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Offshore Winds

A Legal Barometer for Marine and Energy Business

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.

Seven Key Clauses in a Vessel Purchase Agreement

Posted in Marine Finance

Vessel Purchase Agreements
Vessel sales are a constant in the marine industry, even during downturns in the market. In fact, some see adverse market conditions as an opportunity to find bargains on vessels and other marine equipment. Once the buyer has “kicked the tires” on a vessel and the parties have agreed on a price, there usually is great pressure from all sides to quickly sign a purchase and sale agreement and close the deal. However, signing an agreement that fails to or inadequately addresses a key issue can cause problems down the road.

Based on years of negotiating, drafting and reviewing vessel purchase and sale agreements for vessels large and small, here is a checklist of the key business and legal points that should normally be addressed in a vessel purchase agreement:

  1. Deposit – If there is to be a deposit, the parties should specify how much it will be and the condition under which it will be deemed forfeited.
  2. Inspection – These clauses vary widely depending on the circumstances. If the buyer has already inspected and is satisfied with the condition of the vessel, the contract may simply provide that the sale is outright and definite upon execution with no right of inspection. Usually, and especially with larger and/or classed vessels with specialized equipment, the buyer will want the right to inspect the vessel and its class records and have the ability to get out of the contract and receive back the deposit, or receive an adjustment in price, if dissatisfied with the condition of the vessel. If there is to be an inspection, the contract normally specifies the scope of the inspection and provides a strict timeline to accomplish it, and may also spell out the consequences for delaying or impeding inspection, insurance and indemnity for claims of inspectors, and allocation of inspection costs.
  3. Time and Place of Delivery – These clauses may include consequences, such as a right of cancellation and/or liability for damages, for failure to timely deliver the vessel.
  4. Total Loss Before Sale – These provisions normally give the buyer the right to cancel if the vessel becomes a total loss before delivery.
  5. Drydocking or Underwater Survey – Similar to inspection provisions, these clauses should address the circumstances under which the buyer may require drydocking or divers’ inspection and who pays for these inspections, which may depend on what is found during the inspection, and insurance and indemnity for claims arising during drydocking. These provisions may also address the buyer’s right to have the tail shaft or other vessel components surveyed during drydocking.
  6. Bunkers, Spares – These clauses typically address how and when bunkers are quantified and priced and paid for, delivery of spares and other items of vessel equipment and whether these are included in the price or paid for separately.
  7. Closing Documentation – The key issue on this point is that the buyer will want to ensure that the seller’s deliverables include all certificates and other documents necessary to meet the requirements of the registry the buyer plans to use. The contract should provide for these to be delivered as a condition of payment of the purchase price, so the buyer does not have to chase the seller after closing for a piece of paper needed to complete registration of the vessel in the buyer’s name.

Vessel purchase and sale agreements usually also have other customary provisions, such as those addressing:

  • Seller’s obligation to deliver the vessel free from all charters, encumbrances, mortgages and liens.
  • Seller’s indemnification for claims incurred prior to delivery that are asserted after delivery.
  • Allocation of responsibility for taxes, fees and expenses.
  • The required condition of the vessel and equipment upon delivery.
  • Default by the buyer or seller and the consequences of default.
  • Dispute resolution.

Numerous forms of vessel purchase and sale agreements are available publicly to use as templates in drafting agreements and specific clauses. However, when presented with any contract, whether based on an established template (e.g. BIMCO, Saleform) or drafted for the particular deal, you should never hesitate to negotiate what is important to you and revise the agreement accordingly.

“In Navigation” Status for Vessels under Renovation Remains Unclear

Posted in Jones Act
Helix

This ship may or may not have been a vessel in navigation while in dry dock for 20 months, according to a Texas court of appeals in the Jones Act case Gold v. Helix Energy Solutions Group.

A Texas court of appeals recently held that a drill ship undergoing a renovation for nearly two years in dry dock might still be a “vessel in navigation.” Gold v. Helix Energy Solutions Group, Inc., No. 14-15-00123-CV, (Tex. App. Dec. 15, 2015). The plaintiff, who had been hired to work as a seaman aboard the Helix, was working on the ship in dry dock when he began to experience neck pain and was diagnosed with a bulging disk. He sued the ship owner under the Jones Act for his injuries. The owner successfully moved for summary judgment on the basis that the worker was not a Jones Act seaman because the Helix, which was under conversion in the Jurong Shipyard in Singapore for a total of 20 months, was not a vessel in navigation. The Texas court of appeals reversed the grant of summary judgment, holding that fact issues existed as to vessel status despite the lengthy withdrawal from navigation.

The Supreme Court has held that a vessel does not cease to be a vessel simply because she is berthed for minor repairs. See, e.g., Chandris, Inc. v. Latsis, 515 U.S. 347, 374, 115 S. Ct. 2172, 2192, 132 L. Ed. 2d 314 (1995). However, there is a point the repairs become so significant, or the time out of the water so vast, that the vessel can no longer be considered “in navigation” for Jones Act purposes. For example, the Ninth Circuit held that a ship undergoing reconstruction over 17 months (three months less than the Helix) was not a vessel in navigation. McKinley v. All Alaskan Seafoods, Inc., 980 F.2d 567, 568 (9th Cir. 1992). The Fifth Circuit held that an extensive overhaul lasting only 77 days was enough to render a ship no longer in navigation. Hodges v. S. S. Tillie Lykes, 512 F.2d 1279, 1280 (5th Cir. 1975). And yet the Helix, laid up for repairs far longer than the ships in either of those cases and with no means of self propulsion, might nevertheless be “in navigation.”

Although there is no settled expiration date for “in navigation” status for vessels under repairs, the weight of authority in the Fifth Circuit and admiralty courts elsewhere suggests that a ship undergoing a major conversion over the course of nearly two years is definitely not a vessel in navigation for Jones Act purposes. Thus, the Texas court of appeals’ decision in the Helix case is a bit of an outlier. Still, the decision is worth noting as a demonstration of how far some courts are willing to go to find Jones Act seaman status.

Marine Borrowers Must Be Vigilant to Stay Afloat in a Stormy Market

Posted in Marine Finance
I think this Workboat article outlined succinctly the challenges faced by debt-laden shipowners in the current market downturn. With adverse market conditions expected to continue for the long term in almost all shipping sectors, shipowners should be taking the following measures to keep their heads above water:
  • evaluate debt service obligations and ability to pay;
  • assess potential for financial covenant default;
  • reach out to lenders to obtain waivers/amendments to credit facilities; and 
  • identify assets that can be sold.

Future Lost Wages Decision of Note by U.S. Fifth Circuit

Posted in Jones Act

The U.S. Fifth Circuit recently reversed and rendered a District Court’s finding of future lost wages so that it was based on statistical work life expectancy rather than Social Security retirement age. In the recent unpublished Fifth Circuit opinion, Mark Barto vs. Shore Construction, LLC; McDermott Inc., No. 14-31326, the Court affirmed a finding of Jones Act negligence against a derrick barge owner, an award for future general damages, and the award for cure against the plaintiff’s nominal employer. However, with regard to the plaintiff’s future lost wages, the decision focused on the District Court’s adoption of the plaintiff’s economist’s supposition that the plaintiff would work until his Social Security retirement age of 67 was reached rather than to an age supported by statistical work life expectancy. The Fifth Circuit reversed the District Court’s finding of future lost wages and reduced the amount as would be appropriate in determining that the plaintiff would have only worked until the age of 55.8 rather than 67.

Are ‘Best Efforts’ Provisions Enforceable in Maritime Contracts?

Posted in Maritime Contracts

NOTE: This post was authored for the firm by Amanda James, a Loyola University New Orleans College of Law student who is spending part of her summer working at King, Krebs & Jurgens. — RJS

Contractual Best Effort in Maritime ContractsParties to maritime contracts frequently include requirements that one or the other party or both of them will use their “best efforts” to perform duties described in the contract. But they also frequently give little thought to what the phrase “best efforts” actually means to them and, perhaps more importantly, what a court will say it means should a dispute arise.

Our review of relevant case law indicates that if you want someone to be contractually obligated to use his “best efforts,” the contract should specifically state what the parties mean by this. Maritime courts often look to state contract law when interpreting the parties’ respective obligations under maritime contracts. While state law offers varying approaches to enforcing “best efforts” provisions, two predominate approaches are evident in the relevant case law:

  1. Certain courts will not enforce a “best efforts” provision at all if it lacks an explicit standard.
  2. Other courts will look to the contract and/or the particular circumstances of the dispute to determine whether a party used its “best efforts” to perform a duty.

The first approach is epitomized by the Fifth Circuit in Kevin M. Ehringer Enterprises, Inc. v. McData Services Corp., in which the court held that a “best efforts” provision must include guidelines in order to be enforceable. These guidelines do not have to be detailed. For example, “best efforts to prepare . . . as promptly as practicable” was good enough for the Fifth Circuit in Herrmann Holdings, Ltd. v. Lucent Techs., Inc. On the other hand, an agreement between a charterer and an owner to “use their best efforts and renew this charter in two year intervals . . . ,” was deemed too vague by the court in Orgeron Bros. Towing, LLC v. Higman Barge Lines. Requiring objective standards for enforceability appears to be a minority position, adopted only by the Fifth Circuit applying Texas law and by a Louisiana district court following the Fifth Circuit precedent in Kevin M. Ehringer Enterprises, Inc.

In the second approach, exemplified by the court in Ashokan Water Services, Inc. v. New Start, enforceability is not dependent upon the inclusion of explicit guidelines. Rather, the court is able to infer standards from other contract provisions. This seems to be the more popular position, affirmatively adopted by courts in Maryland, New York, and California. Courts may also determine whether or not a party used his “best efforts” by looking at the circumstances of the case. Under this approach, the court will engage in a fact-intensive inquiry into what a reasonable (read “average, prudent, comparable”) person would have done. To that end, courts will consider the party’s intent, experience, expertise, financial status, opportunities, abilities, goals, and basically anything else that might be relevant.

While this fact-intensive approach may make it difficult to predict an outcome, the California court in California Pines Property Owners Assn. v. Pedotti did delineate a few things that “best efforts” does not mean:

  • It does not mean you are a fiduciary;
  • It does not mean you have to make every conceivable effort;
  • It does not mean you have to ignore your own interests;
  • It does not mean you have to spend yourself into bankruptcy;
  • It does not mean you have to incur substantial losses; and
  • It is not the same thing as the implied covenant of good faith and fair dealing (but it might require you to act in good faith if you’re in Alabama, Louisiana, Maryland, or New York).

The bottom line is that including “best efforts” provisions in a maritime contract can be a good practice, but only if the contract includes guidelines as to what constitutes the party’s “best efforts.” Otherwise, if a dispute arises, the provision may be interpreted as having no meaning at all or in a manner that the parties did not intend.

Highlights from the Admiralty Law Institute

Posted in Maritime Law

ALI logo

The 25th Biennial Admiralty Law Institute kicked off with great success on March 11, 2015. Informative presentations continued on March 12-13, building on the theme of this year’s conference, “Symposium on Maritime Personal Injury and Death: Jurisdiction to Judgment.”

Thursday, March 12th: The second day of the Admiralty Law Institute began with a panel discussion of punitive damages. Punitive damages has been a hot topic since McBride v. Estis, where the Fifth Circuit, sitting en banc, reversed its own panel opinion. The panel had concluded that punitive damages could be recovered by a seaman for the alleged unseaworthiness of a vessel. In September 2014, the en banc court reversed that panel and held that the statutory remedies provided by the Jones Act could not be supplemented, and thus a seaman cannot recover punitive damages for death or personal injury based on unseaworthiness. The Supreme Court is considering granting certiorari, so the availability of punitive damages in such cases will likely remain controversial.

Thursday’s program also emphasized themes such as alternative dispute resolution and maritime disaster. A panel discussion moderated by Patricia Krebs addressed a shift in the litigation of maritime disputes from expensive and formal arbitration to more flexible and informal mediation.The following panel, entitled “Effective Settlement Negotiations” similarly addressed practical aspects of dispute resolution.

Two of Thursday’s panels discussed the Deepwater Horizon incident. The first focused on government regulation and class society rules post-incident. The other, which panel included attorneys from both sides of the Deepwater Horizon litigation and Magistrate Judge Sally Shushan, provided an illuminating recount of the effective strategies employed by Judge Barbier in helping to move such a massive case towards resolution.

Friday, March 13th included a panel discussion of the recent Coffin v. Blessey Marine Services, Inc. decision, in which the Fifth Circuit held that tankermen (i.e., individuals responsible for loading and unloading tank barges as part of their duties as crew of a tow) were seaman whilst loading and unloading the vessel, and thus exempt from the overtime requirements of the Fair Labor Standards Act.

The conference was not all work and no play; as was the case Wednesday, both Thursday and Friday featured opportunities for participants to mix and mingle with their colleagues. On Thursday, the Young Lawyers group hosted a networking mixer at the Foundation Room of the House of Blues for registrants in practice fewer than six years. Following the programming on Friday was the Tulane Maritime Law Alumni luncheon at Galvez.

The next Institute, which shall focus on commercial aspects of admiralty and maritime practice, will be held in October of 2016.

New Orleans Maritime Attorney Laura Avery


Laura E. Avery
is a member of the Admiralty Law Institute’s Young Lawyer Planning Committee and an associate in the New Orleans office of King, Krebs & Jurgens. She is licensed to practice in Louisiana, and practices primarily in the areas of maritime personal injury, maritime contract disputes, casualty defense and commercial litigation. 

Admiralty Law Institute Kicks Off in New Orleans

Posted in Maritime Law
New Orleans Maritime Law

The Admiralty Law Institute runs from March 11-13 in New Orleans.

March 11, 2015, marked the first day of the 25th Biennial Admiralty Law Institute. Held at Tulane University in New Orleans, the ALI is the oldest and largest continuing legal education program devoted entirely to maritime law. The theme of this year’s conference is “Symposium on Maritime Personal Injury and Death: Jurisdiction to Judgment,” and Wednesday’s presentations were certainly in keeping with that theme. Some highlights from ALI’s first day:

First up was a panel discussion of recent developments in the ancient law of maintenance and cure. The panel noted that, despite the many modern improvements to the seaman’s lot, such as union contracts, vacation allowances, and disability pensions, the entitlement to maintenance and cure remains diligently guarded by the courts. The panel also discussed developments in the case law, such as the inability of the employer to turn a blind eye to accessible evidence corroborating the maintenance and cure claim, the scope of the seaman’s duty to disclose a pre-existing condition, and latent illnesses of the seaman–a subject that pushes the limits of the course and scope analysis.

Another topic up for discussion was cruise ships. The discussion was divided into two parts. First, regulation and compliance, followed by passenger and crew claims. A major topic of discussion was recent developments in the 11th Circuit regarding ship’s physicians. In the 5th Circuit the law remains that a ship’s physician, like a concessionaire, is not an employee or agent of the ship and thus no right of action exists against the shipowner for the medical malpractice or negligence of the on-board physician. As has been stated more often than once, ships are not floating hospitals. However, obtaining personal jurisdiction over the ship’s doctor in such cases is nearly impossible, so aggrieved parties are often left with no avenue of recovery. It seems the law is changing in the 11th Circuit, with a recent case holding the shipowner liable on an apparent agency theory.

Wednesday’s other presentations addressed attorney-client privilege and the admiralty practitioner, vessel status and jurisdiction (which included a very interesting discussion of the Lozman case) and removal of maritime cases. All presentations were followed by lively, and occasionally heated, questions and comments from the attendees. The day was capped off with a very well-attended cocktail reception at the lovely New Orleans Board of Trade.

Thursday’s topics include punitive damages, arbitration and mediation of maritime disputes, and litigating maritime disasters.

New Orleans Maritime Attorney Laura Avery


Laura E. Avery
is a member of the Admiralty Law Institute’s Young Lawyer Planning Committee and an associate in the New Orleans office of King, Krebs & Jurgens. She is licensed to practice in Louisiana, and practices primarily in the areas of maritime personal injury, maritime contract disputes, casualty defense and commercial litigation. 

OWCP on Verge of Amending Regulations to Include Electronic Submissions

Posted in LHWCA

department of labor logoOn Thursday, March 12, 2015, the Department of Labor Office of Workers Compensation Program (OWCP) filed in the Federal Register (Volume 80, No. 48) a direct final rule and request for comments with regard to changes to OWCP regulations intended to broaden the acceptable methods by which claimants, employers and insurers can communicate with OWCP and each other. The direct final rule becomes effective on June 10, 2015, without further action unless OWCP receives significant adverse comment to the rule by May 11, 2015. The notice issued by the OWCP provides that the revisions are procedural in nature and that they will apply to all matters pending on the date the rule is effective. These revisions either codify current practice or broaden the methods by which documents and information may be transmitted under the LHWCA.

In general the rules now recognize email transmission of documents as a means for communication between parties as long as the parties have either in writing or by email provided confirmation that the receiving party agrees to accept electronic transmission if it is sent through a reliable method. The rules also provide for a replication of this agreement. The revisions also provide for the use of the OWCP SEAportal method for serving documents on a District Director’s office, but does not exclude the existing means for delivery of documentation whether by mail, facsimile or hand delivery.

As we all know, the devil is in the details. It is therefore recommended that the LHWCA employer, insurer and practitioner review these revisions to be in compliance by their effective date.