Shipping 2025

Steps Towards Stability in the Middle East

The Middle East is experiencing a moment of calm as a ceasefire deal was reached between Israel and Lebanon on 27 November 2024, halting the war between Israel and Hezbollah. Within the deal, and without precluding both parties’ right to self-defence, Lebanon and Israel agreed inter alia to commit to United Nations Security Council Resolution (UNSCR) No 1701, with Hezbollah withdrawing and dismantling all military facilities and infrastructure starting in the southern part of Litani River, and with Israel withdrawing over a period of up to 60 days.

On 16 January 2025, a ceasefire and hostage deal between Israel and Hamas was announced, halting the conflict that began on 7 October 2023 when Hamas initiated attacks leading to the murder of 1,200 people and the kidnapping of nearly 200 others.

Meanwhile, on 8 December 2024, the al-Assad regime fell in Syria nearly 14 years after the Syrian Civil War started. Collectively, these events have resulted in a diminishment of the presence in the region of Hezbollah’s and al-Assad’s key ally, Iran, paving the way for possible long-lasting regional stability.

Economic Implications of the Houthi Attacks on the Suez Canal

The Houthis from Yemen are the only group continuing – and extending – their attacks against Israel, hijacking MV Galaxy Leader on 19 November 2023 while it was navigating in the Bab-al-Mandeb Strait in the Red Sea and violating the right to innocent passage and navigation, as guaranteed under the UN Convention on the Law of the Sea (UNCLOS), constituting acts of piracy as defined in UNCLOS (Articles 101 and 102). Significant attacks were launched by the United States, United Kingdom and Israel, backed by their allies, who no longer tolerate the Houthis’ missile interception and are intensifying targeted attacks Yemen including in Sana’a, launching multiple precision strikes against Houthi facilities and weapons.

Besides the total shutdown of Israel’s Eilat port, no significant harm was caused to Israel’s shipping trade industry as a result of the Houthi attacks. The Suez Canal seems to have suffered most, with a remarkable loss of revenue seen in association with vessels diverting to the longer route around Africa to prevent the risk of a Houthi attack. According to a statement from the head of the Suez Canal Authority, Osama Rabie, the income of the Suez Canal from the shipping trade in financial year 2023–24 fell to USD7.2 billion – 23% less than the previous year’s income of USD9.4 billion.

Another challenge the Suez Canal might be facing is climate change, namely the melting of glaciers and increasing wildfires. Additionally, Russia and China’s Northern Sea Route – or Polar Silk Road – endeavour is a viable alternative for commercial shipping that offers a shorter sailing distance between Europe and Asia of 13,000 kilometres compared to the 21,000-kilometre Suez Canal Route. The Russia-China-backed route has raised concerns in the US, with President-elect Trump making remarks even prior to assuming office on the necessity of a US presence in Greenland to ensure national security.

FuelEu Regulations

Although maritime transport remains the most carbon-efficient mode of transport per ton km, at the same time, ship traffic to and from port in the European Economic Area still accounts for some 11% of all EU carbon dioxide (CO₂) emissions from transport and 3–4 % of the EU’s total CO₂ emissions (but see (3) of Regulation (EU) 2023/1805; the “FuelEU Regulations”).

Having the objective of increasing the consistent use of renewable and low-carbon fuels and substituting sources of energy in maritime transport across the EU, the FuelEU Regulations came into force on 1 January 2025 in the following manner. According to Article 4, the yearly average greenhouse gas (GHG) intensity of the energy used on board a ship during a year shall not exceed the limit of 91.16 grams of CO₂ equivalent per MJ. This limit is reduced by 2% from 1 January 2025 and further reduced every five years until a reduction of 80% is reached on 1 January 2050.

The energy used by a vessel is calculated according to a formula in Annex I, which takes into account, for example, the types of fuels delivered to the ship, if the ship used electricity at berth and the use of non-biological fuel, which provides the ship with a “reward factor”. Exceeding the above limit will result in a fine, which will be doubled if the violation is repeated in two consecutive years. The FuelEU Regulations apply to all ships above 500 gross tonnage that serve the purpose of transporting cargo passengers for commercial purposes, regardless of their flag, with a requirement for registration, a monitoring plan and other forms of supervision under an accredited legal entity known as "the “verifier”. The allocation of liabilities resulting from the FuelEU Regulations between owners and charterers has been implemented by the revised Baltic and International Maritime Council (BIMCO) FuelEU Maritime Clause for Time Charter Parties 2024. The FuelEU Regulations are to be viewed together with EU Directive 2003/87, setting a GHG emission allowance – applied from 1 January 2024 – on maritime transportation, and EU Directive 2016/802, limiting the sulphur content of marine fuel used in EU seas and the EU exclusive economic zone to 0.10% from 1 January 2015. The goals and direction of the EU environmental regulations are clear, and ship operators calling at European ports should follow them.

Military Use of Autonomous Ships: Development of the Maritime Autonomous Surface Ships (MASS) Code

While the technological and legal evolution of autonomous ships in the civil and commercial sectors is offering a glimpse of the future, the use and development of autonomous ships and naval drones in the Ukraine-Russia conflict is reminiscent of past wars – for instance the developments in aviation precipitated by the First World War.

After sinking the Russian ships Ivanovets on 1 February 2024 and Tsezar Kunikov on 14 February 2024, on 5 March 2024, Ukraine naval drones sunk Sergey Kotov, a patrol ship of the Russian Navy, in the Black Sea near the Kerch strait following two previous failed attempts to target it. On 31 December 2024, for the first time, a Ukrainian naval drone, Magura 5, reportedly successfully hit and downed an air target – a Russian Mi-8 helicopter on Crimea’s west coast – and damaged another.

These sea-to-sea and sea-to-air attacks made by naval drones highlight how naval drone technology contributes to a narrowing of the gap in the military capabilities between Ukraine and Russia, in terms of both air and naval forces.

The International Maritime Organization (IMO) continues its work to keep pace with the rapidly evolving technological developments in autonomous ships, holding a symposium titled “Sailing together: Striving for a future-proof IMO MASS Code” on 14 May 2024 to share expertise on autonomous ship research and development. In the 108th session of the Maritime Safety Committee (MSC), held in May 2024, the Committee continued to progress towards developing the MASS Code. At the subsequent 109th session held on December 2024, a revised road map was set, with the non-mandatory MASS Code to take effect in May 2026 and the mandatory code expected by July 2030, entering into force by 2032.

EU Sanctions Against Russia and Russia’s Evasion Attempts

The EU sanctions against Russia (Regulation No 833/2014), especially those focusing on the shipping industry preventing Russian flag vessels from calling at EU ports (Article 3ea) and prohibiting the supply of navigation goods and technologies (Article 3f), are causing damage to the Russian fleet of approximately 2,800 vessels. The combination of sanctions, the ageing Russian fleet and a lack of maintenance is causing distress to Russian flagged vessels; only recently, two Russian cargo ships, the 55-year-old Volgoneft 212 and the 51-year-old Volgoneft 239, ran aground, causing an oil spill in the Kerch Strait near Crimea. These incidents underline the impact of sanctions and how far-reaching their consequences can be.

Regardless, Russia seems to apply any means to circumvent sanctions, implementing new methods of catching and dragging; recently, on 25 December 2024, the Russian-linked Cook Island-flagged Eagle S vessel dropped its anchor and dragged it, cutting the undersea electricity cable Estlink 2 connecting Estonia and Finland. The vessel was seized by Finland, with the seizure upheld by a Finnish court decision, and investigation of the incident is still ongoing.

Reminder on Owners’ Obligations and Misdelivery of Cargo

According to the English Rafaela S judgment, “Bills of lading stand as the international sale of goods, the operation of documentary credits mediating those sales, and the carriage of goods by sea… bills of lading have come to be regarded as ‘one of the pillars of international trade’”. If letters of credits are the “lifeblood” of cross-border commerce, as they are sometimes described, “then it is bills of lading that are responsible for keeping the lifeblood flowing in most trades”. These are the opening words of honourable S Mohan J of the High Court of Singapore, in the judgment in Maersk Katalin [2024] SGHC 282, another matter where a carrier parted with its cargo without presentation of the original bills of lading and was confronted with a claim from the financing bank and (ultimately) the holder of the bills, following the collapse of Hin Leong Trading (HLT).

In this case, following the seller’s and charterer’s (Winston) orders to discharge the cargo of 752,870 barrels of gasoil without presentation of the original bills of lading in return for the usual indemnities, the carrier (Maersk) discharged the cargo on 28–29 February 2020. On 3 March 2020, HLT applied to the claiming bank – United Overseas Bank (UOB) – for a letter of credit to finance the purchase of the cargo. This application was made pursuant to various lines of credit provided by UOB to HLT in April 2018, with a total amount of USD250 million. On 4 March 2020, UOB issued the required letter of credit and, on 27 March, UOB remitted USD43 million to HLT’s receiving bank (Credit Suisse) after taking receipt of the original payment letter of intent (LOI) and commercial invoice, along with copies of the letter of credit (L/C) documents sent by e-mail.

After HLT announced its insolvency on 14 April 2020, UOB required the original bills of lading from Winston on 15 July 2020.

As holder of the original bills, UOB filed a lawsuit against Maersk claiming its liability for misdelivery, mainly in contract but also in negligence, bailment and conversion.

The court held that by agreeing to the terms in charterparties obliging them to discharge the cargo without presentation of the original bills of lading, and against presentation of suitable indemnity, ship-owners effectively commit to breaching their primary obligation under the bills to deliver cargo only upon their presentation. In fact, the indemnity provided to the ship-owners operates as an admission or acknowledgment of the ship-owners of the wrongfulness of the delivery of the cargo in such circumstances, and merely “relocates” the legal risk of the carrier’s unlawful conduct.

The court denied the carrier’s argument as if, with the discharge and delivery of the cargo to HLT, the bills of lading were “spent”, in the sense that their possession by UOB “no longer gives a right (as against the carrier) to the possession of the goods to which the bills relate”, as governed by clause 2 of the UK Carriage of Goods by Sea Act (COGSA). Citing the joint expert’s memorandum on English law, explaining that “where cargo is delivered against a discharge LOI, rather than upon surrender of the Bill of Lading, the legal status of the Bill of lading is not generally spent: the lawful holder of the Bill of Lading retains the right to the immediate possession upon its surrender and is entitled to sue the carrier for the breach of the contract”, the court held that no reasons were given for the “bold assertation” that HLT was the party entitled to the cargo on 28–29 February; therefore, the bills of lading were not spent. This was also supported by the determination that the relevant “contractual or other arrangement” was the sale contract, which required the opening of the L/C, and the L/C provided accordingly expressly contemplated that payment will be effected against presentation of the original bills of lading. Therefore, clause 2 (a) of the UK COGSA, entitling the right to possessionto one who becomes the holder of the bill “by virtue of a transaction effected in pursuance of any contractual or other arrangement made when such a right to possession ceased to attach to possession of the bill”, has also been operated, another reason why the bills have not been spent.

After considering the evidence, the court concluded that it could not be persuaded, on the balance of probabilities, that – when issuing the L/C – UOB knew that the cargo had already been discharged and delivered into HLT’s possession. Considering that, at the time of the breach (the discharge and delivery of the cargo to HLT), UOB was not even in the picture, the court found it difficult to accept Maersk’s causation defence, submitting that had UOB been asked “Would you have agreed for the cargo to be delivered (to HLT) without production of the original bills of lading?”, UOB would have answered “Yes, of course”, especially when that proposition was never actually tested at trial with UOB’s witnesses.

As all of the ship-owner’s pleaded defences failed, the court granted judgment in favour of UOB against Maersk, awarding a sum of USD39.3 million – being the market value of the cargo at the time of misdelivery as assessed by the court – together with interest at 5.33% per annum, reminding carriers and traders what the consequences – according to common practice – might be of discharging and delivering carried cargos not against presentation of the original bills of lading, with an LOI provided as indemnity for such a breach.

The Wide Protection of the One-Year Time Bar Limitation

Another matter of misdelivery was not favourable to the financing bank, FIMbank, which financed a cargo of about 85,510 MT in bulk carried by the vessel Giant Ace between Indonesia and the Indian ports of Jaigarh and Dighi, and discharged between 1 and 18 April 2018 against letters of indemnity. Although it was held (following authorities reaching back to Glyn Mills v East and West India Dock (1882)) that it was common ground that delivery by a carrier without the production of a bill of lading was a breach of contract with strict liability, such that fault or negligence did not have to be proved, because FIMbank served a notice of arbitration against the (contractual) carrier (KCH) on 24 April 2020, more than one year after the delivery of the goods, following Article III, Rule 6 of the Hague-Visby Rules, the claim was time-barred. The court of appeal found that although the Hague-Visby Rules applied only to the carriage by sea, which began on loading and ended at the discharge of the cargo, the revised wording of the Hague-Visby Rules at Article III Rule 6 (“shall in any event be discharged from all liability whatsoever in respect of the goods”) is wide enough to apply also to liabilities arising beyond the carriage and discharge of the cargo, and to shelter same under the one-year time bar limitation. The Supreme Court (FIMbank v KCH Shipping [2024] UKSC 38) added that the statement made in Article IV bis of the Hague-Visby Rules – “the defences and limits of liability provided for in these Rules shall apply in any action against the carrier… whether the action be founded in contract or in tort” – also made it clear that the defences according to the Rules are not limited only to breach of obligation and include misdelivery claims.

Sanctions and Force Majeure

US Sanctions raised the question of force majeure and a party’s freedom to reject a non-contractual performance in the matter of RTI v Mur Shipping [2024] UKSC, where the charterers (RTI) and owners (MUR) concluded a contract of affreightment (COA) for the carriage of 280,000 MT per month of bauxite between July 2016 and June 2018. Under the COA, payment of freight was agreed to be in US dollars. On April 2018, the US Department of Treasury’s Office of Foreign Assets Control applied sanctions to RTI’s parent company. MUR invoked the force majeure clause of the COA, arguing that continuing with the COA would place MUR in breach of the sanctions, and the sanctions prevented dollar payment of the freight as determined in the COA. MUR denied RTI’s argument that payment could be made in euros, with conversion to US dollars at RTI’s expense, and declined to nominate any ships to carry the cargo of RTI, which later commenced arbitration, claiming its additional costs for the alternative carriage it had arranged. The matter reached the Supreme Court, which held inter alia that principles of freedom of contract and certainty in commercial contracts allowed MUR to reject the non-contractual performance of the contract, as the contractual right was payment of the freight in USD, and the contract did not permit any other form of payment. This was supported by Bulman v Fenwick [1894], where the charterers’ contractual right to nominate the berth was acknowledged, allowing him to decline the owner’s request to place the vessel in an alternative discharge berth, and by Reardon Smith Line v Ministry of Agriculture [1963], where the charterer’s contractual right to insist on the loading of a cargo of wheat only – rather than using the alternative option of loading one-third of barely and one-third of flour – was also acknowledged (in both cases, the charterers used their rights against a background of strikes that delayed the vessels, with no payment of demurrage). Since “reasonable endeavours” in the meaning of the force majeure clause acts to maintain the contractual performance and not to substitute it with a different performance, MUR was not obliged to accept payment in euros, and the force majeure applied. Although this matter dealt with sanctions imposed prior to the war between Russia and Ukraine, it seems that the grounds of viewing sanctions that interfere with a concluded contract as a force majeure event, which could not be avoided by changing the contract, were set.

The cases above are examples of how commercial practice and international sanctions are viewed and decided by the courts according to long-established principles of law.

Other chapters and articles in this guide will also shed light on these and other aspects of maritime law and shipping; each jurisdiction brings unique legal perspectives, practices and challenges, contributing to a more comprehensive and diverse view of maritime law.