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OCSLA Coverage for Land Injuries Has Limits

Posted in LHWCA

James Baker Jr. v. Director, OWCP; Gulf Island Marine Fabricators, LLCJames Baker, Jr. v. Director, OWCP; Gulf Island Marine Fabricators, LLC, U.S. Fifth Circuit No. 15-60634 (August 19, 2016). In this case the Court of Appeals affirmed the Administrative Law Judge’s (ALJ) determination that Mr. Baker, an employee of Gulf Island Marine Fabricators, LLC (Gulf Island) did not qualify for benefits under the Longshore & Harbor Workers Compensation Act (LHWCA), 33 U.S.C. § 901 et seq., either directly or by application of the Outer Continental Shelf Lands Act (OCSLA), 43 U.S.C. § 1331 et seq.

Mr. Baker filed a claim with the U.S. Department of Labor alleging an injury in the course and scope of his employment with Gulf Island for which he sought benefits under the LHWCA. Gulf Island was in the business of constructing and repairing vessels, and specialized in maritime oil and gas structures. One of Gulf Island’s projects was to fabricate the topside living quarters for the tension-legged platform, Big Foot. Mr. Baker had been hired by Gulf Island to work as a carpenter in the fabrication of the living quarters. His entire employment was spent on this project. His work was within 100 yards of the Houma Navigation Canal to which the employer’s property abutted, but he always worked on dry land. Mr. Baker never went offshore to participate in work duties on the Outer Continental Shelf. The parties had stipulated that the “situs” prong of the jurisdictional test under the LHWCA was met as Mr. Baker performed his duties in an area adjacent to navigable water, but the employer disputed whether under the “status” prong of the jurisdictional test Mr. Baker was involved in maritime employment.

In applying the recent decisions of the U.S. Supreme Court in Stewart v. Dutra Construction Company, 543 U.S. 481 (2005) and Lozman v. City of Riviera Beach, Fla., 133 S.Ct. 735 (2013), the ALJ determined that the tension-legged platform, Big Foot, was not a “vessel” in the context of the LHWCA as that term has been defined by decisional law, and Mr. Baker was therefore not involved in maritime employment.

Mr. Baker also sought coverage under the Act by application of the OCSLA, asserting that the Supreme Court’s decision in Pacific Operators Offshore, LLP v. Valladolid, 132 S.Ct. 680 (2012), extended OCSLA coverage to one who was injured on land. As noted by the ALJ, the Supreme Court decision applying OCSLA extra-territorially required the injured employee to establish a significant causal link between the injury that he suffered and his employer’s onsite OCS operations conducted for the purpose of extracting natural resources from the OCS. In this instance, the ALJ found that Mr. Baker never set foot on the OCS and his employer had no role in transporting the Big Foot to the OCS, installing it there or operating it, ergo OCSLA did not provide him with an avenue to LHWCA coverage.

The ALJ’s decision was affirmed by the Benefit Review Board and Mr. Baker appealed to the U.S. Fifth Circuit Court of Appeals. The Fifth Circuit’s decision likewise analyzed the Dutra and Lozman decisions of the Supreme Court and concluded that the Big Foot was not a “vessel” under the LHWCA. It felt that this comported with its cited precedent denying vessel status to structures that were not designed or engaged in maritime transportation noting that mere flotation on water does not constitute a structure a vessel.

The Fifth Circuit also addressed the Pacific Operators holding indicating that Mr. Baker’s injury occurred on dry land while he was building the living and dining quarters for the Big Foot, and therefore, he did not satisfy the fact-specific test enunciated by the Supreme Court. The Court reasoned that Mr. Baker’s job of constructing living and dining quarters was too attenuated from Big Foot’s future purpose of extracting natural resources from the OCS for the OCSLA to cover his injury. Mr. Baker’s employment was located solely on land, whereas the employee in Valladolid spent 98% of his time on an offshore drilling platform. Furthermore, Mr. Baker’s particular job did not require him to travel to the OCS at all, making his work geographically distant from the OCS. Likewise, his employer had no role in moving the Big Foot to and installing it on the OCS. Based upon these specific facts of Mr. Baker’s employment, the Fifth Circuit concluded that the ALJ appropriately denied Mr. Baker’s claim.

Coast Guard Issues Inspection of Towing Vessels Final Rule

Posted in Ports & Cargo Shipping

Coast Guard Inspection of Towing Vessels RuleThe U.S. Coast Guard Inspection of Towing Vessels Final Rule under 46 CFR Subchapter M takes effect on July 20, 2016. The Rule, published this week, has its roots in the Coast Guard and Maritime Transportation Act of 2004, and creates many new requirements for the equipment, operations, construction and design of towing vessels, and establishes a comprehensive inspection regime. The Rule provides that towing vessel owners/operators must select for their fleet one of two inspection compliance options: (1) the Coast Guard inspection option or (2) the Towing Safety Management System (TSMS) option.

The Coast Guard inspection option is fairly straightforward; under it, the Coast Guard conducts annual routine inspections of towing vessels or fleets. To meet record keeping requirements, vessel owners may use a safety management system (SMS), towing vessel record, vessel operations manual or logbook. The second option, TSMS, requires owners/operators to implement a survey program for vessel compliance, which may be internal or external. Under an external survey program, Third Party Organizations (TPOs), such as certain classification societies, perform routine inspections of the vessels. An internal survey program is conducted using internal resources or contracted surveyors, with the oversight of a TPO. Whatever option is selected, a new towing vessel must obtain a Certificate of Inspection from the Coast Guard before it enters into service. Owners/operators of only one towing vessel must have a valid Certificate of Inspection by July 20, 2020, while owners/operators of a fleet of towing vessels must obtain a Certificate of Inspection for each vessel according to a set schedule (July 2019 for at least 25% of the fleet; July 2020 for at least 50%; July 2021 for at least 75% and July 19, 2022 for 100% of the fleet). Owners/operators that select the TSMS option must obtain a TSMS certificate from a TPO at least six months before their vessels may obtain a Certificate of Inspection.

The Coast Guard estimates that the Inspection of Towing Vessels Final Rule will affect 5,509 U.S.-flag towing vessels and 1,096 owners or operators of towing vessels. The financial impact on the industry is estimated to amount to an annual cost of about $33 million, with some cost savings stemming from certain exemptions in the Rule for existing vessels. Vessel owners/operators are well-advised to fully review the Final Rule to ensure compliance, as failure to timely implement the Rule’s requirements could result in substantial penalties, delay in vessel operations, and other liabilities.

Liar, Liar, Pants on Fire! Preventing the Application of the Section 20(a) Presumption with Surveillance

Posted in LHWCA

Surveillance and Section 20a PresumptionThe recent decision of the U.S. Court of Appeals for the Fifth Circuit in Bis Salamis, Inc. v. Director, OWCP (Joseph Meeks), No. 15-60148 (March 17, 2016), highlights how the defense to a claim under the Longshore and Harbor Workers’ Compensation Act, 33 USC 901 et.seq. (LHWCA), can have a tortured journey through the liberal Benefits Review Board (BRB) until a successful result is reached in at least some of the U.S. Courts of Appeals. This opinion also underscores the importance of surveillance evidence when facing a prevaricating claimant.

In this matter the Fifth Circuit reversed the BRB which had twice reversed an Administrative Law Judge’s (ALJ) finding that the claimant’s testimony, video surveillance and other evidence presented by the employer showed that the claimant’s assertions were so unworthy of belief that they were not adequate to invoke the Section 20(a) presumption. Without the presumption aiding the claimant, the ALJ concluded that the claimant had failed to prove that his disability was related to his work activities. Not only did the claimant relate several versions of how his alleged accident occurred, he was also heard to say shortly after the event that he had been “hurt before but … never got anything for it.” There was also conflicting evidence as to whether the personnel basket transfer that was used to transport the claimant from a platform to a vessel and that was alleged to have caused the injury, resulted in a small jostling of personnel or involved a six to ten foot fall.

In his original opinion the ALJ concluded that the claimant was such an unreliable witness and dishonest individual that his testimony and the supporting opinions and reports of the doctors who relied on what he told them had virtually no probative value or evidentiary weight. The ALJ found that the only relevant fact that was established, as more likely than not to have occurred, was that the claimant was involved in an incident where he was tossed about in a personnel basket.

Underlying the ALJ’s initial opinion was his evaluation of  surveillance video showing the claimant capable of performing many activities without exhibiting pain or limitation at the time he reported to doctors that he was in intense pain and incapable of performing even the lightest of activities. The video also refuted the claimant’s testimony that he spent most of his time in bed and could not lift anything heavier than 10 lbs.

The Benefit Review Board (BRB) reversed the ALJ’s first opinion faulting the ALJ for failing to place his findings within the LHWCA’s framework or explicitly discussing the presumption on causation in the claimant’s favor under Section 920(a). The BRB felt that the ALJ had shifted the burden onto the claimant to prove the work relatedness of his injuries.

After the first remand to the ALJ, he again found that any testimony, findings or opinions based on the claimant’s statements and complaints were entitled to virtually no weight because he found the claimant to be so dishonest and unreliable. The ALJ acknowledged that employers are liable for instances that aggravate pre-existing conditions, but found that the claimant failed to meet even the slight prima facie burden to establish a compensable harm. The only harm the ALJ found claimant incurred was a lumbar strain for which claimant was treated and released to full duty.

On the second appeal to the BRB, it again reversed the finding that the ALJ’s order indicating it was not supported by substantial evidence because objective medical evidence in the record established that the claimant required treatment for his injuries and was prevented from going back to his hard labor job. On the second remand, the parties stipulated to the claimant’s average weekly wage and the ALJ entered an order awarding temporary total disability in compliance with the direction of the BRB. This was then appealed to the Fifth Circuit.

Applying the accepted standard of review in determining whether the ALJ’s decision was supported by substantial evidence, the Fifth Circuit concluded that an ALJ may make credibility determinations in asserting whether a claimant has established the prima facie showing required to obtain the benefit of the presumption under 20(a). The Court indicated that the BRB had improperly reasoned that even if the claimant was not credible, some of the medical evidence was sufficiently objective, that the ALJ should have accounted for it and applied the Section 20(a) presumption. The Court noted that it is established law that the ALJ may choose between reasonable inferences and that he exclusively empowered to weigh the evidence. It reiterated that an ALJ may accept or reject the conclusions of experts and is not required to accept the opinion or theory of a medical expert that contradicts his findings based on common sense. It noted that there was plentiful evidence demonstrating that the claimant had a preexisting degenerative back condition that could reasonably cause the pain he alleged. The court, however, found that there was no definitive evidence showing that the claimant’s suffered a traumatic injury, and that there was no evidence showing a difference in his spine before and after the incident on the personnel basket. The Court further noted that although some of the doctor’s findings were based on what they viewed as objective tests, it was not irrational for the ALJ to conclude that the claimant probably faked assertions of pain and limited range of motion which was refuted by the video surveillance.

Punitive Damages Only Mostly Dead Under General Maritime Law

Posted in Jones Act

Punitive Damages - US Eastern District Court HouseFollowing the Fifth Circuit’s opinion in McBride v. Estis Well Service, 768 F.3d 382, 391 (5th Cir. 2014), we reported that punitive damages had “expired and gone to meet their maker” when it comes to Jones Act seamen. As it turns out, they were only mostly dead. In Corey Hume et al. v. Consolidated Grain & Barge, Inc. et al., No. CA 15-0935, 2016 WL 1089349, at *1 (E.D. La. Mar. 21, 2016), Judge Zainey of the Eastern District ruled that punitive damages are still recoverable by Jones Act seamen against non-employer third parties.

The Plaintiffs, who were employees of defendant Consolidated Grain, were working aboard a vessel owned by defendant Quality Marine Services when a running wire of the vessel struck each of them in the face and head, resulting in brain injuries and facial disfigurement. The Plaintiffs sued Quality Marine for punitive damages under general maritime law. Quality Marine moved to dismiss, arguing that, pursuant to McBride v. Estis Well Service, 768 F.3d 382, 391 (5th Cir. 2014) (en banc), cert. denied, 135 S.Ct. 2310 (2015) (which held that an injured seaman cannot recover punitive damages against his employer), and Scarborough v. Clemco Industries, 391 F.3d 660, 668 (5th Cir. 2004) (which held that a seaman who invokes Jones Act status cannot recover punitive damages against a non-employer third party), Plaintiffs were not able under general maritime law to recover punitive damages from Quality Marine.

The court disagreed. Relying on another recent decision from the Eastern District, Collins v. A.B.C. Marine Towing, L.L.C., 14-1900, 2015 WL 5254710 (E.D. La. Sept. 9, 2015), the court declined to follow the Fifth Circuit’s holding in Scarborough, finding Scarborough had been “effectively overruled” by the Supreme Court in Atlantic Sounding Co. v. Townsend, 557 U.S. 404 (2009). The court held instead that the Jones Act forecloses a seaman’s recovery for non-pecuniary loss in maritime cases only with respect to his employer. With respect to a non-employer tortfeasor such as Quality Marine, to whom the Jones Act does not apply, no statutory regime exists that conflicts with general maritime law remedies, and thus punitive damages may be recoverable. In the end, the court held that the “takeaway from Townsend” was that a seaman may recover punitive damages under general maritime law if the Jones Act is not implicated, and denied Quality Marine’s motion to dismiss the punitive damages claim.

Is Choice of Law Subject to Waiver? Fifth Circuit Petitioned for En Banc Rehearing

Posted in Offshore Jurisdiction

On March 10, 2016, I reported on the Fifth Circuit’s opinion in Petrobras America, Inc., et al. v. Vicinay Cadenas S.A., No. 14-20589 (03/07/16), where the Fifth Circuit addressed the waivability of OCSLA’s choice of law provision and determined that it could never be waived. The appellee, Vicinay Cadenas, S.A., has now petitioned for a rehearing en banc and asserts the decision conflicts with the Court’s prior holding of In Re HECI Expl. Co., 862 F.2d 513 (5th Cir. 1988) holding that choice of law – even if mandated by a statutory provision that cannot be overridden by the parties’ agreement – is non-jurisdictional and thus subject to waiver. The appellee also urges that the decision threatens to impair the efficient administration of justice by placing a statutorily-prescribed choice of law provision on par with subject matter jurisdiction, thereby requiring continual reconsideration of the issue regardless of whether it was ever timely raised. A majority of the Court’s judges must now vote that the matter deserves an en banc rehearing for the appeal to move forward.

OCSLA Choice of Law Provision is Paramount

Posted in Offshore Jurisdiction

OCSLA Choice of Law - Petrobras v. Vicinay CadenasThis week The United States Fifth Circuit Court of Appeals in Petrobras America, Inc., et al. v. Vicinay Cadenas, S.A., No. 14-20589 (03/07/16) addressed in further detail whether the choice of law provision under the Outer Continental Shelf Lands Act (OCSLA) can be waived in any context. Prior to this decision, the Fifth Circuit had established that OCSLA’s choice of law scheme was prescribed by Congress and parties could not voluntarily contract around Congress’s mandate. Texaco Exploration & Production, Inc. v. AmClyde Engineered Prods. Co., Inc., 448 F.3d 760, 772 n. 8 (5th Cir., 2006); see also Union Tex. Petroleum Corp. v. PLT Eng’g, Inc., 895 F.2d 1043, 1050 (5th Cir. 1990) (“We find it beyond any doubt that OCSLA is itself a Congressionally-mandated choice of law provision requiring that the substantive law of the adjacent state is to apply even in the presence of a choice of law provision in the contract to the contrary.”)

In this instance neither party had asserted that the issues before the district court were to be determined according to the law of the adjacent state, Louisiana, asserting, to the contrary, that maritime law was controlling. It was only after a motion for partial summary judgment was granted against the plaintiff based on applying admiralty law that the plaintiff asserted OCSLA required the application of the law of Louisiana.

In the case at hand, Petrobras America sued Vicinay Cadenas, S.A., the manufacturer of an underwater tether chain that broke just after being installed. The chain secured a pipeline system for oil production from the Outer-Continental Shelf of the Gulf of Mexico. Petrobras had contracted with Technip U.S.A., Inc. to construct five “free-standing hybrid riser” systems to move crude oil from wellheads on the sea bed to floating production storage and off-loading facilities on the surface of the sea. Technip had subcontracted with Vicinay to supply the chains that were specified to be without weld-over cracks and defects to be used to tether the riser systems. Shortly after the chains were installed, one broke causing loss of one of the free-standing hybrid riser systems, a loss of use of the oil storage facility and loss oil and gas production.

Petrobras and its underwriters sued Vicinay in federal court asserting negligence, product liability and failure to warn claims. They alleged subject matter jurisdiction based on admiralty law or, alternatively, under OCSLA. They did not assert that Louisiana law applied. Vicinay moved for partial summary judgment, arguing that it was entitled to prevail under the maritime law’s economic loss doctrine announced in East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 106 S. Ct. 2295 (1986).

While opposing Vicinay’s motion for partial summary judgment, Petrobras and its underwriters did not contest the application of maritime law. The district court, assuming that maritime law applied, granted summary judgment to Vicinay to which an interlocutory appeal was filed. Approximately two months later, Petrobras’ underwriters filed a motion for leave to amend their complaint asserting for the first time that Louisiana law, not maritime law, applied to this dispute under OCSLA. This was denied by the district court and the appeal of this ruling was consolidated with the previous interlocutory appeals.

Vicinay argued before the Fifth Circuit that Petrobras’ underwriters waived their choice of law argument by not raising it in the district court until the eleventh hour motion to amend their complaint which was filed after the summary judgment was granted. They asserted that the underwriters confused OCSLA’s subject matter jurisdiction conferred on federal courts in 43 U.S.C. § 1349(b)(1)(A) and which cannot be waived, with OCSLA’s choice of law 43 U.S.C. § 1333(a) which allegedly could be waived, and therefore could not be raised for the first time on appeal.

Noting that the court’s precedents firmly established that OCSLA’s choice of law could not be waived by contract, as it was prescribed by Congress and parties may not voluntarily contract around Congress’ mandate, the court determined that, even more so, the choice of law provision could not be waived by failure to raise the issue below. This was found to be distinguishable from the Court’s earlier holding in Fruge v. Amerisure Mutual Insurance Co., 663 F.3d 743, 777 (5th Cir. 2011). It was explained that the failure to raise an issue as to the choice of law analysis in Fruge stemmed from a contractual provision, and since it was not timely raised before the district court, it was waived. In the instant case, the choice of law provision was one that stemmed from a statutorily mandate and could not be waived under any circumstances.

Offshore Supply Vessel Market Turnaround May Be In Sight, But You Need a Long Telescope to See It

Posted in Energy, Marine Services

OSV OutlookI attended an excellent conference on March 3, 2016, put on by WorkBoat® exploring the “OSV Capital Outlook for 2016 and Beyond”. The conference featured a diverse and highly experienced panel of speakers including investment and marketing analysts and consultants, vessel operators, shipyard executives and WorkBoat® editors. You may want to read WorkBoat’s® own blog post about the conference; my takeaways from attending are as follows:

  • Praveen Narra, a Raymond James analyst, indicated that while oil prices appear to have bottomed and are beginning to climb toward an expected range of $65 to $70 per barrel in 2017 and 2018, a sustainable turnaround in OSV day rates and utilization should not be expected until at least 2018.
  • Mr. Narra stated that actual rig tendering activity will likely continue to decline in 2016 with no substantial uptick in day rates until 2017.
  • Richard Sanchez, a marine analyst with IHS Energy-Petrodata MarineBase, cautioned that when drilling activity does resume, it is likely to first rebound onshore rather than offshore, as onshore projects can be brought to production much faster, more efficiently and at less cost than offshore projects.
  • Sanchez is seeing that the downturn in OSV utilization is affecting shallow water platform supply vessels more than large PSVs and anchor handling tugs, with day rates for shallow water PSVs at below break-even levels.
  • Matthew Rigdon, a senior executive with Jackson Offshore Operators, cited as one of the lingering effects of this downturn the loss of trained, certified and licensed labor to operate vessels when the rebound finally does occur. Many mariners will move to jobs in other industries. Additionally, U.S. Coast Guard certification requirements necessitate expensive periodic training and recertification, the cost of which is traditionally shared between OSV operators and the mariners. Many out-of-work mariners may not have the means or inclination to maintain these certifications, which will shrink the pool of qualified labor available when their services are needed.
  • Allen Brooks, managing director at PPHB, LP, cited as the “elephant” in the rig market the degree of debt-load of drilling companies. This also is a significant concern for OSV operators. High debt service obligation coupled with diminished cash flows due to low utilization and low day rates will lead to substantial destressed asset activity. However, the amount of this activity is unknown. It is also unknown when investors will begin to seize the opportunity to acquire these assets.

Armed with knowledge of the bleak outlook, OSV operators should be pro-active in making decisions regarding stacking of vessels, redeployment or laying off personnel, cost cutting and restructuring debt-loads. Bankers are traditionally hesitant to repossess OSVs. There is significant costs in storing and maintaining them pending resale and these costs could mount if, as is the case now, prospects for an advantageous resale are dim. It should be emphasized that the current downturn in the OSV market does not only affect the Gulf, but is a global phenomenon. Thus, there will be no buyers for these vessels until the market begins to rebound. This gives OSV operators leverage in restructuring negotiations. [On that note, see my post of November 23, 2015.]

Forget the Invites, Use a Contract Instead

Posted in Maritime Contracts

Maritime ContractMany of the indemnity provisions Master Service Agreements use in the energy and construction industries contain the term “invitee” in the definition of “Owner Group” and “Contractor Group”. However, the term “invitee” is rarely defined itself. Drafters should strongly consider jettisoning the term “invitee” from the definition of “group”. For most contracts applicable to worksite operations, the terms “contractor” and “subcontractor” are substantially easier to understand and to apply.

In the absence of a contractual definition, the courts will have to resort to judicial definitions of “invitee” in order to give meaning to the indemnity provision. In Grogan v. W&T Offshore, Inc., No. 15 – 30369 (5th Cir. Jan. 27, 2016), the U.S. Fifth Circuit Court of Appeals had to interpret indemnity provisions in which both “groups” included the undefined term “invitee”.[1] W&T agreed to defend and indemnify Triton from the claims of W&T’s invitees, and Triton agreed to defend and indemnify Triton from the claims of Triton’s invitees.

Tiger was hired by W&T to provide hydrogen sulfide (H2S) monitoring services and personnel, training and equipment during the operation of Triton’s vessel. Mr. Grogan, an employee of Tiger, was injured when he fell to the deck of the Triton vessel on which he had worked while attempting to board a personnel basket.

The Fifth Circuit adopted the parties’ reliance on the Louisiana judicial definition of invitee in Blanks v. Murco Drilling Corp., 766 F.2d 891 (5th Cir. 1985) to supply the applicable definition of invitee in a maritime contract.  (It remains to be seen whether this Louisiana land–based definition is applied by other coastal courts in interpreting “invitee” in their maritime contracts.) Under Blanks, an invitee is “a person who goes onto premises with the expressed or implied invitation of the occupant, on business of the occupant or for their mutual advantage.”  Id. at 894.

The district court denied cross–motions for summary judgment, finding disputed material facts as to whose invitee Mr. Grogan qualified; the issues were ultimately resolved through trial on submitted memoranda and evidence including deposition transcripts.

On appeal, the Fifth Circuit first concluded that even though Triton owned the premises, W&T exercised sufficient control (presence of a company man, establishment of the order of work, etc.), that W&T qualified as an occupant for purposes of Mr. Grogan’s status as W&T’s invitee. Thereafter, the court of appeals concluded that even though Triton impliedly consented to Mr. Grogan’s working from the Triton vessel, and that Triton indirectly benefitted from his presence, it was W&T that ultimately benefitted from Mr. Grogan’s presence and services.  As a result, the district court did not err in concluding Mr. Grogan was the invitee of W&T, not Triton.

[1] King, Krebs & Jurgens, the author, and his partner, Jack Jurgens, represented W&T Offshore in the district court and on appeal.

Offshore Supply Vessel Tax Credit Targeted in Louisiana Governor’s Proposed Fiscal Plan

Posted in Marine Finance

Louisiana Governor John Bel Edwards’ proposal for short term fixes for the State’s fiscal problems includes a shot at already-hurting offshore supply vessel owners/operators. OSV operators/owners currently receive a refundable credit of 100% of the ad valorem taxes paid on vessels operating on the Outer Continental Shelf. The Governor’s plan would suspend these credits for 2016 and reduce them to 80% beginning in 2017.Offshore Supply Vessel Tax Credit

Governor Edwards made his pitch to the industry at a recent meeting of the Offshore Marine Service Association in New Orleans. He cited the need for all sectors of the Louisiana economy to share in addressing the State’s budget shortfall. However, the proposed suspension and reduction of the credit could not come at a worse time for OSV operators already finding it difficult to weather current stormy market conditions.

Greek Shipowners Consider Exodus as Crisis Leads to Proposed Higher Taxes

Posted in Ports & Cargo Shipping
Greek Shipowners Consider Exodus

Greek shipowners facing proposed higher taxes due to the Greek financial crisis are considering an exodus from the country, which would be a blow to the economy and Greek ports such as the Port of Piraeus, pictured above.

The Greek shipping industry will have to sustain additional taxes according to a proposed bailout agreement. Greek shipowners already agreed to voluntarily pay an additional tonnage tax from 2014-2017 to help the embattled economic crisis. However, the Greek government says that isn’t enough and plans to further increase the tonnage tax (a flat annual rate based on a ship’s capacity), and will also cut other tax advantages that have been accorded to shipowners for years.

Greek shipowners are therefore having to weigh their options, and many state that if these measures are enacted they will have to consider relocating to other shipping-friendly places such as Cyprus, London, Singapore and Dubai. In fact, Hong Kong, Singapore, London and Cyprus have sent delegations to lobby disgruntled shipowners. Cyprus has had the most success by recently luring 42 Greek shipping companies to their country. The Central Bank of Cyprus stated that revenues from shipping have increased 9.3% (approximately $491 million) in the past year.

Greece’s unemployment rate is now above 25%, and the Greek shipping industry currently employs about 200,000 people, representing about 3.5% of the country’s workforce. The shipping industry makes up about 7.5% of the already dwindling Greek economy. It is anticipated that the continued exodus of Greek shipowners would cause a blow to the industry and to the economy as a number of people would lose their jobs.

New Orleans Attorney Joanne Mantis


Guest blogger Joanne Mantis is a multilingual attorney in the New Orleans office of King, Krebs & Jurgens. She is admitted to both the Louisiana and Greek Bar, and represents a variety of clients both domestically and internationally. She has previously blogged for Offshore Winds regarding the Greek Tonnage Tax.