Maersk wins legal battle against USSM on vessel transfers

Maersk wins legal battle against USSM on vessel transfers    Maersk Line Ltd. will move ahead with plans to take over operations of 15 U.S.-flag vessels after winning a court case against U.S. Ship Management (USSM), which has operated the ships. The vessels are part of the federal government’s Maritime Security Program (MSP).
   The U.S. District Court for the District of Columbia ruled Thursday that the transfer was lawful. The U.S. Maritime Administration approved the transfer of the 15 USSM vessels to Maersk Line Ltd. in a June 7 decision.
   “We have said all along that the time charters granted us the right to operate the vessels directly if the law permitted,” said Ken Gaulden, senior vice president and chief commercial officer of Norfolk, Va.-based Maersk Line Ltd. “With this decision, we can now bring this entire episode to a close and transfer the ships to MLL.”
   Maersk Line Ltd., a U.S.-flag vessel subsidiary of Denmark's A.P. Moller-Maersk, made the request with MarAd for the transfer in November 2002. The company claimed that under its 1999 MarAd-approved time charters USSM agreed to transfer direct operations of the former Sea-Land Service vessels to Maersk should Maersk Line Ltd. elect to become the MSP contractor. The transfer of the 15 MSP ships will make Maersk Line Ltd. the largest operator in the program at 19 container ships.
   MSP was created in the 1996 Maritime Security Act and is managed by MarAd. The program provides the federal government with immediate access to 47 militarily useful commercial U.S.-flag container and roll-on/roll-off ships during times of war or national emergency. To help offset the higher vessel operations costs of these U.S.-flag vessels, the government pays the MSP operators $2.1 million per ship per year.
   Since last year, Maersk Line Ltd. and other U.S.-flag vessel operators have been working hard to firm their positions in a newly authorized and expanded MSP program. The 10-year program, starting Oct. 1, 2005, increases the MSP fleet to 60 ships and raises the annual payment per ship, starting at $2.6 million per ship for fiscal years 2006-2008; $2.9 million per ship for fiscal years 2009-2011; and $3.1 million per ship for fiscal years 2012-2015.
   USSM has bitterly fought the transfer of its ships to Maersk Line Ltd. In the U.S. District Court for the District of Columbia case (filed April 29, 2003), USSM contested the legality of MarAd’s legal opinion approving the transfer.
   Maersk Line Ltd. said it meets all the legal and regulatory requirements for enrollment in MSP. The carrier is independently controlled by a board of directors comprised of U.S. citizens, with retired vice chief of naval operations Adm. Harold W. Gehman serving as chairman.
   “We hope that USSM will fulfill its obligations under the charters” and move forward with the transfer, Gaulden said.