviewed by Attilio M. Costabel, an Adjunct Professor of Law at St. Thomas University, School of Law, Robert L. Gardana who is board certified by the Florida Bar in Admiralty and Maritime Law, Stephanie A. Propsom who practices in the area of Maritime Law and Frank J. Sioli who is board certified by the Florida Bar in Admiralty and Maritime Law. The Editorial Committee consists of Attilio M. Costabel, Robert L. Gardana, Ashley S. Gardana-Arrarás, Aaron B. Greenbaum, Chase A. Jansson, Stephanie A. Propsom, David B. Sharpe and Frank J. Sioli.
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Available at ABA Publishing, with a deep discount for Admiralty & Maritime Law Committee members, please navigate to the link below: https://www.americanbar.org/products/inv/book/393853362/
DIVERSE SPEAKERS DIRECTORY Open to both ABA and Non-ABA members.
The Directory allows you to create a customized Speaker Profile and market your experience and skillset to more than 3,500 ABA entities seeking speakers around the country and the world.
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Steering... continued from page 1 issues are too various to attempt to enumerate, let alone analyze, in this short essay. Accordingly, this Article focuses on an issue that may become highly consequential to all the major, publicly traded cruise-line companies: the interaction of maritime liens and the Bankruptcy Code.3
Although it may seem unfathomable that cruise-lines with market capitalizations soaring to the tens of billions just a few months ago could see the value of their equity obliterated by the absolute-priority rule in a Chapter 11 restructuring,4 the coronavirus should now have taught us all to hope for the best but prepare for the worst.5
This Article seeks to chart a course for the strategic lawyer to guide clients through the difficult passage of maritime bankruptcy. The unique features of maritime liens will present an obstacle to the debtor-in-possession (DIP)6 in fully utilizing the administrative powers of the bankruptcy estate.7 Counsel must understand these differences with Article 9 security interests and state-law statutory liens8 (among other non-maritime liens) in order to assist the client in making the right strategic decisions about the usefulness of bankruptcy or alternative procedures.9 In accordance with this goal, this Article will describe the usually potent administrative powers that may be hamstrung by the arcane procedures and “secret liens” of the admiralty.10
In Part II, the Article discusses the major differences between maritime liens and state- law liens. In Part III, it outlines the effect of these differences on important administrative powers of the DIP (the automatic stay, § 363 sales, post-petition financing, and executory contracts). In Part IV, the Article analyzes the strategic implications for maritime debtors and creditors, in the context of the cruise-line industry.
II. Important Differences between Maritime Liens and State-Law Liens For a lawyer familiar with the modern, notice-filing system of Article 9 or the traditional common law of pledge and possessory liens, the world of maritime liens appears to be a fun-house-mirror system of secured credit. Although these differences largely stem from the doctrinal curiosity of the personhood of the ship under American Maritime Law,11 this Article will discuss only the practical differences between maritime and “terrestrial” (non-maritime) liens.12
There are four primary differences between maritime liens and terrestrial liens that may be of practical relevance in a cruise-line bankruptcy.13 First, maritime liens arise by operation of law and do not require the parties’ consent as Article 9 security interests do.14 Second, all maritime liens other than “preferred ship mortgages”15 are “secret liens” and do not require recordation or any form of notice filing.16 Third, maritime liens are not extinguished by the sale of the vessel to a bona fide
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purchaser.17 Fourth, maritime liens of the same class are ranked in a “last in time, first in right” order of priority.18
Two final points are necessary to round out this brief discussion of the differences between maritime liens and non-maritime liens. First, all maritime liens19 outrank any non-maritime lien.20 Second, maritime liens traditionally must be perfected by an admiralty court proceeding in rem against the vessel.21 This second point may give rise to a fascinating but nettlesome constitutional question concerning the bankruptcy court’s authority to sell a ship free and clear of liens that was hinted at by Northern Pipeline Constr. Co. v. Marathon Pipe Line Co.22 and Stern v. Marshall.23 See Part III.B, infra.
III. Maritime Liens and the Administrative Powers of the Estate (DIP) The administrative powers provided by Chapter Three, Subchapter Four of the Bankruptcy Code afford to the debtor powers that would be unimaginable outside of bankruptcy. 24 The automatic stay is a “statutory injunction” that immediately provides a reprieve for debtors beset by dunning creditors the very instant the debtor files for bankruptcy.25 The trustee (or DIP in Chapter 11) has vast powers to use, sell, or lease the property of the estate either in the ordinary course or with the blessing of the bankruptcy-court judge.26 The DIP can even prime senior liens on property of the estate to obtain post-petition financing with the bankruptcy court’s blessing and limited appellate review.27 Finally, the DIP has the power to assume or reject “executory contracts,” and the rejection of such contracts converts the damages for breach of the executory contract into a pre-petition unsecured claim, often redounding to the benefit of the DIP by allowing it to pay dimes or pennies on the dollar for the actual damages caused to the counterparty by breach of the executory contract.28
All of these powers—and the strategic “bargaining endowments”29 they provide the DIP—can be limited by the unique features of maritime liens to varying degrees.
A. The Automatic Stay and Admiralty: The In Custodia Legis Doctrine Prior to the passage of the modern Bankruptcy Code in 1978, the first court to take possession of a vessel would have exclusive jurisdiction over such vessel.30 The in custodia legis doctrine, “based on principles of comity, is ‘a practical means of resolving a jurisdictional dispute between two courts with concurrent jurisdiction over a single res.’”31 Even after the passage of the Bankruptcy Code, bankruptcy courts often deferred to admiralty courts by lifting the automatic stay to allow the admiralty court to determine the fate of the vessel.32 In an influential bankruptcy- court opinion following shortly after Northern Pipeline,33 the court reasoned that
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following the in custodia legis doctrine was preferable because “only an admiralty court can without question deliver a vessel free and clear of all liens…it is unclear that a foreign jurisdiction would recognize the sale of a vessel by the Bankruptcy Court.”34 Some commentators have opined that the in custodia legis doctrine encourages a race to the courthouse.35
A circuit split over the continued relevance of the in custodia legis doctrine has developed between three of the nation’s major maritime circuits.36 Briefly, the Fifth Circuit has sided with the bankruptcy court and sought to consolidate proceedings under the bankruptcy court’s jurisdiction in both Chapter 11 reorganizations and Chapter 7 liquidations.37 The Second Circuit has adopted a middle way—adhering to in custodia legis in Chapter 7 liquidations, but recognizing the need for a centralized proceeding in Chapter 11 reorganizations.38 Recently, the Ninth Circuit intensified the circuit split by holding a bankruptcy-court sale invalid because a previously filed in rem proceeding to enforce a maritime lien had vested the admiralty court with jurisdiction over the vessel.39 The court further stated that the admiralty court’s previously perfected jurisdiction would be respected in both a liquidation and a reorganization.40 This circuit split could present forum-shopping opportunities for all cruise-line stakeholders. See Part IV.A, infra.
B. Section 363 Sales, Admiralty, and the Authority of Article I Judges Section 363 sales have become a frequently used method for debtors to gain much-needed cash during reorganization.41 Unfortunately for maritime debtors, it is unclear whether bankruptcy courts possess the constitutional authority to sell a vessel free and clear of all liens after Stern, 564 U.S. 46242 There exists a tension between a long line of cases holding that only an admiralty court may administer a proceeding in rem against a vessel and the plain language of 28 U.S.C.A. § 157(b) (2)(N) (West) which allows the bankruptcy court to enter final orders “approving the sale of property.”43 Stern, 564 U.S. 462 seems to have weighted the scales in admiralty’s favor, with one leading scholarly commentator explaining that:
“Until Stern, 28 U.S.C.A. § 157(b)(2)(N) provided a clear statutory basis to conduct sales of assets, including vessels. With Stern, however, the statutory framework began to crumble in that another provision of 28 U.S.C.A. § 157(b)(2), which authorized bankruptcy courts to hear and determine counterclaims by the estate against persons filing claims against the estate, was held unconstitutional. Notwithstanding the fact that Congress deemed such counterclaims appropriate for adjudication by a bankruptcy court, the Supreme Court in Stern held that a non- Article III bankruptcy judge, under the circumstances presented, could not adjudicate state law claims set forth in a counterclaim.”44
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If cruise-lines seek to reorganize under Chapter 11, the fate of multi-hundred-million- dollar ships and the proceeds therefrom could be decided by constitutional arcana of a federal-courts nerd’s dreams. See Part IV.B, infra.
C. Pesky Priorities and Priming for Post-Petition Financing 11 U.S.C.A. § 364(d) (West) allows the trustee or DIP to prime liens45 in order to obtain vital post-petition financing.46 In a non-maritime bankruptcy, senior lienholders will often be other financial institutions (or the post-petition lender itself) thus making negotiations over priming in order to secure post-petition financing easier for the DIP. 47 However, in a maritime bankruptcy, senior lienholders on the debtor’s most valuable assets—vessels—will often be classes of lowly seamen and maritime- tort claimants who may not necessarily possess the financial acumen or vested self-interest to support reorganization by accepting junior-lien status. Although the priority of maritime liens is not governed by statute48 or a uniform general-maritime- law doctrine, there is “general agreement” on the rankings.49
First in priority are “custodial expenses,” i.e. those incurred while the vessel is in the custody of the court (in custodia legis).50 Second in priority are seaman’s wage claims, which have long been characterized as “’sacred liens’ entitled to protection ‘as long as a plank of the ship remains.’”51 Third in priority are salvage claims.52 Fourth in priority are maritime-tort claims for collision and personal injury.53 Following are claims for repairs, towage, supplies, and “other necessaries.”54 And the lowest-ranking maritime lien is the only kind of maritime lien that a financial- institution creditor can obtain: a preferred ship mortgage, which is outranked by any “preferred maritime lien” under 46 U.S.C.A. § 31326(b)(1).
While some commentators urge policymakers to adopt the maritime approach of providing involuntary creditors (e.g. wage claimants and tort claimants) with priority over secured creditors,55 it is likely to cause headaches for the DIP in any conceivable cruise-line bankruptcy. See Part IV.C, infra.
D. Executory Contracts, Collective Bargaining, and Wage Priority The power of the trustee or DIP to reject executory contracts and then pay only dimes or pennies on the dollar for the actual damages caused by such breach has been an object of fascination among bankruptcy scholars for many decades.56 The priority of maritime liens generally, and seaman’s wage claims in particular, may make rejecting collective-bargaining agreements a less-useful tool for maritime debtors to reduce overhead while restructuring.
Ordinarily, were an employer to reject a collective-bargaining agreement, the employees’ damages for breach would become a pre-petition unsecured claim with low priority under the operation of 11 U.S.C.A. § 365(g) (West).57 However, because
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bankruptcy courts apply the priority rules provided by the underlying substantive law (usually state law, but federal maritime law, here) and because federal maritime law grants seamen’s wages priority over all but custodial fees, rejecting a maritime collective-bargaining agreement may not benefit the DIP nearly as much as usual.58
IV. Potential Implications from the Uniqueness of Maritime Liens A. Choosing the Bankruptcy Venue—Revenge of the Sovereign- Selection Clause? The circuit split between the Second, Fifth, and Ninth Circuits over the continuing vitality of the in custodia legis doctrine, see Part III.A, supra, should be highly consequential for at least four classes of stakeholders: (1) the cruise-line DIP, (2) seamen with wage claims only, (3) seamen with wage claims, personal-injury/ wrongful-death claims, and maintenance-and-cure-claims,59 and (4) passengers with personal-injury/wrongful-death claims.
The cruise-line DIP will want to select a bankruptcy venue in the Fifth Circuit and would likely not mind venue in the Second Circuit.60 However, the DIP should certainly be wary of filing in the Ninth Circuit. A Ninth Circuit bankruptcy court or bankruptcy appellate panel (BAP) would likely follow the binding precedent of Barnes v. Sea Hawaii Rafting, LLC61 and abstain from exercising jurisdiction over a vessel that was already arrested by an admiralty court.
Even though the cruise-line debtor may select the bankruptcy venue, a difficult issue might be presented if the wage claimants and/or maritime-tort claimants were to arrest a multi-hundred-million-dollar mega-vessel in a district court in the Ninth Circuit before the filing of the bankruptcy petition. Say, the cruise-line debtor had filed in the Southern District of Texas, for instance, and that maritime-tort claimants had already arrested a mega-vessel in the Central District of California, would the federal court in California be able to skirt binding precedent to release the vessel and add to the bankruptcy estate in order to facilitate the smooth reorganization of the DIP? Or would the admiralty court maintain possession of the vessel and the case, and divvy up the proceeds among the maritime-tort claimants, and the notified creditors, in a Rule F Limitation of Liability Action? The uncertainty leads to one certain course of action for the cruise-lines: do not sail allegedly offending vessels into the Ninth Circuit’s jurisdiction until you have decided whether Chapter 11 reorganization will be necessary to sort your affairs.
For the wage and maritime-tort claimants the calculus is precisely the inverse. They will want to seek the Ninth Circuit. A recent case involving a “sovereign-selection clause”62 in California state court suggests that preferred-maritime-lienholders may be able to ask the admiralty court in the Central District of California to take constructive
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possession of certain cruise-line mega-vessels residing outside the district court’s physical jurisdiction.63 In Korman, 32 Cal. App. 5th 206, the plaintiff argued that the forum-selection clause violated the saving-to-suitors clause64 by mandating that only the federal courts of the Central District of California had jurisdiction to hear any case arising under the contract.65 This kind of a forum-selection clause, one that specifies that only the federal or state courts within a certain location may hear cases arising from the contract, is called a “sovereign-selection clause,”66 but the California appellate court held that this sovereign-selection clause did not violate the plaintiff’s saving-to- suitor-clause rights.67 Moreover, the court held that “federal admiralty law” constituted the rules of decision for this case,68 thus even though this is a state-court case it has persuasive precedential value for federal admiralty courts.
Maritime-tort claimants have a colorable argument that, under their employment contracts or passenger tickets,69 the only competent jurisdiction to decide the liability of the ship or the cruise-line in personam would be the federal admiralty court in the Central District of California. It may be shrewd for maritime-tort counsel to bring a case in rem against an offending vessel70 although it be outside the Central District of California’s physical jurisdiction. The Central District of California could make a declaratory judgment that, under the parties’ contract and the pro-enforcement stance of the general maritime law toward forum-selection clauses since Carnival Cruise Lines v. Shute,71 the forum-selection clause is valid, and it is the only court competent to hear the in rem proceeding. Could the Central District of California then issue an injunction against the cruise-line to navigate the allegedly offending vessel into its physical jurisdiction so that it may properly arrest the vessel under the time-honored tradition of federal maritime law? Given the enormous value of cruise-line mega-vessels and the leverage that an arrest in a Ninth Circuit district court would give to maritime-tort claimants, a petition for a declaratory judgment and injunction from the Central District of California is likely a gamble worth taking for plaintiff’s counsel.
B. Constitutional Attack on § 363 Sales of Vessels Assuming that a cruise-line debtor successfully wrangles all its collateral into a friendly bankruptcy venue, disgruntled claimants will still have a potent weapon to scuttle any reorganization they disfavor: the colorable constitutional attack on the “final order” of a § 363 sale after the Supreme Court’s holding in Stern v. Marshall. See Part III.B, supra. Under Stern’s reasoning—that allowing non-life-tenured, non- salary-protected Article I judges to wield the great power of issuing final orders would erode the authority of the Judicial Branch72—how could the sale of a five-hundred- million-dollar ship by the bankruptcy judge be any less a threat to the separation of powers than the bankruptcy court adjudicating Anna Nicole Smith’s four-hundred- million-dollar, state-law counterclaim against Pierce Marshall?
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Indeed, the argument for vesting the in rem proceeding against an allegedly offending vessel in the exclusive jurisdiction of an Article III judge sitting in admiralty seems even stronger. After all, the constitutional structure embodied in Article III should be much more offended by an Article I judge finally deciding federal-maritime claims than an Article I judge finally deciding state-law counterclaims, which an Article III judge could only properly adjudicate in a case of diversity or supplemental jurisdiction. The Constitution itself vests the federal courts with admiralty and maritime jurisdiction,73 unlike the jurisdiction to hear state-law tort counterclaims in Stern. Moreover, the in rem proceeding to enforce a maritime lien is vested exclusively in admiralty courts under 28 U.S.C.A. § 1333 and long tradition.74
Still, the necessity of speed and decisiveness may outweigh doctrinal niceties in a fast-moving, multi-billion-dollar Chapter 11 reorganization.75 One must remember that the dispute between Anna Nicole Smith and Pierce Marshall did not concern thousands of other stakeholders. While potential cruise-line debtors have reason to hope that a bankruptcy judge will rule pragmatically on the constitutional issue, if the vessel will not be able to travel and produce revenue for the DIP because of a public-health directive or other “social-distancing measures,” is there really such great necessity to hurry a § 363 sale or other final order? Would there not be plenty of time to refer the constitutional question up the chain on interlocutory appeal?
C. Could Spiteful Seamen or Passengers Scuttle Post-Petition Financing? Under the unique system of maritime-lien priority, any preferred ship mortgage given to a lender to secure financing will always be outranked by a preferred maritime lien. See Part II, supra. Thus, seamen’s wage claims and maritime-tort claims will have priority over any potential post-petition lender. In the event that allegedly offending vessels need to be used as collateral in order to entice lenders to extend post- petition credit, seamen and passengers will have unusual leverage relative to non- maritime employees and tort victims. Under 11 U.S.C.A. § 364(d), in order to prime a lien on property of the estate, the trustee (DIP) must prove that the senior lienholders will receive “adequate protection.” Adequate protection is defined by example in 11 U.S.C.A. § 361, and it is a central concept for understanding the administrative powers of the estate. Adequate protection consists of lump-sum or periodic cash payments and additional or replacement liens on property of the estate.76
Non-maritime employees and tort claimants would be unsecured creditors in an “ordinary” (non-maritime) bankruptcy. Thus, the DIP would not need to worry about these creditor classes very much in trying to obtain post-petition financing—their claims would not encumber any of the estate’s valuable collateral. In a maritime bankruptcy, and particularly in a cruise-line bankruptcy where multi-hundred-million-
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dollar floating-palaces would constitute the lion’s share of the debtor’s collateral, the priority of preferred-maritime lienholders is likely to prevent the DIP from obtaining post-petition financing at comparable interest rates to those of a non-maritime debtor with similarly valuable collateral and future business prospects.
If seamen or passengers are unhappy with their fate or with their share of the pie in bankruptcy, interfering with the DIP’s attempts to obtain post-petition financing would be a way to harass their real or perceived enemies.
V. Conclusion A brief article by a fledgling legal mind could not hope to broach, let alone fully analyze, all of the fascinating legal issues that form such a helpful diversion in these uncertain and frightening times. As the tide of care-free prosperity that has blessed this nation and many lands across the world ebbs, it is likely that legal issues attending maritime bankruptcies—specifically cruise-line bankruptcies—will rise in prominence and importance. Hopefully, this Article serves as a useful opening in the strategic discussion that should be occurring between all cruise-line stakeholders and their counsel.
Endnotes 1 The S&P 500’s value was 3,225.52 on January 31, 2020 and is 2,824.75 as of April 23, 2020. This is an approximately 12.5% decline despite the Herculean efforts of the Federal Reserve. The three major cruise-lines on the other hand—Carnival Cruise Lines (CCL) (approximately 72% decline), Norwegian Cruise Line Holdings (NCLH) (approximately 78.5% decline), and Royal Caribbean Cruise Lines (RCL) (approximately 68.5% decline)—have all declined in market value by more than two-thirds of their pre-crisis levels.
2 See e.g. Christopher Reynolds, 39 Coronavirus Cases on Cruise Ship Off Japan; 174 Now Infected, L.A. Times, Feb. 11, 2020 at https://www.latimes.com/travel/ story/2020-02-05/coronavirus-cruise-passengers-diamond-princess. 3 11 U.S.C.A. § 101 (West) et seq. (2012) 4 11 U.S.C.A. § 1129(b)(2)(B) (West) (providing that a Chapter 11 plan may not be “crammed down” on unsecured creditors unless “junior claims,” i.e. equity, will not receive “any property” under the plan). 5 Equity could potentially survive a Chapter 11 restructuring but only if each senior class of claims accepts the plan or is unimpaired by the plan. 11 U.S.C.A. § 1129(a) (8) (West). Nevertheless, given the wide-ranging classes of stakeholders with claims senior to equity, one should prepare for the worst-case scenario of involuntary acceptance of the plan through cramdown and the concomitant, draconian rigors of the absolute-priority rule. 6 Id. § 1101(1). The DIP is effectively the trustee in a Chapter 11 reorganization, with all of the powers and most of the duties attending that role. Id. § 1107(a). 7 11 U.S.C.A. § 361-366 (West). 8 In many ways, statutory liens, such as artisan’s liens, are most similar to maritime liens as both arise by operation of law rather than agreement between the parties. The primary difference is that artisan’s liens require possession, whereas maritime liens are entirely non-possessory. 9 The two main alternatives for cruise-lines (in a limited-fund situation) would be (1) Limitation proceedings under Rule F of the Supplemental Admiralty Rules of the Federal Rules of Civil Procedure or (2) interpleader. For potential maritime-lien claimants, the main alternative would be an admiralty proceeding in rem under Rule C of the Supplemental Rules for Admiralty (arrest). 10 Osaka Shosen Kaisha v. Pac. Exp. Lumber Co., 260 U.S. 490, 497, 43 S. Ct. 172, 67 L. Ed. 364 (1923) (“this privilege or lien, though adhering to the vessel, is a secret one”). 11 See Harmer v. Bell (The Bold Buccleugh) 13. Eng. Rep. 884 (Privy Council, 1852). “U.S. Courts have accepted the personification theory of The Bold Buccleugh. By contrast, modern English practice has rejected this theory.” David W. Robertson, Steven F. Friedell, & Michael F. Sturley, Admiralty and Maritime Law in the United States 404 (3d ed. 2015). 12 For a deeper analysis of this metaphysical curiosity, see generally, e.g., Douglas Lind, Douglas Lind, Pragmatism and Anthropomorphism: Reconceiving the Doctrine of the Personality of the Ship, 22 U.S.F. Mar. L.J. 39 (2010). (discussing the historical development of the doctrine and alternative philosophical and practical bases for its continued practice).
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13 Ian T. Kitts, Note: Ian T. Kitts, Between Scylla and Charybdis: Maritime Liens and the Bankruptcy Code, 14 Brook. J. Corp. Fin. & Com. L. 125, 129 (2019). 14 The John G. Stevens, 170 U.S. 113, 122, 18 S. Ct. 544, 42 L. Ed. 969 (1898) (“The collision, as soon as it takes place, creates, as security for the damages, a maritime lien or privilege, jus in re, a proprietary interest in the offending ship”) compare § 9-203. Attachment and Enforceability of Security Interest; Proceeds; Supporting Obligations; Formal Requisites., Unif.Commercial Code § 9-203 (outlining the prerequisites for attaching and perfecting a security interest). 15 See 46 U.S.C.A. § 31322(a) (West 2012) (detailing the requirements for obtaining a preferred ship mortgage, including filing with the Coast Guard “in substantial compliance” with the requirements of 46 U.S.C.A. § 31321 (West)). 16 Compare Osaka Shosen Kaisha, 260 U.S. 490, with U.C.C. §§9-501—9-510 (enumerating the technical requirements of the filing system). 17 See e.g. Harmer v. Bell (The Bold Buccleugh), supra, note 11. Compare § 9-320. Buyer of Goods., Unif.Commercial Code § 9-320 (detailing how both business and consumer-goods purchasers can take free and clear of security interests created by the buyer’s seller). 18 The John G. Stevens, 170 U.S. 113 (“[T]he general rule [] is that they are to be paid in inverse order”). Compare § 9-322. Priorities Among Conflicting Security Interests in and Agricultural Liens on Same Collateral., Unif.Commercial Code § 9-322 (outlining the traditional common-law “first in time, first in right” priority system as the default rule for security interests under Article 9). 19 The two main classifications of maritime liens are: (1) preferred ship mortgages and (2) preferred maritime liens. Preferred ship mortgages are a creature of statute.See 46 U.S.C.A. § 31322(a). “Preferred maritime lien” is a catch-all name given by statute to pre-existing, general-maritime-law liens that outrank preferred ship mortgages. See 46 U.S.C.A. § 31301(5) (West). 20 46 U.S.C.A. § 31326(b)(1) (West) provides that a preferred ship mortgage ranks “over all claims against the vessel (except for expenses and fees allowed by the court, costs imposed by the court, and preferred maritime liens.” (emphasis added) See also David Weil, David Weil, Charting A Course Through Dangerous Waters: A Landlubber’s Introduction to the Rules of Maritime Indebtedness in the Context of A Maritime Bankruptcy, 9 U.S.F. Mar. L.J. 195, 205 (1996) (“Simply put, all maritime creditors have priority over all non-maritime creditors”). 21 The Rock Island Bridge, 73 U.S. 213, 215, 18 L. Ed. 753 (1867) (“The lien and the proceeding in rem are therefore correlative—where one exists, the other can be taken, and not otherwise”). 22 N. Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S. Ct. 2858, 73 L. Ed. 2d 598 (1982). See also Weil, supra, note 20, at 218 (“sophisticated admiralty lawyers believe that the current system, with the district court automatically referring bankruptcy cases to the bankruptcy court is unconstitutional.”). 23 Stern v. Marshall, 564 U.S. 462, 131 S. Ct. 2594, 180 L. Ed. 2d 475 (2011). See also Stewart F. Peck, Stewart F. Peck, Navigating the Murky Waters of Admiralty and Bankruptcy Law, 87 Tul. L. Rev. 955, 966 (2013) (“the issue is whether, in light of Stern, the bankruptcy court may constitutionally, inter alia, enter final orders selling vessels free and clear of liens and encumbrances, enter final orders staying maritime foreclosure actions, [and] enter final orders allowing and ranking maritime liens and ship mortgages”).
24 11 U.S.C.A. § 361-366 (2012). See also e.g. Elizabeth Warren, Jay L. Westbrook, Katherine Porter, & John A.E. Pottow, The Law of Debtors and Creditors 378 (7th ed. 2014) (“Outside bankruptcy, creditors enjoy tremendous power to call loans and seize assets; in bankruptcy, the automatic stay goes into effect while the debtor, as DIP, continues those negotiations.”). 25 11 U.S.C.A. § 362(a) (West). 26 See generally 11 U.S.C.A. § 363 (West). 27 Id. §§ 364(d), 364(e). 28 Id. §§ 365(a), 365(g).
29 See e.g., Warren et al., supra, note 24, at 359 (“Chapter 11…is an invitation to a negotiation.”) (emphasis in original). 30 Wong Shing v. M/V Mardina Trader, 564 F.2d 1183, 1188 (5th Cir. 1977). See also generally, Moran v. Sturges, 154 U.S. 256, 14 S. Ct. 1019, 38 L. Ed. 981 (1894). 31 See Weil, supra note 20, at 202 (quoting Morgan Guar. Tr. Co. of New York v. Hellenic Lines Ltd., 38 B.R. 987, 996 (S.D.N.Y. 1984)). 32 See e.g. United States v. ZP Chandon, 889 F.2d 233 (9th Cir. 1989); Morgan Guar. Trust Co. of New York, 38 B.R. 987 33 See note 20, supra. 34 Morgan Guar. Trust Co. of New York, 38 B.R. at 999. 35 Charles A. Lovell & Eugene G. Bernardo II, Charles A. Lovell & Eugene G. Bernardo, II, The Continuing Debate over Custodia Legis: An Argument for Bankruptcy Court Primacy, 30 J. Mar. L. & Com. 73, 75 (1999). 36 See, note 12, supra, Kitts at 134-138. 37 See e.g. United States v. LeBouf Bros. Towing Co., 45 B.R. 887 (E.D. La. 1985), In re Louisiana Ship Mgmt., Inc., 761 F.2d 1025 (5th Cir. 1985). 38 See e.g. Morgan Guar. Trust Co. of New York, 38 B.R. 987, and, In re Millenium Seacarriers, Inc., 419 F.3d 83, 95 (2d Cir. 2005) n. 10 (2d Cir. 2005) (then-Judge Sotomayor stating in dicta that, “We…need not opine on…whether the fact that the pertinent bankruptcy proceeding is a liquidation or a reorganization impacts the role [the in custodia legis doctrine] plays”). 39 Barnes v. Sea Hawaii Rafting, LLC, 889 F.3d 517, 524 (9th Cir. 2018). 40 Id. at 533. 41 See generally e.g. Alla Raykin, Alla Raykin, Section 363 Sales: Mooting Due Process?, 29 Emory Bankr. Dev. J. 91, 91 (2012) (noting that § 363 sales are not only an immensely popular way to raise cash, but also increasingly popular as a means of disposing of the entire Chapter 11 organization through such sale). 42 See note 23, supra, Peck at 971-979. 43 The long line of cases includes Am. Dredging Co. v. Miller, 510 U.S. 443, 447, 114 S. Ct. 981, 127 L. Ed. 2d 285 (1994); Red Cross Line v. Atl. Fruit Co., 264 U.S. 109, 124, 44 S. Ct. 274, 68 L. Ed. 582 (1924); The Moses Taylor, 71 U.S. 411, 418, 18 L. Ed. 397 (1866). 44 Id. at 972. 45 To “prime a lien” is to grant a “senior or equal lien” on the same collateral. See 11 U.S.C.A. § 364(d).
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46 See note 24, supra, Warren et al. at 435 (“Although the Code can do a great deal for debtors in trouble, it cannot magically produce cash, and so typically the debtor must find a lender who is willing to make new infusions in order for the business to survive.”). 47 See id. (“The first place a debtor goes knocking is its current lenders”). 48 The Commercial Instruments and Federal Maritime Lien Act (CIMLA) 46 U.S.C.A. § 31301-31343 is the primary statute, but “[i]t is not a comprehensive code of maritime lien law.” Robertson et al., Id. at 414. 46 U.S.C.A. § 31326(b)(1) provides the only clear statutory command regarding priority: all preferred maritime liens outrank any preferred ship mortgage, and all preferred ship mortgages outrank anything but preferred maritime liens. In other words, (1) preferred maritime liens, (2) preferred ship mortgages, (3) all other liens. Still, there remains very little authoritative guidance for how to rank preferred maritime liens against one another.
49 Grant Gilmore & Charles Black, Law of Admiralty, § 9-61, at 737 (2d ed. 1975). See also Weil, note 20, Id. at 206–207. 50 The Poznan, 274 U.S. 117, 121, 47 S. Ct. 482, 71 L. Ed. 955 (1927). Interestingly, in a case decided only six months after The Poznan, the District of Maryland allowed seaman’s wage claims and a salvage claim to have priority over custodial wharfage fees in direct contravention of the Supreme Court’s holding. The William Leishear, 21 F.2d 862 (D. Md. 1927). This case underscores the informality of the maritime-lien-ranking exercise in admiralty courts. As Profs. Gilmore and Black stated, “Any branch of the law that is administered at the trial level, with infrequent appellate review, is apt to become highly flexible and the law of lien priorities is no exception…Nine times out of ten, what seems fair to the trial judge will be the law of the case for all time.” See note 43, Id. at 736. 51 ZP Chandon, 889 F.2d at 238 (quoting The John G. Stevens, 170 U.S. at 119). The John G. Stevens at the turn of the twentieth century remains the Supreme Court’s most-recent statement on the ranking of maritime liens. Robertson et al., supra, note [] at 421. 52 Salvage claims are unlikely to be important in a cruise-line bankruptcy unless something similar to the Costa Concordia disaster occurs again and precipitates a bankruptcy. See Thomas A. Dickerson, Justice Thomas A. Dickerson, The Cruise Passenger’s Rights and Remedies 2014: The Costa Concordia Disaster: One Year Later, Many More Incidents Both on Board Megaships and During Risky Shore Excursions, 38 Tul. Mar. L.J. 515, 518–19 (2014) (Justice Dickerson discussing the allision and stranding of the Costa Concordia upon a rock off the Tuscan Coast).
53 See note 49, supra, Gilmore & Black at 739-40. 54 Id. at 740–41. 55 See generally, e.g., Kristen van de Biezenbos, Kristen van de Biezenbos, A Sea Change in Creditor Priorities, 48 U. Mich. J.L. Reform 595 (2015). 56 See e.g. Jay L. Westbrook, Jay Lawrence Westbrook, A Functional Analysis of Executory Contracts, 74 Minn. L. Rev. 227 (1989), Vern Countryman, Executory Contracts in Bankruptcy: Part I, 57 Minn. L. Rev. 439 (1974).
57 See e.g. note 24 supra, Warren et al. at 379 (“Some decry [Chapter 11’s] use as a union buster because the DIP is given power to abrogate collective bargaining agreements that would be forbidden outside of chapter 11”). 58 The bankruptcy court could view the claim to future wages as seaman’s wages or perhaps might view the claim as an unsecured contractual obligation to pay future wages not yet earned and therefore deny priority. Nevertheless, this is an issue that must be flagged because the result is not nearly as obvious as it would be in the case of a non-maritime bankruptcy. 59 The seamen classes are likely to have aligned incentives in most scenarios, but if the maritime-tort claims exceeded the value of the estate their interests could diverge. 60 After all, the Second Circuit seems virtually certain to rule in favor of the bankruptcy court’s jurisdiction in a Chapter 11 reorganization after In re Millennium Seacarriers, Inc., note 36, supra. 61 Note 39, supra. 62 A forum-selection clause that requires the parties not only to litigate within a certain state, but within only the federal or state courts within that state. Dickerson, note 52 Id. at 565. 63 Korman v. Princess Cruise Lines, Ltd., 32 Cal. App. 5th 206, 243 Cal. Rptr. 3d 668 (2019). 64 See 28 U.S.C.A. § 1333(1) (West). The saving-to-suitors clause saves to maritime suitors all common-law remedies to which they are otherwise entitled. This has traditionally been interpreted as allowing maritime suitors to bring their claims in state courts, primarily for the purpose of securing a jury trial. See generally e.g. Romero v. Int’l Terminal Operating Co., 358 U.S. 354, 79 S. Ct. 468, 3 L. Ed. 2d 368 (1959) and Lewis v. Lewis & Clark Marine, Inc., 531 U.S. 438, 121 S. Ct. 993, 148 L. Ed. 2d 931 (2001). 65 Korman, 243 Cal. Rptr. 3d at 678–680. 66 See note 62, supra. 67 Id. at 681. 68 Id. at 676. 69 Assuming that the forum-selection clauses in these two types of contracts are the same and that nothing has changed with Princess Cruise Lines’ contracting practices since the Korman, 32 Cal. App. 5th 206 decision was handed down. 70 It may be better yet to style the action as a declaratory-judgment action against the cruise line in personam. 71 Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 111 S. Ct. 1522, 113 L. Ed. 2d 622 (1991). 72 Stern, 564 U.S. at 502–503. 73 U.S. Const. art. III, § 2, cl. 3. 74 See e.g. The Moses Taylor, 71 U.S. 411.
75 Cf. Warren et al., note 24 Id. at 368 (“The drafters of Chapter 11, and the judges and lawyers that apply it, have a strong practical streak.”). 76 11 U.S.C.A. § 361(1) and (2). 11 U.S.C.A. § 361(3) provides for “other relief” as a base-covering catch-all, but in practice adequate protection always consists of cash or liens.
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On Thin Ice... continued from page 12 framed climate change as a “threat multiplier,” meaning that climate change impacts exacerbate worldwide stressors that already promote terrorist activity and violence, such as poverty, environmental degradation, political instability, and social tensions.13 Additionally, climate change “presents risks to three elements of military effectiveness: readiness, operations, and strategy.”14 Initially viewed as an “emergent threat” due to worldwide increasing humanitarian crises that might require the military to support civil authorities, climate change has grown to pose even greater challenges to the military.15 As the first Secretary of Defense to formulate the military’s climate change adaptation strategy, Chuck Hagel summarized these projected operational challenges:
The military could be called upon more often to support civil authorities, and provide humanitarian assistance and disaster relief in the face of more frequent and more intense natural disasters. Our coastal installations are vulnerable to rising sea levels and increased flooding, while droughts, wildfires, and more extreme temperatures could threaten many of our training activities. Our supply chains could be impacted, and we will need to ensure our critical equipment works under more extreme weather conditions. Weather has always affected military operations, and as the climate changes, the way we execute operations may be altered or constrained.16
Thus, the projected impacts of climate change are anticipated to stress the military for years to come.17 Although the military may face unique climate change challenges, it “also possess[es] unique advantages in the realm of climate change adaptation… due to its developing expertise, the possibility of the military’s enormous influence in the realm of climate change adaptation should be recognized and embraced.”18
II. National policies direct the military to plan for and adapt to climate change “…[C]limate change constitutes a serious threat to global security, an im- mediate risk to our national security… it will impact how our military defends our country… and we need to act now.” – President Barack Obama19
The National Defense Authorization Act for Fiscal Year (FY) 2008 was the first time that Congress directed the Department of Defense to include climate change as a national security risk in its next national security and national defense strategies.20 Specifically, these strategies were to:
include guidance for military planners to assess the risks of projected climate change to current and future mission of the armed forces; to
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update defense plans based on these assessments, including working with allies and partners to incorporate climate mitigation strategies, capacity building, and relevant research and development; and to develop the capabilities needed to reduce future impacts.21
Furthermore, Congress also directed the Department of Defense in its next quadrennial defense review to “examine the capabilities of the armed forces to respond to the consequences of climate change, in particular, preparedness for natural disasters from extreme weather events and other missions the armed forces may be asked to support inside the United States and overseas.”22 Climate change was included in subsequent versions of these documents as well. However, in 2018, the Quadrennial Defense Review was replaced by the classified National Defense Strategy; the unclassified summary fails to mention climate change.23
Similarly, the Department of Homeland Security addresses the homeland security risks of climate change in its National Strategy for Homeland Security Strategy24 and Quadrennial Homeland Security Review,25 though it is not mandated to do so. The most recent version of the Quadrennial Homeland Security Review considers the abrupt or rapid impacts of climate change to be a “potential black swan”—a low- probability, high-consequence event “that could materially change our assessment of overall homeland security risk and priorities over the next five years.”26
In addition to including climate change security threats in their statutorily mandated strategic review processes, the Departments of Defense and Homeland Security each issued a climate change adaptation roadmap in 2012 pursuant to Executive Order 13514. 27 The roadmaps identify and plan for managing short- term and long-term climate change risks, such as sea level rise, extreme weather events, and drought.28
U.S. and naval Arctic strategies and implementation plans reflect heightened concern of climate change threats to national interests in the region Even before higher level climate change policy was put into place, the Navy, Coast Guard, and Marine Corps released A Cooperative Strategy for 21st Century Seapower—also known as the “Maritime Strategy”29— which states: “Climate change is gradually opening up the waters of the Arctic, not only to new resource development, but also to new shipping routes that may reshape the global transport system. While these opportunities offer potential for growth, they are potential sources of competition and conflict for access and natural resources.”30 Foreshadowing potential national security implications—addressed further in Part IV—this strategy
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set the foundation for Arctic climate change adaptation challenges facing the sea services into the next decade and beyond.
Additionally, the growing concern over the unique climate change impacts to national security in the Arctic prompted the United States government to adopt additional policies, plans, and strategies focusing on this region. In fact:
Russia’s dramatic planting of a titanium flag on the Arctic Ocean sea bottom at the North Pole in 2007 prompted a U.S. policy review resulting in National Security Presidential Directive-66/Homeland Security Presidential Directive-25 [NSPD-66/HSPD-25], and raised the possibility that Arctic issues will require national security attention from U.S. naval forces in the future.31
Among the considerations informing this directive are climate change effects and increased activity in Arctic waters.32 This directive thus established a national Arctic policy declaring that the United States has compelling interests in the region requiring protection. With specialized expertise, ability, and historical presence to meet maritime domain awareness requirements33 and to recognize and respond to any potential security threats to the United States in this dynamic maritime environment, the Coast Guard and Navy are uniquely situated to shape climate change efforts in the region.34
Building on NSPD-66/HSPD-25 that same year, the Navy chartered the Navy Task Force Climate Change (NTFCC) to develop an Arctic roadmap “to promote maritime security and naval readiness in a changing Arctic.”35 In fact, the NTFCC charter declared that because the United States is an Arctic nation with strategic interests in a primarily maritime environment, “the Navy must consider the Arctic and climate change in its future policy, strategy, force structure, and investments.”36 Thus, in 2009 the Navy released its Arctic Roadmap, which served primarily as an assessment of the evolving Arctic situation rather than as an operations guide.37 The Navy then updated the roadmap in 2014 to serve as the implementation plan,38 mainly focusing on adaptation actions the Navy should take through 2020.39
A key partner of the Navy, the Coast Guard similarly developed a task force to study operational challenges and capabilities to execute its missions in the Arctic in light of changes in sea-ice cover.40 Yielding three volumes of reports,41 this study formed the basis of the Coast Guard’s Polar Icebreaker Acquisition Program that began in 2013 to recapitalize its polar icebreaker fleet. This program is discussed more in Part V.
Both the Navy and Coast Guard’s efforts to assess climate change challenges in the Arctic occurred before any higher-level Arctic strategy or implementation plan
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was issued. In 2013, the White House, Department of Defense, and Coast Guard issued their respective Arctic strategies, all with essentially the same objectives: to protect national interests, support safety and responsible stewardship, and promote international cooperation in a rapidly changing environment brought on by climate change.42 These entities subsequently issued an implementation plan for executing their strategies.43
III. Global climate change is causing significant melting of Arctic sea ice “I agree that the effects of a changing climate — such as increased maritime access to the Arctic, rising sea levels… — impact our security situation. I will ensure … that we are prepared to address the effects of a changing climate on our threat assessments, resources, and readiness.” – Secretary of Defense James Mattis44
Although global climate change has all but disappeared from the most recent military strategic documents, the defense and homeland security communities continue to recognize and pay special attention to the national security implications of changing environmental conditions in the Arctic. Global climate change is altering the Arctic environment in dramatic and unprecedented ways. The United Nations Environment Programme has reported that the rate of overall Arctic temperature increases is almost twice the rate as the rest of the world.45 As a result, record ocean temperatures have been a factor in the decline of sea-ice levels.46 For instance, scientists noted in 2017 that the Arctic’s minimum sea-ice limit has been declining 13.5 percent per decade since 1979,47 with summer sea ice receding more quickly than winter sea ice.48 Furthermore, the twelve lowest recordings of September sea- ice coverage—the time of year when the minimum amount of sea-ice coverage in the Arctic occurs—all have happened in the past twelve years.49 At this rate, Arctic sea ice is likely to recede periodically in late summers, thus permitting “ice-free” access, anywhere from 203050 to 2040.51
IV. National and homeland security implications of Arctic climate change for U.S. naval forces “All of us, working together, can help Americans understand that it is not just about the Arctic, but it is about our Arctic – the American Arctic – and whether the United States wants to be a leader in the region or cede that position to other Arctic, and more importantly, non-Arctic, nations.” – Michael Pawlowski52
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One of the primary effects of Arctic climate change for which the Coast Guard and Navy must plan is the creation of “blue water,” meaning that warming Arctic waters have created enough ice melt to open up new shipping lanes.53 Old ice, which is multiyear ice that has formed after first-year ice endures the summer melt season,54 is quickly disappearing in the central Arctic Ocean and being replaced by softer and thinner first- year ice55 that is more fragile and regionally variable.56 Old ice “has been a traditional barrier to shipping and human activity,”57 even stopping powerful icebreakers in their tracks.58 Creation of “blue water” causes concern for the Coast Guard and Navy because human activity in the region is growing. In particular, the nascence of blue water is expected to contribute to expanding opportunities for economic ventures “by those seeking access to the region’s abundant resources and trade routes,”59 notably in oil, gas, and mineral exploration and extraction; tourism; and commercial shipping and fishing.60 The complex web of these maritime activities brings with it a host of national and homeland security implications for U.S. naval forces.
Maritime traffic related to commercial shipping and fishing, tourism, and natural resource exploration is expected to increase in the Arctic as decreasing coverage of sea ice creates more open water Expansion of open water in three trans-Arctic routes—Northwest Passage, Northern Sea Route, and Transpolar Route—is one significant result of decreasing sea-ice coverage.61 Consequently, the region has seen, and is expected to continue seeing, growing maritime activity related to commercial shipping and fishing, tourism, and energy and mineral exploration.62 Sailing between the trading blocs of Asian ports and Northern Europe through the Arctic, for example, could be reduced by 40 percent with sizeable cost savings in fuel and emissions.63 Additionally, delivering goods between countries in Asia and North America using one of these routes could save shippers many travel days and thousands of miles.64
Despite the potential for reduced transit length across the Arctic, most commercial vessel traffic currently is regional.65 From 2011 to 2013, commercial shipping transits through the Northern Sea Route increased from forty-one to seventy-one, though the number of transits has decreased since then.66 However, commercial cross- transit through Arctic waters is expected to increase over the next ten years.67 For example, in the Bering Strait, vessel transits increased from about 220 in 2008 to about 540 in 2015, and Coast Guard officials expect this number to grow yearly.68 Additionally, the first-ever commercial transit of the Northwest Passage took place in 2013 when a Danish-owned cargo ship carrying coal sailed through the area north of Canada.69 Furthermore, “Cruise companies have shown a small but growing interest in the Arctic, with one to four vessels crossing the NWP [Northwest Passage] each year…but it is unclear how that growth will change in the coming decade.”70
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In addition to opening new avenues of maritime transit, warming Arctic waters open the potential for commercial fishing and hydrocarbon and mineral exploration. Although a moratorium on commercial fishing exists currently in the U.S. Arctic,71 “…moratoriums on fishing could be in flux as fish stocks alter their paths with climate change.”72 Warming waters and retreat of polar ice may affect the range, migration, productivity, and availability of certain fish stocks,73 and in fact Coast Guard enquiry has noted that fish stocks have begun migrating further north.74 Likewise, more open water expands access to sizeable new fishing areas, which might be susceptible to overfishing75 and illegal fishing.76
In addition to potential commercial fishing activity, exploration and extraction of oil, gas, and minerals is expected to grow in the Arctic as sea ice continues to thaw, expanding the possibility of discovering these resources.77 Enlargement of an ice-free ocean in the summer may allow offshore Arctic drilling to continue, as well as possibly allow ships towing seismic arrays to explore offshore areas with fewer possible collisions with ice floes, over a longer time period.78 Coupled with improved waterway access are promising estimates of undiscovered oil, gas, and minerals that have heightened interest in exploring the area.79 A 2008 U.S. Geological Survey report stated that the “extensive Arctic continental shelves may constitute the geographically largest unexplored prospective area for petroleum remaining on Earth” and “estimated that 90 billion barrels of oil, nearly 1,700 trillion cubic feet of natural gas, and 44 billion barrels of natural gas liquids may remain to be discovered in the Arctic.”80 These prospects thus correlate to approximately thirty percent of the world’s undiscovered natural gas and thirteen percent of the world’s undiscovered oil.81 As these numbers relate to the U.S. portion of the Arctic, more than 1 billion acres of the outer continental shelf are estimated to contain “undiscovered, technically recoverable resources of approximately 27 billion barrels of oil and 131 trillion cubic feet of natural gas (although not all of these resources may be economically viable to recover).”82 Moreover, the Arctic is anticipated to contain approximately $1 trillion worth of minerals including gold, zinc, nickel, and platinum.83
However, even with environmental changes and growing interest in the Arctic, the region still retains “enduring characteristics” that present risks to surface navigation and exploration, such as unpredictable sea ice movement that could trap or damage ships.84 In fact, “the Navy predicts that access to the Northwest Passage will continue to remain limited in the near- and mid-term with an estimated 5 weeks of open water periods beginning in the 2030s.”85 As a result of such dangerous conditions, the United States needs to be more prepared to respond to emergencies,86 such as search and rescue (SAR) and oil spill response.87 “The scale of this increasing activity may be minor today and seemingly slow to build, but it still holds implications
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for the maritime services: according to some experts, the worst-case logistical and operational challenge for the Coast Guard in the Arctic is a large-scale rescue mission.”88 Of particular concern is the possibility that cruise ships will experience problems and require assistance not only with the vessels but also with their passengers.89
In addition to SAR, the Coast Guard is the primary federal responder to oil spills in the region.90 Cruise ships, vessels engaged in trade, and hydrocarbon exploration all increase the risk of oil pollution occurring and requiring a Coast Guard response.91 Depending on the location of either a SAR or oil pollution incident, Coast Guard aircraft or cutters could take hours, days, or weeks to reach the site.92 This poses a problem for oil spills in particular because oil behavior in cold and icy environments is not well understood, response strategies still are developing, and the nearest Coast Guard pre-staged deployable cleanup equipment is located in Anchorage.93 As seen with the 1989 Exxon Valdez oil spill, this type of pollution can have devastating consequences for Arctic species and ecosystems.94
Tensions among Arctic and non-Arctic nations claiming sovereign interests in the region could rise in the future As the previous section demonstrated, Arctic waters gradually are becoming more accessible for maritime transit and resource development due to climate change. Both Arctic and non-Arctic nations realize the region’s growing potential for economic opportunities.95 Within the next few decades, these opportunities likely will be a foundation of competition and conflict for the right to use shipping lanes and recover natural resources.96
Although the likelihood of conflict is low presently, “the long-term geopolitical situation is complex, nuanced, and uncertain,”97 and future disagreements over trade routes, fishing, and hydrocarbon exploration are possible.98 Even non-Arctic stakeholders, such as China, are contributing to this tension with their interest in the region’s expanding sea routes and wealth of natural resources, including oil, gas, minerals, and fisheries.99 China, in fact, “sees the Arctic as free from international boundaries”100 and believes that Arctic natural resources are “common heritage of all humankind.”101 As a result, China may challenge Arctic nations in the future with regard to guarding their own interests in the Arctic.”102 Additionally, disputes over legal title to oil and gas reservoirs are a source of low-level conflict that could escalate.103 For instance, “Though some may warn of Russian escalation in the Arctic, a majority of experts assess that the probability of energy-related Arctic conflict is low because the majority of resources are clearly within the EEZ of respective littoral Arctic states.”104 However, the central Arctic Ocean contains some gray areas where hydrocarbon reserves are not delineated clearly, thus serving as a possible source
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of conflict.105 Furthermore, jurisdictional disputes over the legal status of parts of Arctic waters remain controversial and could continue as baselines change with sea-ice retreat.106 Russia, for instance, claims part of the Northern Sea Route as its internal waters, whereas the United States considers it to be international waters.107
Traditional security threats have the capacity to grow in the thawing Arctic environment Lastly, creation of additional open water in the Arctic yields potential for growing traditional threats to national and homeland security.108 First, increased accessibility to land from water could appeal to drug runners, illegal immigrants, and terrorists smuggling in guns or weapons of mass destruction.109 Second, the region “is at risk of becoming a military flashpoint,”110 especially as Russia continues building up its military capabilities and operations as a means of staking its claim to Arctic oil, gas, and fisheries.111 Third, blue water could favor “destabilization of the global nuclear balance,” primarily between the nuclear superpowers of the United States and Russia.112
Together, then, increased maritime activity and vying sovereignty claims as a result of the Arctic’s changing climate have ramifications for the Coast Guard and Navy to safeguard the fundamental national and homeland security concerns in maritime presence and security operations, and freedom of navigation.113 These implications thus “lead to a need for a greater U.S. military and homeland security presence in the Arctic,”114 requiring the naval services to be prepared to protect sovereign interests and prevent conflict in the region.115
V. Arctic ice melt requires increased polar icebreaking capabilities to protect national interests “In the Arctic region, presence equals influence. The truth is, if we aren’t present, if we don’t know the environment today, our competitors will.” – Admiral Karl L. Schultz116
Although strategies and implementation plans are in place, the Coast Guard and Navy have taken little action to operationalize them, that is, to expand their presence in the Arctic.117 The sea services have recognized that as Arctic ice continues to recede, it opens up potential new operating ranges requiring year- round patrols.118 Due to their design limitations, Navy surface ships are capable of maneuvering and operating only up to the “marginal ice zone”119 in the Arctic.120 Coast Guard polar icebreakers, which are high endurance cutters121 engineered specifically for open- water icebreaking, are vital naval force capabilities that provide the only guaranteed surface access in the Arctic and supplement military submarine and air assets.122
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Originally the Navy’s responsibility, polar icebreaking missions were transferred to the Coast Guard in 1965.123 The Coast Guard is designated as the lead agency, with Department of Defense support, to advance U.S. security interests in the changing Arctic by “[e]nsur[ing] the United States maintains icebreaking and ice- strengthened ship capability with sufficient capacity to project a sovereign U.S. maritime presence…”124 Polar icebreakers, thus, are key instruments for establishing “maritime presence and maritime security operations, homeland security, asserting a more active and influential presence, and exercising control over the U.S. EEZ, the continental shelf, and the contiguous zone.”125 U.S. naval forces, however, have fallen short in maintaining a sufficient and capable polar icebreaker fleet.126
The nation’s icebreaker inventory and capability status are insufficient to achieve current and future Arctic security mission objectives The Coast Guard’s polar icebreaking fleet is composed of two heavy polar icebreakers, the sister ships Polar Star and Polar Sea, and one medium polar icebreaker, the Healy.127 Only the Polar Star and Healy currently are active.128 Commissioned in the late-1970s, the Polar Sea and Polar Star are past their designed 30-year service life.129 The Polar Sea has been out of service since 2010 due to a catastrophic engine failure and presently serves as a spare parts donor to the Polar Star.130 Should the Polar Star suffer the same casualty, it has no self-rescue capability131 and would have to rely on foreign icebreaker assistance.132 During the 2018 and 2019 icebreaking seasons, the Polar Star experienced fire, as well as mechanical and electrical failures, illustrating that age is taking a toll on the cutter.133 Replacing parts to keep the cutter operational is challenging because either they no longer are made or they have been stripped from the Polar Sea, requiring the Coast Guard to scour alternate sources, such as eBay.134
With only one operational heavy polar icebreaker, the Coast Guard lacks Arctic maritime domain awareness.135 National and homeland security experts thus have expressed concern that current and anticipated national security concerns in the Arctic are at risk without an expanded icebreaker fleet.136 2007 National Research Council report, for example, concluded that the United States needs a minimum of three polar icebreakers to meet the nation’s current defense, security, sovereignty, economic, and scientific requirements in the polar regions, and it anticipated that the number would increase as climate change facilitated greater activity in the Arctic.137 For instance, the Coast Guard does not have sufficient icebreaker capability to access remote areas where an oil spill may occur.138 Moreover, in 2009, Admiral Thad Allen testified that a minimum of three, but ideally six, cutters would constitute an adequate icebreaker fleet to maintain continuous presence and protect national interests as activity grows in the Arctic.139 Furthermore, in 2010, the Coast Guard
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commissioned the High Latitude Study to analyze its current and future mission needs and asset requirements in the polar regions.140 The study concluded that the “significant deterioration of the Coast Guard icebreaker fleet…will significantly impact emerging mission demands…[in] Defense Readiness, Ice Operations, Marine Environmental Protection, and Ports, Waterways, and Coastal Security in the high latitude regions.”141 This point was illustrated when, from FY 2011 through FY 2016, the Coast Guard could meet only 78 percent of requests for its polar icebreaking services mainly because both the Polar Star and Polar Sea were unavailable.142 Another study, the Department of Homeland Security’s 2013 Mission Needs Statement, confirmed that the Coast Guard requires up to three heavy and three medium polar icebreakers to meet present and future mission demands in the polar regions.143
The inadequacy of the United States’ current icebreaker inventory also causes concern as analysts note the sizable capacity of foreign icebreaker fleets and growing militarization of the environmentally changing Arctic.144 One study observed, “This deficiency is particularly significant given the recent and continuing investment in icebreaking resources by other countries, including China, Russia, Japan, South Korea, and the European Union.”145 Russia’s inventory, for example, contains forty-six icebreakers, seven of which are nuclear powered and two of which are armed with missiles.146 Additionally, Russia has eleven more icebreakers under construction and four more planned.147 Furthermore, “Russia is securing its interests with increased militarization of the Arctic” with the presumed purpose of “deter[ring] other countries and actors from pursuing Arctic interests and effectively creat[ing] a northern buffer for the Russian homeland.”148 As former Coast Guard Commandant Paul Zukunft noted, “Russia is making claims to abundant natural resources in the rapidly melting Arctic, and the U.S. can do little to challenge them…The remedy… is to build more polar icebreakers.”149 China also is demonstrating its commitment to securing a place in the Arctic, where China calls the cross-transit trade routes the “Polar Silk Road,”150 with its fleet of three icebreakers and one more under construction.151 Although China is not preparing presently to militarize the region, China has not ruled out the possibility that future conflict may occur and that the United States should “maintain defensive capabilities for safeguarding the security of the Arctic region.”152
Recapitalizing the Coast Guard heavy polar icebreaker fleet is an investment decision that supports the country’s current and emerging security needs in the changing Arctic Recognizing that increasing its icebreaking capability is not only an operational imperative to achieving its own missions within more than 950,000 square miles
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of ocean off the Alaskan coast153 but also is “critical to the success of DOD in the Arctic,”154 the Coast Guard tried for several years to recapitalize its icebreaker program.155 Faced with a tight budget156 and competing funding priorities, the Coast Guard launched a polar icebreaker acquisition program in FY 2013 to procure the first of three heavy polar icebreakers.157 The Coast Guard has taken various steps since then to advance its polar icebreaker acquisition program.158
Notably, in FY 2016, the Coast Guard and Navy established a joint partnership by forming an Integrated Program Office (IPO) “to leverage the Navy’s shipbuilding expertise and collaborate on developing and implementing an acquisition approach.”159 The Coast Guard also released an accelerated acquisition schedule where delivery of the first heavy polar icebreaker is projected to occur in FY 2023—three years earlier than initially planned.160 In FY 2017, the IPO confirmed the icebreaker design,161 which included reserving space to accommodate an anti- ship cruise missile package should the need arise in the future to arm the cutter “if tensions ramp up (‘[g]iven how rapidly the Arctic is changing, and the potential showdown in the Arctic over U.S. sovereign waters’) and the Navy continues to cede the Arctic to the Coast Guard.”162 After the IPO issued a Request for Proposal in FY 2018 for detail design and construction at a U.S. shipyard, the Coast Guard’s next step was to secure full funding in FY 2019 so that it could adhere to its accelerated acquisition schedule.163 As part of its strategy to secure its requested budget of $750 million for the heavy polar icebreaker acquisition program, the Coast Guard rebranded it the “Polar Security Cutter” program to emphasize its national security missions.164 Averting a second government shutdown, Congress passed the FY 2019 Department of Homeland Security Consolidated Appropriations Act,165 which provides $675 million for the Polar Security Cutter program, including $20 million towards materials for the program’s second ship.166 With the spending bill passed, the IPO awarded a shipbuilding contract to VT Halter Marine, Inc. on April 23, 2019.167
The sea services must plan for a likely heavy polar icebreaking capability gap between the end of the Polar Star’s useful service life and delivery of the first new heavy polar icebreaker The Polar Star’s useful service life is expected to end between FY 2020 and FY 2023.168 Deployment of the first new heavy polar icebreaker is not expected before FY 2023, and the Coast Guard does not anticipate the cutter will “achieve its operational requirements until FY 2026.”169 As required by law, the Coast Guard must determine how to mitigate this gap of three to six years.170 Currently, the Coast Guard is planning on investing $75 million to keep the Polar Star operational until FY 2025,171 which would allow the Coast Guard to concurrently operate two heavy polar icebreakers.172 However, analysts observe that this figure is too low
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because repairs will be more costly and time consuming than anticipated.173 The Polar Star thus is vulnerable to incapacitation,174 potentially leaving the United States without a national security asset “to enable full maritime power projection” in the melting Arctic for the foreseeable future.175
VI. Summary of findings and concluding remarks “The issue of climate change respects no border. Its effects cannot be reined in by an army nor advanced by any ideology. Climate change … is an issue that must be addressed by the world.” – President George W. Bush
Climate change is having a profound physical effect in the Arctic while holding consequences for national and homeland security. The decline of sea ice has heightened interest in the region, as the growing navigable sea continues to unlock new economic opportunities in commercial shipping and fishing, energy and mineral recovery, and tourism for both Arctic and non-Arctic nations.176 In addition to influencing increased human activity, these climate-induced environmental changes hold potential for conflict and competition as nations assert sovereign claims in the region.177 These factors, combined with climate model forecasts of a sustained Arctic thaw, require U.S. naval forces to maintain a continuous presence in the region using heavy polar icebreakers.178 However, obsolescence of the Coast Guard polar icebreaker fleet has hindered the sea services from achieving their Arctic strategic objectives.179 To narrow the polar icebreaking capability gap, the Coast Guard has initiated an acquisition program to recapitalize its fleet.180 With the Navy’s support, the Coast Guard is planning to construct three heavy polar icebreakers and extend the service life of the Polar Star, the nation’s only remaining operational heavy polar icebreaker.181 However, the risk exists that a three- to six-year gap could occur if the Polar Star suffers a catastrophic failure beyond repair before the expected delivery of the first new heavy polar icebreaker in 2023, thus leaving the United States vulnerable to national and homeland security risks in the warming Arctic.182
Endnotes
1 Carl Von Clausewitz. On War. Book II, Ch. II (1832). 2 “Arctic” is defined as “all United States and foreign territory north of the Arctic Circle and all United States territory north and west of the boundary formed by the Porcupine, Yukon, and Kuskokwim Rivers; all contiguous seas, including the Arctic Ocean and the Beaufort, Bering, and Chukchi Seas; and the Aleutian island chain. (Arctic Research and Policy Act of 1984, Pub. L. No. 98-373, § 112 (1984) (codified at15 U.S.C. § 4111)). 3 In this paper, the Coast Guard and Navy collectively are referred to as “maritime services,” “sea services,” “naval services,” and “naval forces” where the specified issues may apply to each of them. However, some statements relate to the individual services and are noted as such. The Navy is one of the four military branches operating under the Department of Defense. The Coast Guard is the fifth branch of the military, but it operates under the Department of Homeland Security and may be transferred to the Navy, either by Congress in a declaration of war or by presidential direction. References in this paper to “U.S. military” include all five branches, unless otherwise specified.
4 U.S. Gov’t Accountability Off., GAO-15-566, DOD Expects To Play A Supporting Role To Other Federal Agencies And Has Efforts Under Way To Address Capability Needs And Update Plans 24 (2015).
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5 Id. at 1.
6 See Ronald O’rourke, Cong. Research Serv., Rl41153, Changes In The Arctic: Background And Issues For Congress (2019), https://fas.org/sgp/crs/misc/R41153.pdf; see also Joshua William Busby, Climate Change and US National Security: Sustaining Security Admidst Unsustainability, in Sustainable Security: Rethinking American National Security Strategy (Jeremi Suri & Benjamin Valentino, eds., forthcoming 2016); Nat’l Res. Council, National Security Implications Of Climate Change For U.S. Naval Forces 48 (2011); Tod O’Connell, The Bering Strait – Strategic Choke Point (May 6, 2016) (Naval War C. paper) (on file with the Joint Chiefs of Staff Education Publications).
7 See, e.g., Henri Feron, A New Ocean: The Legal Challenges of the Arctic Thaw, 45 Ecology L.Q. 85 (2018). 8 Coast Guard Arctic Implementation Capabilities: Hearing before the Subcomm. on Coast Guard & Mar. Transp. of the H. Comm. on Transp. & Infrastructure, 114th Cong. (2016); Dep’t Homeland Sec., Coast Guard Mission Needs Statement, Fiscal Year 2015 Report To Congress (Jan. 8, 2016),https://www.dhs.gov/sites/default/files/ publications/United%20States%20Coast%20Guard%20%20Mission%20Needs%20Statement%20FY%202015.pdf; see Melissa Renee Pegna, U.S. Arctic Policy: The Need to Ratify a Modified UNCLOS and Secure a Military Presence in the Arctic, 44 J. MAR. L. & COM. 169 (2013).
9 U.S. Gov’t Accountability Off., GAO-16-453, Arctic Strategy Is Underway, But Agency Could Better Assess How Its Actions Mitigate Known Arctic Capability Gaps (2016), https://www.gao.gov/assets/680/677855.pdf; Ronald O’rourke, Cong. Research Serv., Rl34391, Coast Guard Polar Security Cutter (Polar Icebreaker) Program: Background And Issues For Congress (2019), https://crsreports.congress.gov/product/pdf/RL/RL34391. 10 Polar icebreakers are used for missions in both the Arctic and Antarctica (“polar regions”). This paper focuses on icebreaker usage in the Arctic, although reference to “polar regions” sometimes is used where necessary. 11 Chuck Hagel, U.S. Sec’y of Def., The Department of Defense Must Plan for the National Security Implications of Climate Change, White House Blog (Oct. 13, 2014, 11:30 AM), http://www.whitehouse.gov/blog/2014/10/13/defense-department-must-plan-national- security-implications-climate-change.
12 See Dep’t Of Def., Summary Of The 2018 National Defense Strategy (2018), https://dod.defense.gov/Portals/1/Documents/pubs/2018-National-Defense-Strategy- Summary.pdf; The White House, National Security Strategy (2017), https://www.whitehouse.gov/wp-content/uploads/2017/12/NSS-Final-12-18-2017-0905-2.pdf.
13 Dep’t Of Def., Quadrennial Defense Review (2014), http://www.defense.gov/pubs/2014_Quadrennial_Defense_Review.pdf; Dep’t Of Def., 2014 Climate Change Adaptation Roadmap (2014), http://www.acq.osd.mil/ie/download/CCARprint_wForeword_c.pdf; Dep’t Of Homeland Sec., Quadrennial Homeland Security Review (2014), http://www.dhs.gov/publication/2014-quadrennial-homeland-security-review-qhsr; Dep’t Of Homeland Sec., Climate Change Adaptation Roadmap (2012), https://www.dhs. gov/sites/default/files/publications/Appendix%20A%20DHS%20FY2012%20Climate%20Change%20Adaptation%2 0Plan_0.pdf.
14 The Ctr. For Climate Sec., Climate Security 101 3 (2015), http://www.climatesecurity101.org. 15 Busby, supra note 6, at 4.
16 Dep’t Of Def., 2014 Climate Change Adaptation Roadmap (2014), supra note 13, at Foreword.
17 CNA Mil. Advisory Board, National Security And The Accelerating Risks Of Climate Change 17 (2014).
18 Gregg Badichek, The Threat Divider: Expanding the Role of the Military in Climate Change Adaptation, 41 Colum. J. Envtl. L. 139, 141 (2016). 19 U.S. President Barack Obama, Remarks at the United States Coast Guard Academy Commencement (May 20, 2015). 20 Pub. L. No. 110-181 (2008). 21 Id. § 951(g). 22 Id. § 951(2).
23 Dep’t Of Def., Summary Of The 2018 National Defense Strategy (2018), https://dod.defense.gov/Portals/1/Documents/pubs/2018-National-Defense-Strategy- Summary.pdf. 24 As directed by presidential order establishing the Department of Homeland Security. 25 Homeland Security Act of 2002, Pub. L. No. 107-296 (2002) (codified at6 U.S.C. § 347).
26 Dep’t Of Homeland Sec., Quadrennial Homeland Security Review, supra note 13, at 29. 27 Exec. Order No. 13514, 74 Fed. Reg. 52117 (Oct. 5, 2009) (requiring federal agencies to evaluate climate-change risks and vulnerabilities). This Exec. Order was revoked by Exec. Order No. 13693 on March 25, 2015. Exec. Order No. 13693 required federal agencies to develop climate change preparedness and resilience planning.
28 Dep’t Of Def., Climate Change Adaptation Roadmap (2012), http://www.acq.osd.mil/ie/download/ green_energy/dod_sustainability/2012/Appendix%20A%20%20 DoD%20Climate%20Change%20Adaption%20Roadmap_20120918.pdf; Dep’t Of Def., 2014 Climate Change Adaptation Roadmap, supra note 13; Dep’t Of Homeland Sec., Climate Change Adaptation Roadmap, supra note 13 (The roadmaps focus largely on identifying risks and providing strategic objectives. Implementation plans usually are issued separately.). See, e.g., U.S. Navy, Marine Corps, & Coast Guard, A Cooperative Strategy For 21st Century Seapower (2015), http://www.navy.mil/maritime/ MaritimeStrategy.pdf (identifying climate change as an item of interest and discussing areas for likely future naval attention); see also, e.g., U.S. Navy, Marine Corps, & Coast Guard, Naval Operations Concept 2010 1 (2010), https://www.uscg.mil/Portals/0/Strategy/MaritimeStrategy.pdf (“describes the ways with which the sea services will achieve the ends articulated in A Cooperative Strategy for 21st Century Seapower”).
29 U.S. Navy, Coast Guard, & Marine Corps, A Cooperative Strategy For 21st Century Seapower (2007).
30 David W. Titley & Courtney C. St. John, Arctic Security Considerations and the U.S. Navy’s Roadmap for the Arctic, 63 Naval War C. Rev. 35, 42 (Spring 2010).
31 Nat’l Res. Council, supra note 6, at 48. 32 Titley & St. John, supra note 29, at 43. 33 “Maritime domain awareness” is defined as “the effective understanding of anything associated with the maritime domain that could impact the security, safety, or economy of the United States.” U.S. Marine Corps, Navy, & Coast Guard, A Cooperative Strategy For 21st Century Seapower supra note 28, at 15.
34 Nat’l Res. Council, supra note 6, at 30. See Badichek, supra note 18, at 139; see also Christine Parthemore, Promoting the Dialogue: Climate Change and the Maritime Services (Ctr. for a New Am. Sec., Working Paper, 2010); Titley & St. John, supra at note 30. 35 Bob Freeman, Office of the Oceanographer of the Navy, Navy Releases Roadmap for Global Climate Change (May 24, 2010), https://www.navy.mil/submit/display.
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asp?story_id=53562 (The article also notes that the Navy’s Climate Change Roadmap “is intended to be a companion document to the Navy Arctic Roadmap, released in November 2009.” According to the director of the Navy Task Force Climate Change, Rear Adm. Dave Titley, “We issued the Arctic Roadmap first because that is where the most significant evidence of climate change is occurring…”). See U.S. Navy, Navy Climate Change Roadmap (2009), https://apps.dtic.mil/dtic/tr/fulltext/u2/a522306. pdf; U.S. Navy, Navy Arctic Roadmap 2014-2030 (updated to include an implementation plan that delineates the Navy’s strategic approach to developing Arctic operation capabilities), https://www.navy.mil/docs/USN_arctic_roadmap.pdf.
36 J.W. Greenert, Task Force Climate Change Charter 1 (2009), http://greenfleet.dodlive.mil/files/2010/09/Task-Force- Climate-Change-Charter.pdf [http://perma.cc/ ML4A-M9UE]. 37 U.S. Navy, Energy, Env’t & Climate Change, Arctic & Maritime Security, http://greenfleet.dodlive.mil/climate-change/arctic-and- maritime-security [http://perma.cc/ KJP8-2KK6] (describing the roadmap as “designed to promote studies and assessments to help the Navy better understand the changing environment and its impact on future readiness, and to capture the challenges of high latitude naval operations”). 38 Id. (“…the roadmap…outlines the Navy’s strategic approach for the Arctic Ocean and the ways and means to support the desired defense and national end states”). 39 Id.
40 Abs Consulting, United States Coast Guard High Latitude Region Mission Analysis Capstone Summary (Prepared For The United States Coast Guard) (2010), http:// assets.fiercemarkets.net/public/sites/govit/hlssummarycapstone.pdf. 41 Id. at 1.
42 The White House, 2013 National Strategy For The Arctic Region (2013), https://obamawhitehouse.archives.gov/sites/default/files/docs/nat_arctic_strategy.pdf; Dep’t Of Def., Arctic Strategy (2013), https://apps.dtic.mil/dtic/tr/fulltext/u2/a591584.pdf; U.S. Coast Guard, Arctic Strategy (2013), https://www.uscg.mil/Portals/0/Strategy/ cg_arctic_strategy.pdf. T
43 The White House, Implementation Plan For National Strategy For The Arctic Region (2014), https://storage.googleapis.com/arcticgov-static/publications/related/imp_ plan_for_natl_strategy_for_arctic_region.pdf; The White House, Appendix A, Implementation Framework For The National Strategy For The Arctic Region (2016), https:// obamawhitehouse.archives.gov/sites/whitehouse.gov/files/documents/National%20Strategy%20for%20the%20Arctic%20Region%20Implementation%20Framework%20 %28Appendix%20A%29%20Final.pdf; Dep’t Of Def., Report To Congress On Resourcing The Arctic Strategy (2016), https://dod.defense.gov/Portals/1/Documents/ pubs/Report_to_Congress_on_Resourcing_the_Arctic_Strategy.pdf; U.S. Coast Guard, Arctic Strategy Implementation Plan (2014), https://www.dco.uscg.mil/Portals/9/ DCO%20Documents/5pw/Arctic%20Policy/CGAS%20IPlan%20Final%20Signed.pdf?ver=2017- 08-25-075935-927. 44 To Conduct a Confirmation Hearing on the Expected Nomination of Mr. James N. Mattis to be Secretary of Defense: Hearing Before the S. Comm. on Armed Servs., 115th Cong. (2017) (statement of James Mattis, Sec’y of Def. Nominee).
45 UNEP, Global Outlook For Ice & Snow (2007), http://www.wedocs.unep.org/bitstream/handle/20.500.11822/7792/full_report_LowRes.pdf?sequence+3&isAllowed+y.
46 Brian La Shier & James Stanish, Env’t & Energy Study Inst., Issue Brief: The National Security Impacts Of Climate Change 5 (2017). 47 Id.
48 U.S. Gov’t Accountability Off., supra note 4, at 25.
49 U.S. Gov’t Accountability Off, GAO-19-42, Navy Report To Congress Aligns With Current Assessments Of Arctic Threat Levels And Capabilities Required To Execute DOD’s Strategy (2018).
50 Nat’l Res. Council, supra note 6, at S-5 (The report also notes that “the term ‘ice-free’ is used to mean that multiyear ice has nearly (or completely) disappeared; however, to date, in what are termed ‘ice-free’ conditions, sufficient ice is present to remain a hazard to ordinary ships and routine marine operations.”).
51 U.S. Gov’t Accountability Off., GAO-12-180, DOD Addressed Many Specified Reporting Elements In Its 2011 Arctic Report But Should Take Steps To Meet Near - And Long - Term Needs (2012) (This report notes: “A joint Coast Guard/U.S. Navy Statement on Arctic ice terminology supports usage of the term ‘ice-diminished’ rather than ‘ice-free’ because both agencies recognize that the region will continue to remain ice-covered during the wintertime through the end of this century and the current and projected decline in Arctic sea ice is highly variable from year to year. The term ‘ice-free’ means that no ice of any kind is present. The term ‘ice-diminished’ refers to sea ice concentrations of up to 15 percent ice in the area.”). 52 Michael Pawlowski, Chief of Staff, Office of Senator Lisa Murkowski, Remarks at The Polar Institute’s The Arctic and U.S. National Security Symposium (Dec. 4, 2018). 53 Nick Sobczyk, Navy Plotting Release of New Arctic Strategy, Env’t & Energy Daily (Apr. 20, 2018), LEXIS.
54 Arctic Council, Arctic Marine Shipping Assessment Report 2009 22 (2009), https://www.pmel.noaa.gov/arcticzone/detect/documents/AMSA_2009_Report_2nd_ print.pdf. 55 Titley & St. John, supra note 30, at 36.
56 O’Rourke, supra note 6, at 22.
57 CNA Mil. Advisory Board, supra note 17, at 17.
58 Arctic Council, supra note 54, at 22.
59 U.S. Navy, Coast Guard, & Marine Corps, A Cooperative Strategy For 21st Century Seapower, supra note 28, at 6. 60 Id.
61 U.S. Gov’t Accountability Off., supra note 49, at 5.
62 See, e.g., U.S. Gov’t Accountability Off., supra note 4; Nat’l Res. Council, supra note 6; U.S. Coast Guard, supra note 42.
63 CNA Mil. Advisory Board, supra note 17, at 17-18.
64 U.S. Gov’t Accountability Off., supra note 48, at 5.
65 O’Rourke, supra note 6, at 25.
66 Northern Sea Route Info. Off , http://www.arctic-lio.com/.
67 See The Int’l Council On Clean Transp., A 10-Year Projection Of Maritime Activity In The U.S. Arctic Region (2015), https://www.cmts.gov/downloads/CMTS_10- Year_Arctic_Vessel_Projection_Report_1.1.15.pdf.
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68 U.S. Gov’t Accountability Off., supra note 9, at 9.
69 CNA Mil. Advisory Board, supra note 17, at 19.
70 The Int’l Council On Clean Transp., supra note 67, at 45. 71 Id.
72 Nick Sobczyk, Russia Beating U.S. to Resources—Coast Guard Chief, Env’t & Energy Daily (Apr. 18, 2018).
73 O’Rourke, supra note 6, at 39; Titley & St. John, supra note 30, at 38.
74 Robert J. Papp, The Emerging Arctic Frontier, 138/2/1308 U.S. Naval Inst. Proc. 16 (2012). 75 Feron, supra note 7, at 86. 76 Id. at 116.
77 O’Rourke, supra note 6, at 34. 78 Id. at 29. 79 Id.
80 U.S. Geological Surv., Circum-Arctic Resource Appraisal: Estimates Of Undiscovered Oil And Gas North Of The Arctic Circle, Fact Sheet 2008-3049 (2008), https:// pubs.usgs.gov/fws/2008/3049.
81 U.S. Energy Info. Admin., Arctic Oil And Natural Gas Resources (2012), http://www.eia.gov/todayinenergy/detail.cfm?id=4650.
82 O’Rourke, supra note 6, at 28-29.
83 U.S. Gov’t Accountability Off., supra note 4, at 7.
84 Id. at 9; O’Rourke, supra note 6, at 29.
85 U.S. Gov’t Accountability Off., supra note 4, at 24. 86 Busby, supra note 6, at 13.
87 See, e.g., Feron, supra note 7; O’Rourke, supra note 9. 88 Parthemore, supra note 34, at 8.
89 O’Rourke, supra note 6, at 38.
90 40 C.F.R. Part 300 (1994). See The White House, supra note 42.
91 O’Rourke, supra note 6, at 34. 92 John K. Baker, Department of Defense Arctic Strategy: Building Resiliency on Thin Ice 7 (Jan. 4, 2016) (Strategy Res. Project, U.S. Army War C.).
93 O’Rourke, supra note 6, at 34; See Dep’t Homeland Sec., Bering Sea And Arctic Ocean Pollution Response (2018), https://www.dhs.gov/sites/default/files/publications/ USCG%-20%20Bering%20Sea%20and%20Arctic%20Ocean%Pollution%20Response.pdf.
94 O’Rourke, supra note 6, at 34.
95 U.S. Navy, Navy Arctic Roadmap 2014-2030 supra note 35, at 3.
96 Titley & St. John, supra note 30, at 42 (citing U.S. Navy, Marine Corps, & Coast Guard, A Cooperative Strategy For 21st Century Seapower (2007)).
97 CNA Mil. Advisory Board, supra note 17, at 19. 98 Id. 99 O’Connell, supra note 6, at 11. 100 Id. at 2. 101 David Curtis Wright, Dragon Eyes Top of the World, Arctic Policy Debate and Discussion in China 7 (Aug. 2011) (Ctr. for Naval Warfare Stud. China Mar. Study No. 8, U.S. Naval War C.).
102 O’Rourke, supra note 6, at 66. 103 Feron, supra note 7, at 90. 104 Baker, supra note 92, at 7. 105 Feron, supra note 7, at 90. 106 Id. See Wright, supra note 101.
107 O’Rourke, supra note 6, at 60; Titley & St. John, supra note 30, at 40 (noting, “Currently there are overlapping, unresolved maritime boundary claims between the United States and Canada, Canada and Denmark, Denmark and Norway, and Norway and Russia. At this time, none of these disputed boundary claims pose a threat to global stability.”). 108 See, e.g., Feron, supra note 7; Symposium: Mounting Tension and Melting Ice: Exploring The Legal and Political Future of the Arctic: Who Controls the Northwest Passage?, 42 Vand. J. Transnat’l L. 1133 (2009). 109 Feron, supra note 7, at 86, 116; Symposium, supra note 108, at 1188. 110 Feron, supra note 7, at 120.
111 O’Rourke, supra note 6, at 60; Sobczyk, supra note 53 (noting that the Department of Defense revised its National Defense Strategy in 2018 to reflect Russia and China’s growing interest in the Arctic).
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112 Feron, supra note 7, at 120. “[The Arctic thaw] could facilitate the deployment of the American sea-based Aegis BMD [ballistic missile defense] in the Arctic Ocean (designed to intercept midcourse short-to-intermediate range missiles), as well as the deployment of surface anti-submarine warfare capabilities to hunt nuclear-armed submarines.” Id. at 122. 113 NSPD-66/HSPD-25 (III)(B)(1).
114 U.S. Gov’t Accountability Off., supra note 49, at 1.
115 U.S. Navy, Navy Arctic Roadmap 2014-2030 supra note 35, at 3; Titley & St. John, supra note 30, at 40 (stating, “While present boundary disputes and security concerns pose no major risk to international stability and security, the long-term potential for significant change in the Arctic must be recognized and thoroughly assessed.”). 116 Admiral Karl L. Schultz, U.S. Coast Guard Commandant, Remarks at The Polar Institute’s The Arctic and U.S. National Security Symposium (Dec. 4, 2018). 117 Sobczyk, supra note 53.
118 O’Rourke, supra note 6, at 46 (stating, “Although polar ice is diminishing due to climate change, observers generally expect that this development will not eliminate the need for U.S. polar icebreakers, and in some respects might increase mission demands for them…particularly since waters described as ‘ice free’ can actually still have some amount of ice.”). 119 Titley & St. John, supra note 30, at 41.
120 U.S. Gov’t Accountability Off., supra note 49, at 11. The Navy noted in a June 2018 report that its current assets are sufficient to execute the 2016 Department of Defense Arctic Strategy. Because of this contention, the Navy has no plans to ice-harden its existing surface vessels. “Ice hardening” refers to winterizing the ship’s hull for operating in polar temperatures and protecting the ship from free-floating sea ice.Id. at 3. The Navy also noted that using Coast Guard vessels is an “option” for asserting sovereign presence in the Arctic. Id. at 12. 121 A cutter is a Coast Guard commissioned vessel at least 65 feet long with living accommodations for permanently assigned crew. The polar icebreakers are in the designated WAGB class. U.S. Coast Guard, The Cutters, Boats, And Aircraft Of The U.S. Coast Guard 4 (2018), https://www.uscg.mil/Portals/0/documents/CG_Cutters- Boats-Aircraft_2015-2016_edition.pdf?ver=2018-0614-092150-230.
122 U.S. Marine Corps, Navy, & Coast Guard, A Cooperative Strategy For 21st Century Seapower, Supra Note 28, At 91; Nat’l Res. Council , supra note 28, at 91; Nat’l Res. Council, supra note 6, at 54.
123 U.S. Gov’t Accountability Off., GAO-18-600, Polar Icebreaker Program Needs To Address Risks Before Committing Resources 4 (2018). The Coast Guard’s primary duties are set forth in 14 U.S.C. § 2. Per 14 U.S.C. § 2(4), the Coast Guard shall, among other things, “develop, establish, maintain, and operate, with due regard to the requirements of national defense…icebreaking facilities…for the promotion of safety on, under, and over the high seas and waters subject to the jurisdiction of the United States,” and per 14 U.S.C. § 2(5), the Coast Guard shall “pursuant to international agreements, develop, establish, maintain, and operate icebreaking facilities on, under, and over waters other than the high seas and waters subject to the jurisdiction of the United States ”
124 The White House, supra note 42, at 8.
125 NSPD-66/HSPD-25. These objectives “speak directly to Coast Guard responsibilities, reflecting aspects of the Coast Guard’s 11 statutory missions.” Nat’l Res. Council, supra note 6, at 50-51. The Coast Guard has three basic roles—maritime safety, maritime security, and maritime stewardship—which are subdivided further into eleven statutory homeland security and non-homeland security missions, as codified in Sec. 888(a) of the Homeland Security Act of 2002.
126 ABS Consulting, supra note 40, at 10.
127 O’Rourke, supra note 9, at 3, 5 (Icebreaking classification is based on icebreaking capability. Heavy polar icebreakers can break through ice up to 6 feet thick at a speed of 3 knots, whereas medium polar icebreakers can break through ice up to 4½ feet thick at a speed of 3 knots. The Healy is used primarily for scientific research.).
128 O’Rourke, supra note 9, at 4-5. 129 Id. at 4. 130 Id. 131 The Maritime Executive, U.S. Coast Guard Receives Funding for New Heavy Icebreaker (Feb. 15, 2019), https://www.maritime-executive.com/article/u-s-coast- guard-receives-funding-for-new-heavy-icebreaker. 132 See Woody, infra note 133. 133 Christopher Woody, A Fire Broke Out Aboard the US’s Only Heavy Icebreaker in One of the Most Remote Places on Earth, Business Insider (Feb. 28, 2019), https:// www.businessinsider.com/fire-aboard-coast-guard-heavy-icebreaker-polar-star-in-south- pacific-2019-2. 134 Id. 135 Pegna, supra note 8, at 182. See supra text accompanying note 33.
136 See, e.g., Pegna, supra note 8; CNA Mil. Advisory Board, supra note 17.
137 Nat’l Res. Council, Polar Icebreakers In A Changing World: An Assessment Of U.S. Needs 99 (2007). 138 Scott Waldman, U.S. Couldn’t Clean Up an Oil Spill—Coast Guard Chief, Climatewire (July 19, 2017). 139 Oversight of the U.S. Coast Guard: Hearing Before the S. Subcomm. on Oceans, Atmosphere, Fisheries, & Coast Guard, 111th Cong. 54-55 (2009) (statement of Adm. Thad Allen, Commandant, U.S. Coast Guard).
140 ABS Consulting, supra note 40. 141 Id. at 10-13, 15.
142 U.S. Gov’t Accountability Off., Gao-17-698r, Status Of Polar Icebreaking Fleet Capability And Recapitalization Plan 4 (2017), https://www.gao.gov/assets/690/687330. pdf.
143 O’Rourke, supra note 9, at 8 (citing Dep’t Homeland Sec., Polar Icebreaking Recapitalization Project Mission Need Statement, Version 1.0, Approved By DHS June 28, 2013)).
144 See, e.g., O’Rourke, supra note 6; O’Connell, supra note 6; Baker, supra note 92.
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145 Nat’l Res Counsil, supra note 6, at 54.
146 O’Rourke, supra note 6, at 11. 147 Id. 148 Baker, supra note 92, at 4. 149 Sobczyk, supra note 72.
150 O’Rourke, supra note 6, at 64. In 2012, a Chinese icebreaker completed China’s first cross-Arctic transit by navigating the Northern Sea Route. O’Connell, supra note 6, at 10.
151 O’Rourke, supra note 6, at 11. 152 Wright, supra note 101, at 4. 153 Arctic Operations: Hearing before the H. Subcomm. on Western Hemisphere & Europe, Eurasia, & Emerging Threats, 114th Cong. (2015) (statement of Vice Adm. Charles D. Michel, Vice Commandant, U.S. Coast Guard). 154 Baker, supra note 92, at 23. 155 Ben Werner, Coast Guard Secures $655 Million for Polar Security Cutters in New Budget Deal, USNI News (Feb. 15, 2019), https://news.usni.org/2019/02/15/ polar_security_cutter_coast_guard. As the only military service not under the Department of Defense, the Coast Guard’s budget is “uniquely disadvantaged among the military services. Under the Budget Control Act, discretionary appropriations are divided into defense and non-defense expenditures and capped at limits placed upon each of those categories. Unlike other services, the Coast Guard is funded 96% by nondefense dollars, even though 40% of its major cutters are serving today under the operational command of the Defense Department.” Bryant E. Gardner, Semper Gumby, Benedict’s Mar. Bull. (2018).
156 See U.S. Gov’t Accountability Off., supra note 9, at 37 (The preliminary estimate for one heavy polar icebreaker was $1.09 billion. The Coast Guard’s FY 2016 acquisition budget was $1.945 billion.).
157 U.S. Gov’t Accountability Off.., supra note 9, at 1.
158 U.S. Gov’t Accountability Off., supra note 142, at 4. A detailed discussion of the acquisition program, including design specifications, funding, and costs, is found in U.S. Gov’t Accountability Off. supra note 9.
159 U.S. Gov’t Accountability Off., supra note 158, at 4. 160 Id. at 5. 161 Id. 162 Megan Eckstein, Zukunft: Changing Arctic Could Lead to Armed U.S. Icebreakers in Future Fleet, USNI News (May 18, 2017), https://news.usni.org/2017/05/18/ zukunft-changing-arctic-environment-could-lead-to-more-armed-icebreakers-in-future-fleet.
163 U.S. Gov’t Accountability Off., supra note 9, at 37.
164 O’Rourke, supra note 9, at 12. 165 Division A of H.R.J. Res. 31, 116th Cong./Pub. L. No. 116-6 (2019). 166 The Coast Guard and Navy now expect the acquisition cost for each heavy polar icebreaker to be approximately $700 million. The first ship, known as the lead ship, will cost more because “it will incorporate design costs and be at the start of the production learning curve for the class.” O’Rourke, supra note 6, at 47. 167 The Maritime Executive, VT Halter Wins Contract for New U.S. Coast Guard Icebreaker (Apr. 23, 2019), https://www.maritime-executive.com/article/vt-halter-wins- contract-for-new-u-s-coast-guard-icebreaker.
168 U.S. Gov’t Accountability Off., supra note 9, at 44. 169 Id. 170 Coast Guard and Maritime Transportation Act of 2012, Pub. L. No. 112-213, § 222, 126 Stat. 1540, 1560-1561 (2012), amended by Howard Coble Coast Guard and Maritime Transportation Act of 2014, Pub. L. No. 113-281, § 505, 128 Stat. 3022, 3059-3060 (2014).
171 U.S. Gov’t Accountability Off., Gao-18-454, Coast Guard Acquisitions: Actions Needed To Address Longstanding Portfolio Management Challenges 31 (2018). 172 Id. at 29. 173 Id. at 31. 174 Id. 175 Baker, supra note 92, at 14.
176 See, e.g., O’Connell, supra note 6; U.S. Navy, Navy Arctic Roadmap 2014-2030, supra note 35.
177 Nat’l Res. Council, supra note 137, at 25.
178 Id. at 49; see U.S. Navy, Marine Corps, & Coast Guard, Naval Operations Concept, supra note 28, at 91.
179 See ABS Consulting, supra note 39, at 10.
180 U.S. Gov’t Accountability Off., supra note 9, at 12.
181 U.S. Gov’t Accountability Off., supra note 142, at 3. 182 Id. at 6.
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In Search... continued from page 13 In light of these issues, in December 2016, a coalition of importers, exporters and logistics providers petitioned the Federal Maritime Commission (FMC) to provide guidance on what constitute “just and reasonable practices” with respect to demurrage and detention. An eighteen-month broad consultation of all the maritime actors under the leadership of Commissioner Rebecca F. Dye attempted to reconcile all interests in this complex web of contractual and operational relationships.
Commissioner Dye issued her final report on Conditions and Practices Relating to Detention, Demurrage, and Free Time in International Oceanborne Commerce on December 3, 2018.2 While recognizing that demurrage and detention are valuable charges when applied in ways that incentivize cargo interests to move cargo promptly from ports and marine terminals, the report acknowledged that all international supply chain actors could benefit from more transparent, consistent, and reasonable demurrage and detention practices. For instance, the ocean freight delivery system would benefit from simplified billing practices and dispute resolution processes between carriers and shippers.
On September 6, 2019, the FMC adopted the set of recommendations made by Commissioner Dye.3 Thereafter, on September 13, 2019, the FMC issued a Notice of Proposed Rulemaking (NPRM) outlining the specifics of the FMC’s proposed interpretative rule.4
The NPRM proposed to add a new rule, 46 C.F.R. § 545.5, titled “Interpretation of Shipping Act of 1984-Unjust and unreasonable practices with respect to demurrage and detention.” The purpose of the new rule is to provide guidance on how the Commission will interpret 46 U.S.C.A. § 41102(c) (West)5 (addressing carriers and terminal operators’ need to observe reasonable practices in relation with delivering property) and 46 C.F.R. § 545.4(d)6 (stating that practices and regulations must be just and reasonable) in the specific context of demurrage and detention.
The new rule 46 C.F.R. § 545.5 provides a non-exclusive list of factors when evaluating claims and complaints for demurrage and detention charges following the incentive principle. The more a demurrage practice is tailored to promote freight fluidity, cargo availability and empty-container return, the less likely the practice is to be found unreasonable.
For instance, in assessing the reasonableness of demurrage practices and regulations, the FMC could consider whether and how regulated entities provide notice to cargo interests that cargo is available for retrieval including type of notice, to whom notice is provided, format of notice, and method of distribution of notice. Another factor that the FMC could consider in its reasonableness analysis is the
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existence and accessibility of policies implementing demurrage and detention practices and regulations, including dispute resolution policies.
The FMC received more than one hundred comments to the NPRM. The support for the new rule came mainly from importers, exporters, transportation intermediaries and truckers. Many ocean carriers and marine terminal operators opposed the rule as imposing for instance “sweeping new standards that would make ocean carriers financially responsible for circumstances beyond their control.”7 Having considered all comments, the FMC adopted the Final Interpretive Rule on Demurrage and Detention under the Shipping Act on April 28, 2020, which became effective on May 18, 2020.8 Rule 46 C.F.R. § 545.5 was adopted as set forth in the NPRM, with a few minor changes. In particular, the FMC revised the regulatory text to “(1) adopt a policy regarding demurrage and detention practices and government inspections; and (2) to make clear that the rule does not preclude the Commission from considering additional factors outside those specifically listed.”9
The final rule appears to be a compromise between all actors of the supply chain. As the FMC emphasized, “the rule is not intended to, and cannot, solve every demurrage and detention problem or quell all disputes.”10 The FMC does not impose strict or mandatory rules or procedures for carriers or marine terminals to follow and takes into account the diversity of situation than can cause the imposition of detention and demurrage charges. The downside of this flexibility of action is the uncertainty remaining for cargo interests as to the imposition of charges by carriers. Whether a charge might be considered reasonable under the circumstances of each case will likely have to be decided in litigation, and unfair practices might not change until a solid jurisprudence has been established.
Endnotes 1 See, e.g., CMA CGM S.A. v. Deckwell Sky (USA) Inc., 91 F. Supp. 3d 841 (E.D. Va. 2015). 2 Available on the FMC website at https://www2.fmc.gov/readingroom/docs/FF%20No.%2028/FF-28_FR.pdf/. 3 See https://www.fmc.gov/commission-approves-dyes-final-recommendations-on-detention-and-demurrage/. 4 Available at https://www2.fmc.gov/readingroom/docs/19-05/19-05_NPRM.pdf/. 5 46 U.S. Code § 41102(c) states: (c) Practices in Handling Property.— A common carrier, marine terminal operator, or ocean transportation intermediary may not fail to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing, or delivering property. 6 46 C.F.R. § 545.4 provides as follows: 46 U.S.C.A. § 41102(c) is interpreted to require the following elements in order to establish a successful claim for reparations: ... (d) The practice or regulation is unjust or unreasonable; …. 7 FMC Interpretive Rule on Demurrage and Detention under the Shipping Act, April 28, 2020, p. 10, available at https://www.federalregister.gov/ documents/2020/05/18/2020-09370/interpretive-rule-on-demurrage-and-detention-under-the-shipping-act 8 Id. 9 Id., p. 3. 10 Id.
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