1. YPSN (HK) MARITIME SEMINAR – WEDNESDAY 19 FEBRUARY 2014 THE NORTHERN SEA ROUTE – LEGAL AND PRACTICAL ISSUES ARISING RORY MACFARLANE INCE & CO

2. The Northern Sea Route (NSR) 2 Northern Sea Route Russian Siberian coast Barents Sea to Baring Strait First navigated in 1897 c/f Northwest Passage Canadian Arctic coast Also exiting via the Baring Strait 1905 - Amundsen / The Maud

3. Northern Sea Route c/f Southern Sea Route 3

4. NSR – Potential Advantages 1.Less Time (reduced hire/freight). 2.Less Bunkers. 3.Avoids East African Piracy threat and associated costs. 4.Reduced CO2 emissions. 4

5. NSR - Potential Disadvantages / Hazards 1.Seasonal. July – November (140 days). - Icebreaker support? 2. Navigational Issues: - not a linear route - insufficient charts - compass / GPS reliability - restricted visibility - transit close to coast (15m draft) 3.Casualty Response – (towage/salvage/spare parts). 4.Pollution clean-up costs. 5.Less flexible route commercially. 5

6. NSR- Variations in Ice Flow 6

7. NSR - Potential Disadvantages / Hazards 1.Seasonal. July – November (140 days). - Icebreaker support? 2. Navigational Issues: - not a linear route - insufficient charts - compass / GPS reliability - restricted visibility - transit close to coast (15m draft) 3.Casualty Response – (towage/salvage/spare parts). 4.Pollution clean-up costs. 5.Less flexible passage commercially. 7

8. NSR – Potential Disadvantages / Hazards The Petrozavodsk (2009) 8 The Nordvisk (2013)

9. NSR – Potential Disadvantages / Hazards 9

10. NSR - Potential Disadvantages / Hazards 1.Seasonal. July – November (140 days). - Icebreaker support? 2. Navigational Issues: - not a linear route - insufficient charts - compass / GPS reliability - restricted visibility 3.Casualty Response – (towage/salvage/spare parts). 4.Pollution clean-up costs. 5.Less flexible passage commercially. 10

11. NSR - Legal Issues / Insurance INSOP / ARCOP / Lloyds JHC / Arctic Council. - all conclude that claims arising in arctic would be more expensive - emergency response to ships in distress inhibited Is the vessel sufficiently ice classed? Will the vessel receive ice breaker support? Lack of statistical data. NSR therefore creates issues relating to: - Classification Societies - P&I Insurance - H&M Insurance 11

12. Insurance – Classification Societies Ice class notations differ among classification societies. Ice class is not part of the main class. Societies rules do not regulate the way vessels operate in ice- infested areas. Implications for Insurers Cover will not be prejudiced on the ground of loss of class. Insurers must evaluate the risk and set requirements. 12

13. Insurance – H&M Voyage in arctic waters could be a risk excluded (e.g. English Institute Warranties 1/7/76). Notify underwriters before transit. -Revised terms of cover -Additional premium -Ice deductible [ Note: the JHC has recommended a Russian-speaking desk officer for NSR transit] 13

14. Insurance - P&I Generally no imposition of trading. Notify P&I of transit through NSR in advance. Alteration of risk. 14

15. NSR – Legal Issues / Transit Application Procedure Need a Permit Who:Ship owner/master or owners representative. When:>120 days before transit. <15 days before transit. Where:The NSR Administration, Moscow. How:By email (nsra@morflot.ru):nsra@morflot.ru - pdf form - ship name / IMO number / details - contact details - ship owner statement - attachments (class cert. / insurance details etc..) NB Contact ice breaker administration once application submitted. 15

16. NSR – Legal Issues / Transit After Application Decision:- within 10 working days. Notification:- within 2 working after decision. - published on NSRA website. Validity:- 365 days. - no entry to NSR before permit effective period. - exit from NSR before end of permit. Report:- daily by master to NSRA – email. Refusal:- information false or misleading. - information incomplete. - vessel unsafe under Russian law. Fees:- transit costs (per ton / cargo). - ice breaker fees (unpublished). - ice pilot(s) fee. 16

17. NSR – Ice breakers 17

18. NSR – Legal Issues / General Any different to other maritime routes/ voyages? Hire – increased risk of off hire / termination. Routing – navigational orders ; employment orders. Unsafe port. Seaworthiness. 18

19. NSR - Transit Facts & Figures General Up to 40% shorter than SSR / Suez route. COSCO (Mv Yong Sheng), Sanko (Sanko Odysesy), Tsuchdi Shipping (Mv Nordic Barents), Vitol. Sena Bulk / Hyundai – co-operative long term strategy. Golden Waterway – 5% to 15% of Chinas int. trade by 2020? Transit Figures NSR 20092 vessels. 2010 4 vessels. 2011 18 vessels. 201246 Vessels. c/f Suez Canal 20121,500 per month / 18,000 per year. 19

20. NSR - Transit Facts & Figures (cont.) 2013 # 20

21. NSR Information Office http://www.arctic-lio.com NSR Administration http://www.nsra.ru/en/razresheniya/ NSRA Permit Applications nsra@morflot.ru NSR Transit – masters daily reports nsra-info@morflot.ru Ice Breakers and Ice Pilots http://www.rosatomflot.ru/?lang=en http://www.arctic-lio.com/nsr_icebreakersassistance http://www.nsra.ru/en/org_locman_provodka/ IMO 1024(26) - Polar Water Guidelines www.imo.org/Publications/Documents/Attachments/Pages%20from%20E190E.pdf NSR – Useful Websites / Email Addresses 21

22. Beijing Dubai Hamburg Hong Kong Le Havre London Monaco Paris Piraeus Shanghai Singapore Thank you Rory Macfarlane rory.macfarlane@incelaw.com