Most shipowners will already know about the physical aspects of these problems and the possible commercial consequences, such as the risk of collisions and groundings resulting from malfunctioning navigational equipment and delays resulting from malfunctioning cargo handling systems.

My aim is to draw attention to some of the risks faced by the shipping industry which have received little attention to date. Some are subtle. Many could however have serious consequences.

Ship Finance
Banks are acutely interested in their borrowers' cash flow and asset values and are becoming more proactive. The British Bankers' Association has issued a questionnaire which includes over 50 detailed questions about the millennium bug alone. It is intended to identify borrowers who may experience disruptions in their business as a result of millennium problems.

Ship finance documents often contain terms about:

• Seaworthiness
• Compliance with ISM
• Maintenance of class

If these conditions are breached, a bank may be able to call a Default and demand immediate repayment of the loan.

An actual or anticipated millennium or GPS (global positioning system) problem may thus become the trigger for such a default.

Sale & Purchase Contracts
If a shipowner finds a millennium or GPS problem, it may be expensive to remedy.

Shipowners will therefore want recompense. One possibility is from the seller of the ship. On current standard wordings, rights of recourse may be limited because of the terms of the standard Memorandum of Agreement. Buyers may have rights of recourse against surveyors, providing they can prove breach of contract/negligence. This will however often be a challenge.

For future purchase contracts, buyers should include a specific millennium/GPS contract term.

Hopefully newbuildings will not suffer from these problems. For newbuildings already contracted, the warranties may provide the solution. For those not yet contracted, suitable specific conditions can be included.

Leased Equipment
Navigation and computing systems onboard a ship are often leased.

Shipowners may have remedies depending upon the specific terms of the lease, eg:-

• Returning the leased goods;
• Forcing the lessor to bring the goods up to a compliant standard;
• Damages.

There may be additional avenues open where leases have been transferred from the seller when a ship was bought.

Marine Insurance
Shipowners may face difficulties with their insurance if there is a casualty which is directly or indirectly caused by a millennium or GPS problem, eg:-

• Lack of GPS or millennium compliance may amount to unseaworthiness.
• With time policies, if the shipowner was "Privy" to unseaworthiness, the insurer will not be liable. ISM may make privity easier to prove.
• Failure to deal with a known millennium or GPS bug may amount to "wilful default" by the assured. If so, losses caused may be irrecoverable. ISM may make wilful default easier to prove.
• Failure to be millennium or GPS compliant may breach Class Warranties. If so, there may be no cover.
• If the shipowner has wrongly represented or warranted to underwriters that his ship is millennium or GPS compliant, under writers may not be liable.

These points apply equally to Hull, increased value and P&l insurances.

Shipowners should be aware that they are unlikely to be insured for the costs of checking and replacing non-compliant equipment.

Casualties
Shipowners often have statutory limits of liability. A failure to find and eradicate millennium and GPS problems might jeopardise the right to limit. The position will depend on whether the lack of compliance is:

• a personal omission made recklessly with knowledge that the casualty would probably result (1976 Convention); or
• actual fault or privity (1957 Convention).

Given the degree of publicity which the millennium and GPS problems will have had by the time any casualty occurs it will be unsafe for a shipowner to assume the ability to limit liability if either problem is a cause.

Chartering
Lack of GPS or millennium compliance may affect the operation of the ship and the operation of shore facilities. Locks may not open. cranes may not work, shipboard and cargo handling systems may fail.

Under voyage charterparties the two areas likely to generate problems for shipowners are the commencement of the charter (Notices of Readiness) and damage to cargo during a voyage leg. from failure of cargo management equipment or as a result of a casualty).

• has the millennium and/or GPS problem made the vessel unseaworthy; and
• is failure to correct the problem a breach of Owner's obligation to exercise due diligence to make the vessel seaworthy.

Conversely. Charterers may be exposed to substantial demurrage claims if there are delays for which they are responsible, eg. defects in port facilities which delay the vessel berthing or delay the loading of cargo.

Under time charterparties similar questions will arise as to the commencement of the charter and cargo damage.

A further concern to shipowners is the extent to which millennium and/or GPS problems will put the vessel off-hire as a result of off-hire clauses including, for example, breakdown of machinery.

Bills of Lading
The key point here is likely to be the extent to which shipowners are liable for damage to cargo on the basis that a failure to find and correct millennium/GPS problems is a failure to exercise due diligence to render the vessel seaworthy at the commencement of the voyage.

Carriage of Passengers
Passenger ships are full of high-tech equipment and are particularly vulnerable to millennium bugs. Most of the equipment onboard passenger ships is controlled using electronic gadgetry, eg:

• Lift control systems;
• Fire and smoke alarm systems;
• Security systems.

f passengers are injured or disappointed, they will claim. If losses are caused by unsolved millennium or GPS problems, shipowners may:

• be unable to limit liability; and
• in the USA, be exposed to Punitive damages.

Conclusion
The millennium bug and the GPS glitch are meaty problems. It may be that little can be done to reallocate risk on past transactions. Efforts will have to focus on reduction of the physical risk. For the future however, there are many ways in which both shipowners and charterers can improve their legal exposure to the risks.