Lee Kok Leong, our special correspondent, interviews Philip Teoh, a prominent maritime lawyer, on the importance of ethics and transparency. Philip is partner and head of Shipping, International Trade and Arbitration Practice of Azmi & Associates, one of Malaysia’s largest full-service law firms.
In light of the recent incidents of the Beirut explosion and Mauritius oil spill, it is more important than ever for the maritime industry to fully embrace ethical business practice and transparency.
Without ethics being practiced by the seafaring crew, there will be no trust in their professional conduct. According to reports, the cause of the Mauritius oil spill in late Jul, the worst oil spill in the Indian Ocean that gave rise to considerable environmental damage to two protected marine ecosystems, was attributed to poor seamanship, and a lack of supervision and control.
Moreover, it was reported that there was a birthday celebration going on during the accident and that the ship deviated from its planned course and went closer to the coast so as to pick up an internet signal.
Without transparency, there will be no accountability, as goods crossing borders are prone to corruption and subject to opaque, redundant and lengthy clearance processes.
And in the case of the Beirut explosion in Aug, opaqueness, and corruption, have led to more than 2,700 tons of highly explosive ammonium nitrate sitting in the port, which ultimately resulted in a huge explosion, killing hundreds and injuring thousands more.
Maritime Fairtrade (MFT): In your opinion, why do you think ethics and transparency are important to the maritime industry?
Philip Teoh (PT): Ethics are important in any industry including maritime. A lot of collaborations and transactions are based on trust. Chain of contracts and charters are common in shipping and international trade. The goods are sold several times in the course of shipment. Vessels are chartered through chain of charters.
When ethics are absent, maritime fraud arises. The charterer who has paid for the charter may find that the charterers above him in the chain have not made payment, hence will find their cargoes detained by the Demise Owners due to non-payment of charter-hire. In these situations, disputes arise.
Transparency is not always possible. The trader will not want to reveal the ultimate supplier lest he will be bypassed in the next purchase of deal. This explains the practice of switch bills of lading.
MFT: How can the industry be more ethical and transparent?
PT: The involved parties should make it a practice to obtain more details about each other. This will encourage them to offer more details when approached by others seeking collaboration and charters.
Education will also play a part. The cargo insurers can educate the assureds to be aware of trading risks and to trade prudently as this will reduce claims. This is better than engaging in contentious disputes when claims arise, when the assured fails to exercise prudent risk management. In this situation, the Cargo Insurance Policy may be the only recourse when the cargo owner suffers catastrophic loss.
MFT: What are your thoughts on the Beirut explosion and how can we prevent such incidents in the future?
PT: The cause of the incident arose from the long storage of dangerous chemicals. The International Maritime Dangerous Goods (IMDG) Code has protocols on handling, storage and movement of dangerous goods. These are known and the ports are aware of what needs to be done. Most ports have a section in handling dangerous goods.
Several years ago, I handled a claim involving loss of a vessel due to the explosion of dangerous goods. The freight forwarder declared the cargo and its IMDG specifications to the port but mistakenly declared the cargo as innocuous agro-chemicals. The cargo exploded at the subsequent port causing damage to the vessel and it sank within 20 minutes. The Court held the forwarder liable for the failure to declare properly.
The protocols of handling such dangerous cargo is known and laid out in the Code. In both the Beirut case and the case that I handled, the parties failed to properly apply these protocols. In one report I read of the Beirut incident, there was hot works at the warehouse storing the cargo, which caused sparks to ignite the cargo.
MFT: The recent Mauritius oil spill highlights the importance of a legal framework when disaster strikes. From a legal perspective, please explain this incident in more detail and how you see the development being played out.
PT: The International Convention on Civil Liability for Oil Pollution Damage (CLC Convention) sets out the procedure for claiming for damage caused by marine oil spills would govern the Mauritius incident.
In the incident, the MV Wakashio, a Japanese-owned but Panamanian-flagged bulk carrier, was sailing from Singapore to Brazil with 3,800 tons of fuel oil and 200 tons of diesel onboard when it struck a reef off the southeast coast of Mauritius.
More than 1,000 tons of oil seeped from a gash in the hull before it was announced on August 13 that salvage crews had removed all the remaining fuel from tankers beneath the hold. The problem with the spill was that it occurred at a biologically sensitive area. There are protocols in handling oil spills; in Malaysia there is a National Oil Spill Contingency Plan which has several levels supported by teams from the Oil Majors. Many other countries have similar plans.
However, Mauritius does not have such contingency plans, and thus was not geared up to deal with incident, so other countries have sent experts to help. A French team arrived first, from the nearby island Réunion, to erect ocean booms, floating structures that contain the spill.
The United Nations sent a team including experts in oil spills and crisis management. They’ve been working with communities, the private sector and the government to coordinate clean-up efforts. Marine ecologists and others have arrived from Japan and the United Kingdom.