International Law News Archives - Page 5 of 8 - Malta Maritime Law Association

Smart shipping – Blockchain technology offers the opportunity to revolutionise the shipping sector

September 19, 2018 Leave a Comment

Malta is fast becoming a centre for Distributed Ledger Technology (DLT) businesses. Its efforts to become a global hub in this sector culminated in the enactment of three new laws earlier this year. This new legislative framework seeks to create a regulated environment within which this sector can function and thrive in. However, despite the buzz generated by blockchain, many people are still not sure what this technology really means and more importantly, how it can transform and revolutionise so many different industries, including shipping.

At its core, blockchain is a decentralised and distributed digital database. This means that different parties can share and update the same information online in real time, naturally depending on authorisation rights. There is no need for a central administrator. To simplify matters, imagine a spreadsheet. Rather than having one person regularly update it, here the spreadsheet is duplicated across a network of users (also known as ‘nodes’), who are regularly updating the spreadsheet.

Thus, whereas most centralised databases keep information upto-date at a particular moment, data held on a blockchain exists as a shared database which is constantly being updated and reconciled in real time as new sets of ‘blocks’ are added to it. Each block contains a timestamp and is linked to the previous block, forming a chain of information.

Naturally, while the information can be accessed by all, not all users can add a new entry to an existing chain. To do so, they must have a special cryptographic key. Decentralised data arguably also provides more security as it becomes harder to manipulate the information in the ledger. By way of example, imagine your bank maintains a central database of all its customer details and transactions. When you withdraw money or transfer funds, your bank updates its records in its database. If a hacker manages to access to this centralised database – they can change balances and change transaction details at will.

However, with blockchain, this would not be possible as there is no centralised database. All the users have real-time access to the data. Any manipulation would require the same change being made on all copies of the distributed ledger at the same time, which is highly unlikely. Most people associate blockchain technology with banking and cryptocurrencies. Perhaps this is a result of the fact that these two industries were the first to identify the enormous potential of this technology and have invested so heavily in it.

However, blockchain as a secured, decentralised and encrypted ledger is being explored by other sectors and the shipping industry is no exception. Shipping remains to date a paper-intensive industry, with most transactions dependent on the use of paper documents such as sale contracts, charterparties and bills of lading. Some of these documents may also need to exchange hands several times.

For instance, traditionally a bill of lading is issued at the port of loading in favour of the shipper. It may subsequently need to pass on to several banks before ultimately reaching the receiver. The process can be so time consuming that sometimes the cargo arrives at the port of discharge before the bills of lading do.

Blockchain technology offers the opportunity to turn shipping paperless, by means of which all the key stakeholders – including shippers, receivers, carriers, charterers, banks, terminals and customs officials – may contract, exchange or store information in encrypted format, give and accept instructions and securely effect payment exchanges. Every party involved in a transaction may access any of the relevant trade documentation in real-time, with the peace of mind that these have not been tampered with. By doing so, the use of blockchain technology promises to simplify current shipping processes, reduce costs, provide more time-efficient solutions and also offers a securer way of trading.

Blockchain technology may also revolutionise the shipping industry through the use of smart contracts. These electronic contracts are essentially drawn up by a computer programme which is intended to facilitate negotiations and execute agreements between parties. Additionally, they also aim to self-enforce or perform the obligations when certain pre-defined conditions are met. For instance, automated payments could become self-executing under a smart contract once the performance of the obligations therein is carried out.

It will be interesting to see whether the industry will embrace the use of smart contracts. In shipping, most transactions are carried out using standardform contracts and thus, much could depend on how well these contracts can be coded or transposed into smart contracts. The potential that blockchain has to transform shipping operations into more efficient and profitable enterprises is already being recognised by a number of big stakeholders in shipping.

Indeed, over the last couple of months, we have seen a number of ambitious projects go live. Container shipping giants A.P. Moller–Maersk have teamed up with IBM and recently launched their blockchain trade platform TradeLens. This platform aims to connect all parties involved in the shipping trade and enables them to interact efficiently and access real-time shipping data. It will enable participants to also digitalise and exchange trade documentation using a module, called ClearWay, which will also allow for the use of smart contracts and automated processes, such as import and export clearance. In layman’s terms, this technology will allow multiple trading partners as well as authorities to establish a single shared view of each transaction. Shippers, carriers, freight forwarders, terminal operators and customs authorities can interact more efficiently through real-time access to shipping data and shipping documents.

Blockchain-based start-up CargoX recently also successfully carried out its pilot shipment for the first ever smart bill of lading. The test trail saw shipments of garments arrive in the port of Koper from Shanghai, China on August 19, 2018. CargoX claims that its services can reduce the costs associated with issuing and processing bills of lading by up to 85 per cent, as well as save time and provide a more secure way of shipping cargo. The likelihood is that widespread acceptance of blockchain technology in shipping will not happen overnight.

There are still a number of challenges which will need to be overcome, primarily the need to ensure that the law supports the technology and also protects the legitimate interests of so many parties’ involvement in the maritime chain. Another important factor will certainly be the willingness of public authorities to embrace and use this technology. We must therefore patiently wait to see as to what extent the shipping industry can take advantage of blockchain technology.

by Adrian Attard, Member of the MMLA and maritime lawyer at the marine litigation department of Fenech & Fenech Advocates

Source: Times of Malta, Maritime&Logistics Supplement

MMLA President at UNCITRAL in New York

July 5, 2018 Leave a Comment

The President of the Malta Maritime Law Association (MMLA), Ann Fenech together with the President of Comité Maritime International (CMI) Stuart Hetherington represented CMI at the 51^st session of UNCITRAL in New York on 29^th June 2018. Also present was another CMI Executive Council member, Professor Alex von Zeigler who was the Swiss delegate representing Switzerland. Up for discussion was the Swiss Proposal to UNCITRAL suggesting that UNCITRAL should work on cross border issues related to judicial sales.

In February the MMLA together with CMI and the Ministry for Transport organized an international Colloquium on a Draft International Instrument on Foreign Judicial Sales of Ships and their Recognition, a convention drafted by the CMI, where international experts discussed the importance of having an international convention to deal with the issues of recognition of judicial sales of ships. Present for the Colloquium were representatives of the entire maritime and trading industry including ship owners, charterers, financiers, suppliers of provisions and bunkers, flag registries and representatives from BIMCO, FONASBA, the ITF as well as legal practitioners and maritime service providers from around the world. The conclusions of the Malta Colloquium formed the basis of a report attached to the Swiss Proposal requesting UNCITRAL to take on the work.

The CMI are delighted to report that notwithstanding a number of other proposals put to UNCITRAL for future work, the Swiss proposal for work on recognition of judicial sales was one of two proposals accepted by UNCITRAL. UNCITRAL therefore mandated one of its working groups to take on this project. It is expected that work on this will commence as soon as one of the working groups finishes its current assignment.

MMLA President invited by the Spanish Maritime Law Association

June 18, 2018 Leave a Comment

The President of the Malta Maritime Law Association, Ann Fenech was invited by the Spanish Maritime Law Association to give a presentation on Judicial Sales and the CMI draft convention on the international recognition of judicial sales at a congress in Madrid held on the 14^th and 15^th June.

Dr. Fenech discussed the processes leading to judicial sales, the problems when there is a failure by states to recognise such judicial sales and the importance for states to support the proposal for a discussion on cross border recognition of Judicial Sales at UNCTIRAL on the 29^th June in New York.

The President of the CMI Mr. Stuart Hetherington and Ann Fenech will together be representing the Comite Maritime International at the 51^st Meeting of UNCITRAL in June.

Malta Yachting Industry challenges Notice by EU Commissioner

March 20, 2018 Leave a Comment

The Malta Maritime Law Association, the Malta Maritime Forum, the Yachting Services Trade Section within the Malta Chamber of Commerce, Enterprise and Industry, the Institute of Financial Services Practitioners and the Super Yacht Industry Network Malta denounce the recent Notice sent to Malta by the EU Commissioner in connection with the Maltese VAT rules for pleasure yachts.

In light of the fact that the Maltese system is fully in line with EU law and no similar notice was sent to Member States which apply the same principle under the EU’s VAT Directive the Maltese yachting industry questions why such a notice has been sent at all and why this discriminatory approach is being adopted by the Commissioner.

It is noted that the manner in which Malta has applied the option granted by Article 59a of the European Union’s VAT Directive is exactly the same as that adopted by Italy. Indeed, Malta’s rules on effective use and enjoyment of pleasure yachts within and outside EU territorial waters mirror those adopted by Italy through Circular No 49 of 7 June, 2002 issued by the Agenzia delle Entrate (Italian Revenue authorities).

The actual percentages of deemed use of yachts within EU territorial waters adopted by Malta are identical to those which Italy had drafted in the said Circular. Malta has certainly not re-invented the wheel, but has rather based itself on a similar interpretation given by Italy which the Italian tax authorities confirmed most recently in October 2010 through a “Vademecum del Leasing Nautico” issued with the collaboration of the Italian tax authorities.

Furthermore it is highlighted that France has been recognising since 2005 that it is difficult for lessors of yachts to establish how much a leased yacht is used within EU waters. Article 13 of the Administrative Instruction 3 A-1-05 published by the French tax authorities in Bulletin Officiel des Imports on 24 January, 2005 recognises such difficulty, and then allows yacht lessors to apply a 50% reduction on the total lease amount, irrespective of the category of the yacht. In practice, this means that only 50% of French VAT would be payable as a result of this French rule.

Malta’s system does not exempt yachts from payment of VAT but rather provides guidelines (as allowed for by the EU Directive) regarding deemed use outside and within EU territorial waters such that yachts using such guidelines will always pay VAT at varying degrees.

We believe that both the Italian and French systems do not infringe the EU vat laws. Therefore we cannot understand why Malta’s system should be singled out.

We appeal to the President of the European Commission, Mr Jean Claude Juncker, to intervene in this matter so as to ensure that there is no discrimination against smaller EU States like Malta.

It is also the belief of the local Yachting Industry that it is in the European Union’s collective interest that the Commission protects the European yachting sector in line with the EU’s Integrated Maritime Policy thereby ensuring that Europe does not lose out to competition in the maritime sector by non-EU countries.

Finally, we appeal to all political parties and stakeholders in Malta in a situation where the Maltese system reflects a legitimate application of a principle of EU law which is supported by other EU Member States, to act as a united front in protecting Malta’s yachting industry.

Ann Fenech re-elected to the Comité Maritime International (CMI) Executive Council

September 12, 2017 Leave a Comment

Ann Fenech, who has for the last two years served as a member of the CMI Executive Council, was unanimously re-elected to a second term on the said Council. Ann Fenech’s reappointment took place during the CMI General Assembly held in Genoa at the beginning of September, which entrusted her to serve for another two year term as one of the 13 members of the CMI’s Executive Council.

Ann Fenech is the President of the Malta Maritime Law Association and the first Maltese person who has ever been elected to the CMI Executive Council.

The Comité Maritime International is the oldest organization in the world that is exclusively concerned with the unification of maritime law and related commercial practices. Founded in 1897, CMI has been responsible for the developing and drafting of most international maritime law instruments over the last century. To this effect, CMI also enjoys observer status at the International Maritime Organization (IMO).

Since her appointment two years ago, Ann Fenech has also been appointed as chair of the CMI International Working Group (IWG) on Ship Financing Security Practices. She delivered a presentation at the CMI/AIDIM Seminar, wherein she gave a detailed overview of the work carried out by the said IWG over the last year.

The Conference was very well attended with more than 200 maritime lawyers from all over the globe.

Member of the Comité Maritime International

Smart shipping – Blockchain technology offers the opportunity to revolutionise the shipping sector

MMLA President at UNCITRAL in New York

MMLA President invited by the Spanish Maritime Law Association

Malta Yachting Industry challenges Notice by EU Commissioner

Ann Fenech re-elected to the Comité Maritime International (CMI) Executive Council

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