SOUTH KOREA: An Introduction to Shipping
Turning Point: 2024
The year 2024 has been a transformative one for Korea’s shipping and shipbuilding industries. Three key developments are expected to profoundly impact the sector going forward:
- the transition to the demonstration phase of autonomous ships;
- the application of the Serious Accidents Punishment Act to the shipping industry; and
- the full-scale expansion of offshore wind farm projects.
These changes present both opportunities and challenges for the Korean shipping sector.
Autonomous ships and their technological advancements
The autonomous shipping field has made remarkable progress in Korea in 2024. In 2020, Korea allocated a budget of KRW160 billion over the next six years to develop core technologies for autonomous ships. This comprehensive initiative encompasses intelligent navigation systems, engine automation, performance verification, operational systems, and standardisation. Notably, in September 2024 the first autonomous demonstration vessel was launched in Korea, marking a milestone. This achievement resulted from collaboration between the national autonomous ship development company and Pan Ocean, a major Korean shipping company.
The legal groundwork for autonomous ships is steadily being laid. The Act on the Development and Commercialisation of Autonomous Ships enacted in January 2024 will come into effect in January 2025. This legislation provides a comprehensive legal framework to promote technological advancement, ensure safe operations, and facilitate commercialisation through an integrated maritime logistics system. The Act also establishes specific standards for technology, certification procedures, safety and operational requirements, liability systems, and testing protocols.
Despite the progress in the field of autonomous shipping, there still remain hurdles to commercialisation. A notable concern relates to the absence of specialised insurance products for autonomous ships. Risks such as cyber-threats, system malfunctions, remote control failures, and decision-making errors pose unique challenges. In response, joint liability insurance between shipbuilders and shipowners, specialised insurance for third-party damages, and coverage for cyber-risks have been discussed, however, it will require time and patience for these measures to materialise.
Application of the Serious Accidents Punishment Act (SAPA) of Korea to the shipping industry
When SAPA was enacted in January 2022, it introduced new challenges for the shipping sector. The Act aims to enhance workplace safety, protect workers from industrial accidents, and increase corporate accountability. However, concerns have been raised that its uniform application without considering the unique characteristics of the maritime industry could potentially undermine effective safety management.
Against this backdrop, in 2024 the Korean Ministry of Oceans and Fisheries (MOF) provided its interpretations to clarify SAPA’s application. In the case of foreign shipowners who conduct business within Korean jurisdiction, these shipowners are subject to the health and safety obligations under SAPA, based on the principle of territoriality. However, if the bareboat charterer is a Korean national, the Korean bareboat charterer will bear responsibility for ensuring the health and safety of seafarers aboard the foreign vessel. Additionally, the MOF clarified that, for Korean-owned ships, the shipowner may be held accountable if the incidents fall within their domain of control, operation or management, despite the accident having occurred on the high seas or in foreign ports.
Consequently, ensuring the health and safety of seafarers has become a critical issue for businesses involving Korean-affiliated ships.
Offshore wind farms in the context of the cabotage rule
In 2017, the Korean government announced the “Renewable Energy 2030 Action Plan” (the “Plan”) to increase the proportion of renewable energy to 20% by constructing additional wind farms. Under the Plan, a 12 GW offshore wind farm would be installed, making Korea one of the world’s top five offshore wind farm countries. In response to the Plan, global wind power companies have formed consortiums with Korean companies to develop large-scale offshore wind farm projects.
However, the cabotage rule has posed a legal challenge to these efforts. The Korean cabotage rule restricts foreign-flagged vessels from operating between domestic ports, thereby potentially limiting the deployment of the foreign-flagged ships/units required to install and transport offshore wind farms.
In 2024, the issue became more pronounced with the introduction of a foreign-flagged offshore unit in Korea for wind farm infrastructure installation. As the further involvement of foreign-flagged vessels and equipment is anticipated, a thorough review and reasonable solution in the context of the cabotage rule will be essential to facilitate the progress of offshore wind farm projects in Korea.