Australia: Breaking the Ice: shipping in the Arctic

Shipping newsletter - Legalseas

The Arctic Ocean is the world's smallest ocean. Until fairly recently, it was icebound for most of the year and shipping activities were restricted. The ice is now retreating significantly and passages through the Arctic Ocean are open for enough of the year to generate the interest of the international shipping community.

Commercial activity is not a stranger to the Arctic. Whaling has been the most sustained activity, and since the 17th century at least 39,000 ships have gone whaling in the Arctic. Currently, ships in the Arctic are engaged in many activities, including community re-supply, fishing, tourism, seismic, offshore supply vessel operation and an increasing amount of commercial transit traffic, particularly through the Northern Sea Route (NSR) which was opened to foreign shipping in 1991. In 2012, 46 ships transited the NSR between Europe and Asia across the Russian Arctic. This was a ten-fold increase in traffic from two years prior. A million tonnes of cargo transited NSR, most of it being hydrocarbon products.

In addition to the NSR there is a routing along the northern coast of Canada, the Northwest Passage (NWP), which has not been developed to anything like the extent of the NSR. It is thought that in the future, it may be possible to transit directly over the North Pole. One thing that is clear, however, is that traffic is increasing in the Arctic and will continue to do so.

There are a number of parties with their own agendas which are at play in the Arctic and which will have an effect on the way in which shipping is, and will be, regulated. The littoral states, being Russia, Canada, United States, Denmark (Greenland) and Norway all have interests in protecting their portions of the Ocean. The Arctic Council is composed of the littoral states, a number of observers and a number of permanent participants (Arctic indigenous representatives). Because of the current interest in the Arctic a number of non-Arctic countries are seeking observer status, notably China. The Arctic Council is regarded as the leading consensus building and potential rule making body for the Arctic. As industrial and commercial opportunities develop in the Arctic the relevant industrial interests are becoming more and more present. Certainly oil and gas and mining industries are present. Environmental groups such as PEW, WWF and their affiliates are very active in articulating their views of the way in which the Arctic should be protected.

Each of these interest groups seeks to regulate the Arctic according to its own priorities, while recognizing that the risks for shipping in the Arctic are very different from those of other oceans. Some of the challenges for Arctic shipping include ice, inadequate navigational aids, poor or non-existent charting, weather conditions including extreme cold and darkness, qualification of crews, and lack of sufficient ice navigators. There is a lack of infrastructure in the Arctic, both with respect to the handling of cargo and the ability to respond to casualties at sea, whether it be a vessel losing power, an oil spill or grounding. A Hazid (Hazard identification) Risk Matrix for vessel planning purposes for transit through the Arctic will include many of the unique risks of operating in the Arctic and it is difficult to conclude that rescue capabilities, vessel traffic services, and maritime infrastructure are adequately in place in the Arctic.

The international shipping industry has been used to international regulation through the adoption of conventions by flag states. In the Arctic, SOLAS and MARPOL fulfill this requirement. However, the Arctic is much more complicated and the other agendas at play can potentially have an effect on commercial shipping. The NWP and the NSR passages are within the EEZ limits of Canada and Russia. Both countries have chosen to enact their own pollution legislation, which have effect in these passages. Russia and Canada have enacted these laws through the authority of Article 234 of the UN Convention on the Law of the Sea (UNCLOS), which grants this right for states whose EEZ has "ice covering such areas for most of the year" and where pollution in the EEZ could cause major harm. Article 234 is the only article of UNCLOS which grants a unilateral right to a coastal state over waters beyond its territorial sea.

The Arctic Council has produced various standards which seek to regulate many aspects of shipping activities in Arctic waters. This has been done by the creation of guidelines for such matters as offshore oil and gas, the transfer of refined oil and oil products in Arctic waters, and others. These guidelines have in some cases been adopted by the shipping industry, but in and of themselves they do not have the force of law. The Arctic Council is now moving beyond guidelines to "agreements" and, in that respect, has agreed on a search and rescue agreement which divides the Arctic into different areas and assigns responsibility for these areas for search and rescue amongst the participating Arctic states. In Spring 2013, the Arctic Council will, in all likelihood, approve an agreement in respect of oil pollution preparedness and response for Arctic waters. These are laudatory accomplishments. The International Association of Classification Societies has produced Rules to govern the operation of the types of vessels operating in Polar waters. These Rules dovetail with the insurance requirements of the marine insurance industry. Meanwhile IMO is putting the finishing touches on a mandatory code for all vessels operating in Polar waters (Polar Code). As is the case with other IMO codes, it will have the force of law through amendments to SOLAS and MARPOL.

While all of this interest in safety for Arctic navigation is encouraging, it can also be said to be potentially confusing for the shipping industry as it comes from many different sources.

This multi-faceted development of Arctic shipping regulation has attracted the attention of the International Chamber of Shipping (ICS). The ICS represents over 80 per cent of the world's merchant fleets. In December 2012, it issued a position paper on Arctic shipping which expresses concern about individual coastal states and the manner in which they might regulate. While recognizing the rights of the coastal states, the ICS advances the position that such rights need to be exercised in a manner that is consistent with the international conventions. In particular the ICS expresses concern about prejudicial measures that might arise with respect to ships registered with "non-Arctic nations" that might prejudice their ships. Examples noted are "unilateral ship construction, design and equipment standards; navigation requirements including mandatory navigation or icebreaker, service fees; and the imposition of additional insurance requirements." ICS suggests that Arctic nations should only apply requirements to foreign flag vessels if they are consistent with generally accepted international rules and standards.

In support of its view that Arctic regulation should strive for uniformity, the ICS questions the rationale for the adoption of unilateral pollution legislation by Russia and Canada in accordance with UNCLOS Article 234. The ICS seeks clarity for international ship operators as to "which nations or organizations are responsible for ensuring the safety of maritime transport in Arctic waters".

Arctic transit is developing quickly and has many advantages for the commercial shipping industry. As noted, however, the risks of shipping in the Arctic are many and, to date, the regulatory framework is not fully developed. It is an ocean which provides great opportunity, but the navigation of which requires considerable care and attention to its uniqueness.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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