THE MASTERS, MATES & PILOTS'
WHEELHOUSE WEEKLYonline

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Volume 8 . . . . . SPECIAL EDITION . . . . August 16, 2004



 

COURT OKs MAERSK LINE LIMITED TAKEOVER OF USSM-MANAGED SHIPS

On Thursday, August 12, the U.S. District Court for the District of Columbia issued a ruling that clears the transfer of three vessels owned by Maersk Sealand and operated by U.S. Ship Management in the Maritime Security Program to direct operation by Maersk Line, Limited.

The ruling is the result of a suit filed with the Court on April 29, 2003 by U.S. Ship Management (USSM) against the U.S. Maritime Administration following MarAd's initial ruling that Maersk "qualifies as an eligible transferee of the MSP Agreements from USSM." District Court Judge Richard J. Leon subsequently denied USSM's motion for preliminary injunction.

In a release from Maersk Line Limited (MLL) late on August 12, the company noted that the ruling paves the way for Maersk Line, Limited to assume direct operation of the ships currently operated by U.S. Ship Management, and their related Maritime Security Program operating agreements.

"This decision will allow operation of these critical sealift assets by an industry leader that has provided the Department of Defense with unparalleled transportation services," said Ken Gaulden, Senior Vice President and Chief Commercial Officer of MLL. "We have said all along that the time charters granted us the right to operate the vessels directly if the law permitted. With this decision, we can now bring this entire episode to a close and transfer the ships to MLL. We hope that USSM will fulfill its obligations under the charters to cooperate in that effort."

MLL has stated they will immediately begin working with the Maritime Administration to execute the transfers of these ships and their MSP operating agreements.

"I must say that I am extremely proud of our MLL team. Their professionalism throughout this entire process was exemplary," added Gaulden. "While USSM has engaged in some last-minute, desperation tactics, such as mischaracterizing a dinner discussion I had with their executives more than three years ago seeking an amicable resolution without having to litigate, we took the high road and prevailed on merits and the substance."

MLL further emphasized that the vessels will remain U.S.-flagged, supporting U.S. global trade and national security, and will be crewed by American seafarers. The change in contractors, from USSM to MLL, will increase the number of MSP vessels currently operated by MLL under contract with the Maritime Administration. These vessels will be integrated into MLL's existing U.S.-flag fleet operations, streamlining operations and creating efficiencies in MLL's global network of intermodal assets, including terminals, cranes, logistical platforms, computerized management systems, containers and chassis, the company's release stated. MLL further projects that this will strengthen the MSP for military purposes and enhance the U.S.-flag presence in international shipping.

 

Statement from the MM&P

The United States District Court for the District of Columbia has acted to permit the turnover of the vessels that are currently being managed by USSM to Maersk Line, Limited. It has been a long struggle for both of these companies but the decision has finally been made.

MLL has been furnished with the current wage and benefit information and your Union has been working for almost two years establishing a relationship with the new operators. Maersk and the MM&P realize that we still have to establish a new collective bargaining agreement and we will be taking steps in the near future to get this done.

However, at the present time the operational continuity of MLL's ships is the most important issue.

Senior MM&P officials emphasize that, "all Licensed Deck Officers aboard Maersk's ships currently managed by USSM are asked to provide the same degree of cooperation and professionalism to MLL that you have provided to USSM for the last four years. MM&P members provide the very best talent available in the country. Now is the time to demonstrate this."

As this Wheelhouse Weekly goes to press, it is MM&P's understanding that USSM has issued instructions to the vessels that Maersk Line personnel are not to be allowed aboard. Therefore, the transfer may not go as smoothly as anticipated. MM&P HQ will keep you posted as the situation develops.

 

Background

By letters dated July 10, 2003 and September 18, 2003, Maersk Line, Limited requested approval from the Maritime Administration to transfer Maritime Security Program Operating Agreements from U.S. Ship Management, Inc. to itself.

The vessels, or their predecessors, were originally operated by SeaLand Service, Inc. The transportation assets of SeaLand's international liner division, other than the MSP Agreements or title to the vessels, were sold to Maersk in 1999. Maersk is a company organized in the United States, but is owned by the A.P. Moller Group, a Danish consortium.

At the time of the sale to Maersk, SeaLand proposed to transfer the MSP Agreements to USSM, a newly-created U.S. citizen company and on December 8, 1999, the Maritime Administrator authorized transfer of the MSP Agreements from SeaLand to USSM. Titles to the vessels covered by the Agreements were required to remain with existing U.S. citizen trusts or were transferred to other qualified trusts in order to maintain the U.S. citizen status of the vessels for MSP purposes. SeaLand assigned the bareboat charters of all 15 vessels to USSM, the MSP contract holder. In turn, USSM time chartered the 15 vessels to Maersk, through September 30, 2005, when the current MSP expires.

The time charters contain a provision where Maersk could claim its right of election to become the MSP contractor for the 15 vessels at any time during the term of the time charters, subject to the qualification that the arrangement is operated under applicable laws and regulations and the terms of the Operating Agreement. On November 7, 2002, Maersk requested that MarAd confirm Maersk's eligibility to become the contractor for the vessels as provided in the time charters.

An opinion by MarAd's Chief Counsel issued on April 29, 2003, concluded that, "Maersk qualifies as an eligible transferee of the MSP Agreements from USSM." That opinion stated that it was limited solely to the question of Maersk's eligibility as a transferee under applicable statutes and regulations, "and in no way addresses whether MarAd would grant approval for such a transfer if an application were filed." In addition, that opinion did not address whether the proposed vessel operation and ownership arrangements would be acceptable.

USSM immediately filed a complaint in U.S. District Court for the District of Columbia, titled U.S. Ship Management, Inc. v. U.S. Maritime Administration, No. 1:03-cv-00951-RJL (filed April 29, 2003), contesting the legality of MarAd's legal opinion.

On April 30, 2003, Maersk delivered to USSM a Notice of Election. USSM was required to respond within five business days or be declared in default of the time charters. On May 9, 2003 Maersk delivered to USSM a Notice of Default, which then triggered a 60 day period for USSM to remedy said default. USSM rejected Maersk's Notice of Default in a letter dated July 3, 2003.

In a July 9, 2003 letter, Maersk advised USSM that it had declared USSM in default of the time charters on that date and was unilaterally seeking to act for USSM with regard to transfer of the Agreements. Maersk asserted that it has the right to submit the subject transfer application on behalf of, or in place of, USSM.

No further significant action occurred until the ruling from the U.S. District Court for the District of Columbia on August 12.


The MM&P Wheelhouse Weekly is the official electronic newsletter of the International Organization of Masters, Mates, and Pilots, ILA, AFL-CIO, 700 Maritime Blvd., Linthicum Heights, MD 21090-1941. Phone: 410-850-8700; Fax: 410-850-0973; Email: iommp@bridgedeck.org. For further info or to subscribe contact John Peige at jpeige@bridgedeck.org. The Wheelhouse Weekly is sent via Email to MM&P-contracted vessels at sea, broadcast worldwide via FEC marine telex and is posted on our web page.

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