05 May 2023, 16:40

Maritime Business during the War Times: Trends and Challenges

Artem Volkov
Artem Volkov Head of Maritime Law Practice at ANK Law Office, Attorney-at-law, UMAC arbitrator

Russia’s invasion to Ukraine commenced on February 24, 2022 and continuing to date has affected all spheres of life and maritime business was not an exception. The aggression led to the closure of Ukrainian seaports, halted free shipping in the South-Western part of the Black Sea and redirected cargo flows to Ukrainian seaports on the Danube.

Missile Strikes and Capture of Merchant Vessels

During the first weeks of the war, there were recorded cases of damage to civilian vessels due to the impact of Russian shells and missiles (m/v “YASA JUPITER” flying Marshall Islands flag), m/v “MILLENIAL SPIRIT” flying Moldova flag, m/v “NAMURA QUEEN” flying Panamanian flag, m/v "LORD NELSON" flying Panamanian flag and m/v “BANGLAR SAMRIDHHI” flying Bangladesh flag.

Three vessels, namely, bulk carriers “AFINA” and “PRINCESS NICOLE” (both under the flag of Ukraine) and rescue tug “Sapfir” (flag of Ukraine) were captured by russian militaries and forcibly delivered to the occupied Crimea. According to the information of the ANK law firm collected from open sources, during the period from February 24, 2022 to April 1, 2023, as a result of military operations, 27 vessels were damaged, where 11 vessels were flying under Ukrainian flag.

The Grain Corridor and Opening of the Ports in Odesa Region

The situation changed for the better in the summer of 2022, when on July 22, 2022, the “Initiative for the Safe Transportation of Grain and Foodstuffs from Ukrainian ports” has been signed in Istanbul, which became known throughout the world as the “Grain Deal”. It started the so-called "grain corridor" from the ports of “Great Odesa” (Odesa, Pivdenny, Chornomorsk), within which 857 vessels left from August 1, 2022 to April 1, 2023, exporting 26.2 million tons of Ukrainian food to Asian countries, Europe and Africa.

We would like to remind that three seaports participate in the “Grain Deal” - Odesa, Chornomorsk and Pivdenny, and three groups of cargo are allowed to be transported: grain (wheat, barley, corn, soybeans, etc.), foodstuff (flour, sunflower/rapeseed oil, compound feed and others) and fertilizers, including ammonia. On November 17, 2022, the validity period of the “Grain Deal” has been extended for another 120 days – until March 17, 2023, and from March 18, 2023 - for another 120 days.

However, the official statements of Ukraine and Russia regarding the latest extension of the “Grain Deal” were divided: Ukraine stated that the “Grain Deal” was extended for the next 120 days, i.e. until June 15, 2023 (a similar statement was made by the UN), but Russia denied it, stating that the “Grain Deal” has been extended for only 60 days, that is, until May 16, 2023, and further extension will depend on the fulfillment of the conditions put forward by Russia. Ukraine has long been insisting on the necessity to extend the “Grain Deal” for one year and intends to include Mykolaiv Sea Port (including all terminals therein) into the range of ports participating in the “Grain Deal”.

Restrictions on sailing of vessels from the ports of “Great Odesa” (mainly related to the nomenclature of goods allowed to be transported through the “Grain Corridor”) caused the fast development of Ukrainian ports on the Danube. We are talking about the ports of Izmail, Reni, Ust-Dunaysk with the Kiliya port station. Only during the war period two container terminals appeared there (in the ports of Reni and Izmail), the ports significantly increased the volume of transshipment of bulk cargoes (including oil products) and general (non-grain) cargoes.

What did Maritime Lawyers Work with?

The cases faced by maritime lawyers during the last year can be roughly divided into three groups. First, these are cases related to detention (in accordance with Article 80 of the Merchant Shipping Code of Ukraine) and arrest of vessels (in accordance with Article 42 of the Merchant Shipping Code of Ukraine). It is interesting that the majority of such cases were connected with ship calls to the Danube ports, here are a few examples.

I would like to note the case No. 916/952/22 about the arrest of the m/v “BERK” (IMO 8519942) at Ust-Dunaisk port with the subsequent cancellation of the arrest due to the deposit of funds by the shipowner to the court; detention of the m/v “MAZU” (IMO 9190195) in the water area of Izmail Sea Port upon the maritime claim of the cargo owner; and case No. 916/2708/22 on the arrest of the m/v “MILA” in Izmail Sea Port to secure the maritime claim of the cargo owner related to the wetting of the cargo and its subsequent cancellation due to the conclusion of a settlement agreement by the parties.

Case No. 916/548/22, related to the arrest of the m/v “BEDFORD CASTLE”, which entered Chornomorsk port on the eve of the war to unload PET cargo in big bags, caused extreme interest among maritime lawyers (and not only). On February 20, 2022, the vessel was detained by the Harbour Master for 72 hours, and on February 23, 2022, the Commercial Court of the Odesa region imposed an arrest to secure a maritime claim related to the cargo damage (see the Arrest Ruling in the case No. 916/477/ 22).

The case obtained wide publicity in the maritime community due to the fact that the Master of the vessel “BEDFORD CASTLE” decided to leave the anchorage area of Chornomorsk port ignoring the arrest and sailed to Varna following owners’ instructions. If I am not mistaken, this is the first case in the history of Ukraine when a vessel left the port ignoring the court’s arrest.

Ukrainian Seafarers and Travelling Ban

The war started by russia also affected the fate of Ukrainian seafarers. On the one hand, already in the first weeks of the war, foreign shipowners began the procedure of replacing crew members on ships that were blocked in Ukrainian seaports. Some replaced the entire foreign crew with Ukrainian ones, while others decided to leave the minimum permissible crew on board. With the declaration of mobilization due to martial law, sailors between the ages of 18 and 60 were prohibited from traveling abroad, which made it impossible to work under labor contracts and forced foreign ship managers to urgently look for replacements for Ukrainians.

Thanks to the joint efforts of seamen’s trade unions, crewing companies and shipowners, who appealed to the Government and the Office of the President, in August 2022 it was possible to adopt changes to the Rules for Crossing the State Border (Resolution of the Cabinet of Ministers of Ukraine No. 992 of 02.09.2022), which regulated the procedure for the departure of seamen abroad. The aforementioned changes freed sailors who board a ship in a Ukrainian port from the obligation to obtain the permission of the military commander to travel abroad. As for the rest of the sailors, for them going abroad to work on a foreign ship requires the permission of the military commander, the procedure for obtaining which raises many questions from the side of seafarers and their employers.

Blocked Vessels and Abandonment Notices

After February 24, 2023, when a year had passed since the beginning of the russian aggression, the shipowners of the blocked vessels began to declare abandonment (i.e., renunciation of rights to the vessel) in favor of their insurers. They argue that since a particular vessel, even being seaworthy, cannot leave the port for a long period (more than 12 months), such a situation falls under the insured event, which falls under the “Blocking & Trapping Vessels” clause and entitles the shipowner to receiving insurance compensation from the insurer in exchange for abandoning the vessel in his favor. 

Insurers carefully study each such case in view of the real reasons that prevent the vessel from sailing. If, for example, we are talking about the Kherson seaport, which was officially closed at the end of April 2022 and no ship has left Kherson since the beginning of the war due to obvious danger, such a risk may be covered by B&T. 

If we are talking, for example, about a ship blocked with a “non-grain” cargo in one of the ports of Odesa region (Odesa, Chornomorsk, Pivdenny), then there are fewer reasons for the shipowner’s optimism, because insurers usually offer the shipowner to negotiate with the charterer and unload the cargo. After that just to load the grain and sail from the port through the “grain corridor”. Such cases also require the involvement of maritime lawyers (from both insurers and shipowners/charterers) and require detailed consideration of each side's arguments.

In conclusion, I would like to note that the maritime and port industry not only adapted to work under martial law, but even managed to achieve certain successes over the past year. We hope that thanks to the joint efforts of the maritime community, the Ukrainian authorities and the Armed Forces of Ukraine, shipping in the South-Western region of the Black Sea will be fully restored in the near future and Ukrainian seaports will work at full capacity.


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