A paper presented by Julian Clark at the ‘Autonomous Shipping – Liability and Contractual Issues Conference’ (27 October 2021, co-hosted by the UCL Autonomous Shipping Project and The Institute of International Shipping and Trade Law of Swansea).
I would like to start by asking all those present to raise their hands if they believe that within their lifetime they will see the regular use of automated commercial vessels and automated ports operating in the global supply chain regularly. The next question that I wanted to ask you was whether any of you were familiar with the film “The Matrix”? If you are not, then this next part of my presentation may fall on stoney ground.
In the film ‘The Matrix’, Orpheus provides Neo with this option:
“You take the blue pill and the story ends here, you wake up in your bed and believe whatever you want to believe. You take the red pill, you stay in wonderland, and I show you how deep the rabbit hole goes”.
So I invite you to take the red pill and join me on a journey, for automation of ports is most certainly a very deep rabbit hole.
I am going to take you on this journey in three stages.
(1) Where are we now and what is in store over the next 20 to 30 years?
(2) What are the non-legal challenges?
(3) What are the legal challenges?
(1) Where are we now?
In 1956 Malcolm McLean devised the concept of the shipping container. Eight years later the world’s first fully purposed container vessel, MV Kooringa, set out on its maiden voyage. What followed was the greatest change in maritime transportation since the transition from sail to steam.
If, and I am underlining the word “If”, the envisaged automation of vessels and ports comes to pass, I would submit that the change as a result will eclipse both the move to fuel based propulsion and containerisation.
For a vision of the future, I would invite you to Google when you get home “Kalmar Global’s 2060 Vision”. What they set out in a short video clip is a vision of a true on-demand logistics global supply chain, utilising the full automation of both vessels, road, rail freight and ports. Where end-to-end product selection and mode of transport is geared in response to consumer demand. Where AI is utilised in order to optimise efficiency, and drone technology is an integral part of the maintenance regime. Now this may at first glance appear as distant from reality as my opening quote from ‘The Matrix’, but I would suggest that this vision of the future is not that far away.
During London International Shipping Week, Michael Parker, the chairman of Citigroup’s Global Shipping Logistics and Offshore business, provided a well-argued thesis that one of the reasons why the all-embracing concept of ESG and a move to carbon neutrality will succeed is due to the fact that consumer demand will both drive and fund such a change. As he said, “this is perhaps the first time in history where shipping can really take its place at the top table”. He argued (and I would support this) that in an on-demand society consumers will not only select greener forms of transportation but be willing to pay extra for them.
And some of what the Kalmar vision predicts is already here. The Box Bay system in Dubai is a fully automated container stacking system. London Gateway has 12 of the world’s largest ship to shore cranes. These cranes are 138 meters in height and can move 4 x TEU’s, or 2 x FEU’s in a single lift. Their remote operation means that they can function in virtually any weather condition. These leviathans are supported by 60 automated stacking cranes, able to load and unload 1800 trucks per day.
The ports of Newcastle and Singapore have already started to move to automation with significant investment. Although what has to be the most impressive automated port in the world so far is that of the Maasvlakte II port in Rotterdam which can already process 2.7 million TEUs and by its full operation in 2030 is predicated to be able to meet 4.5 million TEUs. The estimate of global investment in port automation is currently running at around US$10 Billion and this figure is expected to double (or even treble) within the next five years. The Chinese port of Caofiedian is already reporting a 70% increase in efficiency and a 30% reduction in labour cost as a result of automation. And not only is large scale investment the driver here but the recognition of the need to move from a micro supply chain ecosystem to a global autonomous logistics network. Where we are likely to see the increased use of a combination of AI, machine learning, and Internet of Things technology, utilising automated equipment, robotic loading and discharging systems, drone maintenance bots, remote driverless vehicles, all controlled from a central terminal control tower or shore control centre. These centres would run both the logistics operations and the interfacing with vessels and consumers.
It is developments such as these and the real possibility of the introduction of virtual reality remote working and integration of smart containers (already brining a 20 to 40% improvement in cost and sustainability), which has led to those most closely involved in the operation and management of ports launching their own studies.
The UK Government’s 2050 maritime strategy underlines and strongly supports the role and growth potential of the UK port network in a post-Brexit world. The British Port Authority’s launch of their autonomous shipping and ports network in August 2020 and the formation of the Mass Port’s Group, comprising of 8 nations (China, Finland, Denmark, the Netherlands, Korea, Japan, Norway and Singapore), in order to provide a thought-leadership think tank in relation to port automation and systems compatibility, shows the degree of attention which is being placed on the sector.
So what are the key drivers here? As I have already said, the move to an “on demand” consumer requirement. A closer connection between shipping and the major supply chain operators; corporations such as Amazon, Alibaba and Walmart and the significant potential that they may move closer and be more directly involved in the supply chain operation, not only running logistics and chartering vessels and boxes, but perhaps even moving to a full ownership operation.
Then there are the savings in cost and the reduction of carbon emissions. Enhanced logistical efficiency and the reduction of congestion. Improved port planning and the maximisation of port space as a result of removing the human element. Also, as part of the reduction of physical manpower operating in ports, the reduction of personal injury risk which itself can have a direct correlation with the efficiency of a port due to the inevitable delays which occur whilst incidents are dealt with and investigations carried out. Finally, the elimination of supply chain blockages – never again would we need to fear that there will be no turkeys or Christmas trees for Christmas.
(2) Non-Legal Challenges
But all of these potential gains are not without significant challenge. To truly take advantage of a universally automated supply chain we will need transparent data exchange, which is a challenge in an industry which still relies heavily upon completion and trade advantage. Satoshi Nakamoto’s vision of a global blockchain has largely been frustrated due to the reluctance to openly share data. While there has been considerable success in private blockchains, public blockchains and the vision of a system that could replace the international banking system, still seems far away. And yet without such transparent data exchange will we ever be able to fully recognise the benefits of a fully automated supply chain?
This indeed leads to another issue. The possibility of systems between major ports, say, for example, the Ports of Singapore and London, having the ability to exchange data seamlessly may be solved relatively easily, but what of the world’s smaller and more remote ports? And how will funding for projects in more economically challenged jurisdictions be achieved? Indeed, the high cost and source of funding remains a major obstacle in port automation.
Then there is the issue that advances in technology are moving far quicker than the required training and education of the specialist personnel that will still be required to update, maintain and supervise automated functions in ports.
However, perhaps the single, largest challenge in an automated world is the social risk. Reduction of the need for manpower in ports and throughout the global supply chain, vessel’s crews, crane operatives, truck drivers etc. will inevitably lead to mass unemployment. We will need to address the social consequences that will likely follow. Equally, we will have to consider how we deal with the loss of tax revenue as a result of a reduced workforce. It seems likely that the source of tax revenue will have to move to the supply chain itself and therefore increase cost to the ultimate consumer. If this is the case, how much of the cost saving benefits will be eroded by a new taxation system?
Finally, and this next section could easily deserve a paper in its own right, there is the issue of cyber-risk. We have seen a dramatic increase over the last three years in cyber-attacks on corporations and indeed on international ports. Even more worrying is an increase in attacks focused on the maritime sector and operational technology in particular. A number of counter-terrorism forums have identified the concern that the maritime sector may become increasingly targeted by cyber activists. One only has to consider the dramatic impact that the grounding of the Ever Given in the Suez Canal had on the global supply chain to envisage how attractive to a terrorist, environmentalist or geo-political group such an attack may be. Of course, there is nothing to suggest that what took place in relation to the Ever Given had any connection to cyber whatsoever. However, what is clear is that a hack of operational technology could easily have resulted in a similar casualty. And the range of factors, geo-political, environmental, criminal and terrorist, itself presents a major challenge. Without doubt we will have to see greater utilisation of cyber-protection and a widening of insurance protection were we to move to a fully automated supply chain.
(3) Legal Challenges
Everywhere we turn we seem to be faced by increased regulation. In a recent research project carried out by Ince our clients identified that the number one most likely requirement of clients for legal services was in relation to guidance through increased regulatory compliance.
Current port regulation will need to undergo significant and seismic review in order to make it fit for purpose.
Another important consideration will be the issues that a port needs to bear in mind when comparing, for example, the hire of an employee as against the hire of a robotic service. Issues of licencing, how we will identify breach, intellectual property rights, are all matters for consideration. Similarly the comparison between the leasing of a crane as against the leasing of the technology in order to automate a crane. The legal challenges involved are far wider than in a traditional context.
The same is true of claims and disputes. In a traditional port context, legal issues generally track to two sources (i) fault of the machinery, (ii) fault of the operator. However with automation that tracking matrix expands. We still have potential fault of machinery and fault of the remote operator, but added to this will be possible fault of the machine, defect in the AI, fault of the hardware, software, cyber-attack, loss of power, or the disruption of power supply as a result of a cyber-attack on major infrastructure. Another risk area is that of telecommunications failures. The issue here being that the number of different technologies on which automation relies is far wider than in a traditional port context.
Then there is a jurisdictional issue. If remote operation is being conducted from a jurisdiction different to the location of the port, which law will apply?
The exiting contractual framework will also need significant revision in order to address issues such as:
(i) Who owns the data?
(ii) Who is responsible for a failure of AI?
(iii) What legal recourse is available to a consumer or third party in the case of a failure of an automated system?
In a global on demand supply chain, where are the possible breaks in the chain of causation? If one goes back to the Kalmar example, how will we assess liability in a true consumer on demand system?
Then there are issues surrounding the capture of personal data and preferences. We are already seeing challenges in relation to personal data collection. In a more automated world these challenges are only likely to increase. There will also likely be a need for a wholesale revision of health and safety and employment law regarding the interaction of humans and machines.
We have already identified that with increased automation will come increased regulation, but if we over-regulate and restrict AI do we defeat its very purpose? And finally, once again, the speed of technological advancement is greatly outpacing the development of law and regulation.
I hope that over the last 25 minutes I have given you food for thought. Having started with a quote from ‘The Matrix’, I thought I should end with a quote from ‘The Terminator’. I did think about John Connor’s line, “The future has not been written. There is no fate but what we make for ourselves”.
But I settled with, “I’ll be back”.
Julian Clark is Global Senior Partner at legal and professional services firm, Ince. Julian is ranked in Chambers and Partners, the Legal 500 Hall of Fame, the US publication Super Lawyers and is a ‘Global Leader’ in ‘Who’s Who Legal’.