While the nature of the United Kingdom’s
future trading relationship with the European Union (“EU”) will take some time
to become clear, it is important to realise that in the immediate aftermath of
the result of the UK’s recent EU referendum, nothing has changed in terms of
the trading relationship and the movement of people and goods between the EU
and the UK and the laws which apply to your maritime business and contractual
arrangements. As the political machinations play out, it is clear that Article
50 will not be invoked until a new Prime Minister is in place, which will not
be until at least September. Once invoked, the UK has an extendable period of
two years to negotiate new trade arrangements with the EU. During this
negotiating period the UK remains a full member of the EU and subject to all
the related rules and regulations. While trade relationships of various forms
between the UK and EU have been suggested as possibilities by different people,
organisations and publications, ultimately it is difficult at this stage to
know what form that relationship will take, or to be able to advise in detail
on the full potential impact of a Brexit from the EU for the maritime sector.
English law: a favourable contractual
& dispute resolution regime for maritime contracts?
Whatever the outcome of the UK’s trade
relationship with Europe, we are of the belief that English law will remain a
favourable legal regime for the documentation of international contracts and transactions.
The choice of English law is due to the certainty of its long established legal
precedent and court system, not because the UK is part of the EU. Generally
speaking other elements of law that directly regulate the maritime sector are
international in scope and incorporated into English law so the status quo
would largely remain in place. As regards England as a jurisdiction for
disputes, Brexit should not have any effect on the pre-eminence of London and
its arbitral institutions in the resolution of international arbitrations. The
current worldwide enforceability of London awards should remain. As regards
court litigation, the various EU regulations in respect of jurisdiction,
applicable law, enforceability of judgments and insolvency should be applied by
English courts, and by the courts across the EU in respect of UK matters, until
such time as the UK has left the EU. Nothing should change during this period,
although it remains to be seen how different courts in fact deal with matters
as the date of departure approaches. As regards the situation after the UK
leaves the EU, we consider it too early to draw conclusions on what the
landscape might look like for dispute resolution and insolvency. However, we do
not consider it a necessary or probable outcome of the UK leaving the EU that
the English courts and those of the remaining Member States will lose a common
framework for ruling on jurisdiction or applicable law or that the reciprocal
enforcement of judgments or recognition of insolvency proceedings will cease.
UK Tonnage Tax & UK flag
Whilst the UK Tonnage Tax regime currently
needs to comply with EU State Aid Law, the regime itself is not derived from EU
law. The legislation that governs tonnage tax is domestic legislation and,
accordingly, Brexit does not need to have any impact on the UK Tonnage Tax
regime. If the UK is able to operate without the need to comply with the EU
State Aid Law, then there could even be the possibility of relaxations to the
rules, for example, on the limits on time chartered in tonnage. It is to be
hoped that the UK Government will retain its current support of the tonnage tax
system, and continues to recognise the important role it has in contributing to
the UK economy and attracting shipowners to set up businesses in the UK.
Employment & Immigration
law in the maritime sector
In terms of employment law implications, the
position is very uncertain. One view is that the Government may seek to
deregulate this area in order to make the UK appear more competitive compared
with countries remaining within the EU. However, laws underpinning employment
on board ships arises from the ILO Maritime Labour Convention, 2006 (the
“Convention”), which the Government ratified on 7 August 2013, and a number of
enforcing EU Regulations. The overriding aim of the Convention was to set
decent, minimum global standards for seafarers’ living and working conditions
and to help create conditions of fair competition and a level playing field
throughout the shipping industry. In order to comply with the Convention, UK
legislation (insofar as it was necessary) was brought in line with its
standards and in our view it is unlikely that the UK will in any way seek to
deviate from its Convention obligations not least because of the international
repercussions. However, many believe that there will be some watering down of
certain employment law rights, such as rules relating to the calculation of
holiday pay, which could be relaxed allowing employers to reach their own
decisions on the appropriate level of pay, and also on the ability of employees
to carry forward leave in cases of long term sickness absence. It is also
unlikely that the anti-discrimination laws will undergo a radical change but we
agree with the views expressed by the UK Chamber of Shipping that the
Government may seek to introduce a cap on the damages awarded in such claims.
In terms of immigration we expect big changes in this area and we would be very
surprised if the UK Immigration Rules and Tier 2 remain in their current form.
For example, the government may need to open the Tier 3 “low-skilled” category
of the Points Based System (“PBS”) (currently suspended) to fill any void left
by EU workers e.g. agricultural workers. In terms of the maritime sector, this
could be beneficial by opening up a category to non-EU nationals (e.g. Filipino
nationals) who don’t currently qualify under Tier 2. However, if the plan is to
move EU nationals into the current PBS system then this will increase pressure
on the system and the current PBS problems, which include delay and
inconsistency across different jurisdictions, will apply to EU nationals also
(although, this, of course, depends on the negotiations).
Border controls and customs
Potential changes to border controls are of
particular concern to cruise & ferry operators; however, as the UK is not
part of Schengen and passport controls are already in place at UK ports no
practical changes are anticipated and there will be no immediate changes in any
event. Whether there will be changes to applicable customs rules will depend on
the negotiations surrounding the UK’s continued access to the Single Market.
Environmental and safety
regimes
While the EU has done much to advance
environmental and safety legislation, there have been thoughts in some quarters
that such legislation is at times as much a burden as a benefit. Practically
speaking, once the UK leaves the EU we would expect most EU environmental
legislation that has shown itself to be of value to be incorporated into the
laws of the UK. An interesting case that might provide opportunities for the UK
concerns the recycling of decommissioned vessels. Recycling activity is
currently governed by the EU Ship Recycling Regulation, which takes elements
from the 2009 Hong Kong Convention for the Safe and Environmentally Sound
Recycling of Ships. Once no longer beholden to some of the more onerous
elements of the regulations, more ship recycling may be possible in the UK and
thus provide a boost to this industry. Metal from a number of already
decommissioned North Sea offshore platforms still standing could be recycled if
their owners no longer had to abide by the exacting standards of the EU Ship
Recycling Regulation.
Conclusion
The extent to which changes resulting from
Brexit will impact the shipping industry will depend heavily on the
relationship of individual companies with the UK and the EU and, ultimately, as
for all sectors, where the discussions between the UK and the other EU member
states finally come out on the key issues of free movement and access to the
Single Market. It is, at present, “business as usual” and, as the maritime
industry is a global, predominantly US dollar industry many may not directly
feel the impact of Brexit. We will be watching developments closely to
determine how they will affect our clients.
Source: Hellenic
shipping news. 13 July 2016
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