Shipping finance plays increasingly important role.
David Astwood
30 June 2005
Lloyd's List

BERMUDA continues to thrive as a first-class offshore financial jurisdiction.

It was the shipping industry that first put the island on the international business map more than 50 years ago, and today Bermuda also has a thriving international ship finance and registration industry.

Earlier this month 124 vessels were registered with the Bermuda Department of Maritime Administration, aggregating about 6.5m gross tons. The Bermuda Register continues to expand.

Many of the world’s leading owners, managers, builders, insurers, lawyers, accountants and bankers have developed close relationships over the years with Bermuda in order to put together financial structures tailored to the specific requirements of the shipping industry.

As a result Bermuda lawyers practising shipping law are able to follow developments in the industry very closely.

The past few years in particular have afforded lawyers in Bermuda the chance to observe significant developments in ship financing, which has been experiencing an economic boom.

The two most significant developments from a ship finance perspectiv relaings to Bermuda are the surge in initial public offering activity by Bermuda-based shipping groups, particularly on the US capital markets, and the increasing use of Bermuda as a base, both for companies and for the registration of vessels, for LNG ships.

The surge in shipping IPO activity is evidenced by such Bermuda companies as Arlington Tankers, TBS International and Aries Maritime Transport which are listed on the New York Stock Exchange in Arlington’s case and the Nasdaq National Market in the others.

It is expected that Bermuda-based shipping companies will continue to be used for listings on stock exchanges in the US, Europe and Asia as long as the appetite for public offerings continues.

Also of significance is the increasing use of Bermuda as a base of operations for LNG shipping groups. There are 13 LNG newbuildings on order or under construction for the Bermuda flag, al in South Korea.

With the continuing positioning of shipping groups to move into LNG with its attractions as an alternate source of energy, Bermuda has proved an attractive jurisdictio, acceptable to shipowners and, more important, to charterers, for flagging LNG vessels and incorporating their owning companies.

There is always a need to provide some form of financing to existing vessels, so there are always a number of deals taking place whatever the economic climate.

In the past six months the number of ship financings has increased, with many shipping groups taking advantage of competitive prices available for newbuildings in Asian and European shipyards to modernise their fleets.

There is always the fear that this spurt of newbuilding activity will sow the seeds for the next downswing of the economic cycle due to overcapacity.

Much of the world’'s ageing tanker fleet, however, is getting to the stage when it has to be replaced.

Accordingly, it is to be hoped that a prosperous equilibrium will be achieved between the forces of supply and demand.

There are a number of reasons why Bermuda continues to be used as a jurisdiction of choice for the shipping industry. These include:

(i) Modern shipping legislation as evidenced by the enactment of the Merchant Shipping Act 2002 and related regulations which consolidated and updated the island’s shipping legislation.

(ii) A sophisticated and stable regulatory framework.

(iii) Shipping industry expertise.

(iv) An advanced and sophisticated communications infrastructure.

(v) An English law-based legal system that provides for the application of legal principles and concepts well-known to the shipping industry.

The legal system is based on that of the United Kingdom, with a final appeal to the Privy Council of the House of Lords in England.

(vi) Sophisticated banking, telecommunications, computer, legal and accounting services.

(vii) An efficient and well-run shipping register.

(viii) Extremely low port state control detention figures as recorded by the Paris Memorandum of Understanding.

(ix) A government committed to the flexibility and adaptability of Bermuda’s international laws in order that they may keep pace with the requirements and demands of international clients.

(x) No income tax or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by a Bermuda company or its shareholders, other than shareholders ordinarily resident in Bermuda.

(xi) Absence of exchange controls.

It is anticipated that Bermuda will go from strength to strength as one of the world’s premier shipping centres providing financial and legal services to the international shipping industry, in good times and bad.

David W J Astwood is a partner with Conyers Dill & Pearman.

Bermuda takes top spot as world’s leading flag
3 June 2009
Lloyd's List

THE Paris Memorandum of Understanding on Port State Control has issued its 2008 rankings, based on the results of thousands of inspections across Europe and the North Atlantic, placing Bermuda at the top of the white list.

The UK jumps two places on the previous year, coming in at number three, with France in second place. Leading flags of convenience such as the Marshall Islands and Liberia also make the cut, while the US has been relegated to grey-list standing.

The black list of flags that face increased scrutiny include long-standing poor performers, such as the largest register in the world, Panama, along with North Korea, Bolivia and Albania. This year they are joined by Libya, Moldova and Dominica.

Belize, meanwhile, has failed to achieve its longstanding goal of shaking off the black-list tag.

All told, the white list now numbers 41 countries, three more than last year, while there are 21 black-list flags, two more than previously. Lithuania, Turkey and Japan have been upgraded from grey to white, while Iran joins the US in making the reverse journey.

As the Paris MoU points out, a flag’s placing is taken into account when targeting ships for inspections, and ships registered with black-list flags are liable to be banned from the region after multiple detentions.

A table of recognised organisations has also been released, with Det Norske Veritas at the top for the second year in succession, followed by Germanischer Lloyd, Rina, ABS and Lloyd’s Register.

Turkish Lloyd, which is not a member of the International Association of Classification Societies, is put in sixth place, followed by Bureau Veritas, ClassNK, the Russian Maritime Register of Shipping and China Classification Society.

The bottom six recognised organisations, from 22nd to 27th, are Panama Maritime Documentation Services, Shipping Register of Ukraine, International Register of Shipping, Bulgarski Koraben Registar, North Korea-based Korean Classification Society and Albania’s Register of Shipping.

All rankings are calculated on the basis of number of detentions compared to number of inspections, although in the case of recognised organisations, only detentions judged directly related to statutory surveys count.

A DNV spokesman commented: “We are, of course, very pleased. Quality is our main goal at all times and we always focus on quality. This is why we, together with our shipowners, have been able to achieve a low detention rate.”

The UK Maritime & Coastguard Agency, which runs the UK flag, pointed out that the UK has stayed in the top 10 for at least the last decade. Chief executive Peter Cardy said: “The UK operates a quality register for quality ships and we look to ensure that our reputation is not compromised in any way. Maintaining a high position on the Paris MoU white list demonstrates the UK’s commitment to safer lives, safer ships and cleaner seas.”

Attempts to contact the Bermuda Maritime Administration for comment were unsuccessful. Bermuda is regarded as an FoC by the International Transport Workers’ Federation.

Maritime & Coastguard Agency chief executive Peter Cardy has reassured MPs that he has taken measures to deal with the criticisms of his organisation’s work contained in a report from the National Audit Office earlier this year.

Last February, the public spending watchdog slated the MCA for missing inspection targets and failing to secure full cost recovery for survey work.

But Mr Cardy told the House of Commons public accounts committee that he had addressed the issues raised, in part through reduced bureaucracy. For example, the executive board had been cut from five members to three.

Mr Cardy admitted that there had been “quite a lot of managers, but not much management”, but he insisted he had made the organisation leaner and more responsive.

Bermuda rejects cruise ship gaming bill
10 July 2009

HAMILTON, Bermuda (AP) - Bermuda lawmakers have rejected a bill that would have allowed cruise ship passengers to play gaming machines on vessels making port calls at night in the British Atlantic territory.

Premier Ewart Brown's cruise ship gaming bill failed Friday in the House of Assembly by 18 votes to 11. In a terse statement issued after the vote, Brown said "cruise lines and tourism partners now know where things stand and can plan accordingly."

Bermuda lawmakers banned slot machines in 2001, arguing they were driving some islanders into debt. The law took effect in 2004.

Table games such as blackjack are also outlawed in Bermuda, but sports betting pools and some other gambling activities are permitted.