A TRIPLE TO CELEBRATE 100 30 10 years of P&I in Greece ... Triton 1-2010.pdf · Examination 20-21 |...

The Swedish Club

No. 1 - 2010 April

A TRIPLE TO CELEBRATE

4-16

Page 4-7

LaunchingThe Swedish Club Academy

100 yearsof P&I

30 yearsin Greece

10 yearswith MIC

Page 9

THE SWEDISH CLUB TRITON 1-2010

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Claims Report | New FlameContent | No. 1 - 2010 April

The Swedish Club is a mutual marine insurance company, owned and controlled by its members. The Club writes Protection & Indemnity, Freight, Demurrage & Defence, Charterers' Liability, Hull & Machinery, War risks, Loss of Hire insurance and any additional insurance required by shipowners.

Head Office Sweden Visiting adress Gullbergs Strandgata 6 411 04 Göteborg Postal adress P.O. Box 171 SE-401 22 Göteborg Sweden Tel +46 31 638 400 Fax +46 31 156 711 E-mail [email protected]

Emergency tel +46 31 151 328

Greece 5th Floor, 87 Akti Miaouli GR-185 38 Piraeus Greece Tel +30 211 120 8400 Fax +30 210 452 5957 E-mail [email protected]

Emergency tel +30 6944 530 856

Hong Kong Suite 6306, Central Plaza 18 Harbour Road, Wanchai Hong Kong Tel +852 2598 6238 Fax +852 2845 9203 E-mail [email protected]

Emergency tel +852 2598 6464

Japan Suzuyo Hamamatsucho Building 5F 2-1-16 Kaigan, Minato-Ku, Tokyo 105-0022 Japan Tel +81 3 5442 5466 (24 hour tel) Fax +81 3 5442 5922 E-mail [email protected]

The Swedish Club Triton is published three times a year and distributed free of charge.The Swedish Club Letter is an editorially inde-pendent newsletter and opinions expressed by external contributors are not necessarily those of The Swedish Club. Articles herein are not intended to provide legal advice and the Club does not ac-cept responsibility for errors or omissions or their consequences. For further information regarding any issue raised herein, please contact our head office in Göteborg.

Editorial Advisory Board Peter Andersson, Susanne Blomstrand, Henric Gard, Birgitta Hed, Anders Leissner, Lars A. Malm, Lars Rhodin,Tony Schröder, Carola Weidenholm.

Production co-ordinator Susanne Blomstrand

PR-consultant TRS Public Relations Ltd., London.

Layout Eliasson Information, Göteborg

Cover photo (The deer of Mandraki): IStockPhoto

Print PR Offset

© The Swedish Club. Articles or extracts may be quoted provided that The Swedish Club is cred-ited as the source.

1004PR5200Bwww.swedishclub.com

LEADER | An appetite for progress! 3

CLUB INFORMATION | The Swedish Club Academy 4-7 | News from Asia 8

FINANCE |Result 2009 9 | Risk management 10-11

MARKET | State of the Market 12

CLUB INFORMATION | News from Piraeus 13 | Anniversaries 14-16

UNDERWRITING | Renewal 17

P&I | Visa requirements in the US 18-19

CREW | Pre Engagement Medical Examination 20-21

CARGO | Direct Reduced Iron 22-23 | Iron Ore Fines 24-25

CLUB INFORMATION | Basic facts / New members 25

LEGISLATION | Pollution 26-27

CORRESPONDENTS | Guidelines 28

FD&D | Market update 29 | Withdrawal from charter 30-31 | Off-hire clauses 32-33

REGULATIONS | Sanctions 34-35

LEGAL | Arbitration in Sweden 36-37

CLUB INFORMATION | Notice board 38 | History of Triton 39 | Out and About 40-41 |In Memoriam 42-43 | Staff News 43 | Club calendar 44


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Claims Report | New Flame

Dear members and associates,Summarising 2009, we closed the year in good shape, recovering well from the rocky waters of the preced-ing year. Our result shows surpluses in all lines of business, in combination with a positive investment income in contrast with 2008. Volatility is inherent in our industry. Yet we have gone through a “stress test” second to none. It is heartening to note the high level of support we have enjoyed from our members dur-ing this period. We have an appetite for progress.

The eagle-eyed reader will have spotted that our “Club Letter” has changed its name to “The Swedish Club Triton”. The Triton – our guardian and logotype – represents calm oceans. That is what shipping and our members need on the path of recovery. The storm was sudden, fierce and raged continuously. Yet there are pockets of navigable waters and opportunities in some instances. It is in times of difficulty that we value what we do and also revalue the way we do it. Cyclicality is there, and can be brutal in its challenges, but will also provide for opportunities for those posi-tioned to take advantage of them.

The Club is preparing itself for the Solvency II re-gime, which takes effect in 2012. It is like the advent of ISM for the shipping industry. Either you chose to merely comply or you take the full benefit of the un-derlying reasons to make the most out of it. We have opted for the latter route. This is a new dimension of our mindset. Solvency II, with capital adequacy mod-elling and the like, will be an excellent management tool in the management of risks going forward. It will reshape the whole approach to the way we conduct business from a risk point of view. As a first step, we have made a major overhaul of our reinsurance ar-rangements in an effort to utilise our own capital more efficiently.

We should, however, never lose sight of the services required by our members. Service excellence is our trademark; that is what we deliver. Recently we have strengthened our resources to meet the expectations in terms of casualty response and claims adjustment. We are ready for the “rainy day”. On that day, we can make a difference.

Our Maritime Resource Management training pro-gramme has passed an important milestone, not only in the context of the number of licensed training pro-viders, but also in its shape and form. In recognition of its importance, a new company has been estab-lished – The Swedish Club Academy AB – and Martin Hernqvist has been appointed Managing Director. The clear objective is to make a substantial contribu-tion to reducing exposure to shortcomings in human performance. It is not enough to identify mistakes; we need to know why and thereafter address the under-lying reasons. The company is dedicated to future ex-pansion around the world and to improve the training programme to meet future needs. The programme certainly makes a difference!

On a concluding note, the Club has entered a year of anniversaries. 100 years ago, foresighted board members decided to commence offering Protection & Indemnity cover in addition to the Hull insurance cov-er which had been established in 1872. We will also celebrate 30 years in Piraeus and the 10-year mile-stone of our Marine Insurance Course in Gothenburg. We will be marking these memorable anniversaries with special events throughout the year.

Yours sincerely,

Leader | MD Lars Rhodin

An appetite for progress!PH

oto

: Jonas Ahlsén

Lars RhodinManaging Director


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Our MarItIMe Resource Management (MRM) global training programme reached a turning point in its 16-year history in 2009. Following agreements with a record number of new MRM training providers in 2009, the programme achieved self-funding status during the year. In recognition, a new com-pany – The Swedish Club Academy AB – was established. It is dedicated to future expansion and development of MRM training around the world.

The fundamental aim is to make a sub-stantial contribution to reducing exposure to shortcomings in human performance. Over the years training of this type – focused on appropriate attitudes and behaviour for the safe operation of vessels and efficient team-work – has demonstrated that such exposure can be reduced.

As of March 2010, there were 58 licensed MRM providers worldwide, based in 26 coun-tries. 30 are universities and independent training institutes. A further 19 are operated

by shipowners and shipmanagers, another six by crew managers and three by Pilot training establishments.

The new company’s objectivesIn the new company, the core business will be MRM, not insurance, though still main-taining all the benefits of being closely linked to the Club’s Hull and P&I business – what we can get and what we can learn from that. The main purposes of the new company will be to safeguard continuity for The Swedish Club and our training partners, provide an increased focus on course development, ad-ditions of value-added services and products, customer satisfaction and, finally, ensure that all these operations are carried out as efficient-ly as possible. The vision and objectives that we have had with MRM will remain, and we fore-see only positive consequences of this decision for The Swedish Club and for our clients.

Clubinformation | The Swedish Club Academy

Martin HernqvistManaging DirectorThe Swedish Club Academy AB

theSwedishClubproudlylaunches…

MorefromtheSwedishClubAcademy page6-7


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theSwedishClubproudlylaunches…

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The swedish Club Academy

The Swedish Club Academy logotype and business card example

Martin HernqvistMANAGING DIRECTOR

THE SWED I SH CLUB ACADEMY AB

Gullbergs Strandgata 6, P.O. Box 171, SE-401 22 GothenburgTel office +46 31 638 400 Tel direct +46 31 638 420 Fax +46 31 156 711

Mobile +46 706 313 299 E-mail [email protected]

www.swedishclub.com/academy


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Claims Report | New FlameClubinformation | The Swedish Club Academy

outandabout

19 January 2010 – MRM information seminar at Metropolitan Hotel, Athens, Greece.

6 November 2009 – MRM information seminar at Sofitel Philippine Plaza Manila Hotel, Philippines.

2 November 2009 – MRM Workshop Leader training at New Alliance Marine Training Centre (NAMTC), Wuhan, China.

Antwerp Maritime Academy, Antwerpen, BelgiumThe Antwerp Maritime Academy (Hogere Zeevaartschool) in Belgium was re-founded under Belgian rule in 1834 after the French period. Today, courses are taught both in Dutch and French and the Academy is at present the only college in Belgium offering training in Nautical Sciences and Marine Engineering. The Academy has offered re-source management training since the mid-1990s and MRM training commenced in April 2010.

New MRM trainingproviders

Uniteam Marine (Yangon) Limited,Yangon, MyanmarUniteam Marine (Yangon) Limited was founded in 1991 as a fully fledged recruit-ment, training- and manning agency in Yangon with the purpose of providing owners with well-trained and qualified crew. The group itself – the Uniteam Ma-rine Management Group – dates back to 1978, when the management of the Group began working together as a team in Cy-prus, and is today a multinational company active in full management, operations, crew and technical management.


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16-18 February 2010 – MRM Workshop Leader training and meeting at The Swedish Club’s head office, Gothenburg, Sweden.

11 November 2009 – MRM Workshop Leader meeting, with guests, at Marlow Navigation Phils. Inc., Manila, Philippines.

Åland University of Applied Sciences, Mariehamn, Åland, FinlandÅland University of Applied Sciences was founded in 1997 by the Åland Provincial Government as a co-operative network for vocational higher education certified with a polytechnic diploma. On 1 January 2003 Åland University of Applied Sciences became permanent, when it merged with Åland Open University and changed its Swedish name into “Högskolan på Åland”. The university offers seven degree pro-grammes with a total of 400 students.

Bangkok Maritime Institute, Bangkok, ThailandBangkok Maritime Institute is the new name of Zenith Maritime Institute lo-cated in Bangkok, Thailand. The institute is certified by Ministry of Education and Marine Department of Thailand and ISO 9001:2008 certified by Bureau Veritas. The institute offers at present 17 STCW courses approved by Marine Department. The institute’s objective is to develop Thai seafarers to a competitive work force in the global shipping market.

Wallem Maritime Training Centre, Manila, PhilippinesWe are pleased to welcome yet another Wallem Maritime Training Centre (WMTC) to the group of MRM training providers. WMTC Mumbai was the first external training partner to us in 1996 and the latest addition is WMTC Philippines. The training centre was totally refurbished and expanded in October 2008, purpose built for CBT Applications and CBT Simulator Training. The centre is located in the Wallem Building in historic old Ma-nila’s Intramuros.


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Ruizong WangManaging DirectorHong Kong

We have just COMPleted our P&I renewal in Asia and achieved our targets on premiums and increased ton-nage. We are still at the final stage in calculating the overall increase in premi-um; an increase of about 3% on average on mutual P&I was achieved.

On balance we gained about 130,000 gt on mutual P&I. We entered two new charterers’ P&I members.

The volume of charterers’ business is expected to increase during the year and some of our members committed new tonnage to the Club in this policy year for new buildings. At a rough estimate the committed tonnage totals at about 700,000 gt.

We charged lower general increase compared with most other clubs in the

International P&I Group. In recogni-tion of the members’ continued support to the Club in past years the Board of Directors decided to charge 2.5% general increase, whilst most other clubs had decided to levy 5%. This was meant to be a small token of appreciation for the Club’s loyal and supportive members. Our members deserve our support in a difficult time in shipping.

The Club’s finances emerged from the international financial crisis stronger than ever before, and the free reserves increased to the highest level in our his-tory, thanks to the members’ support.The technical underwriting generated a surplus for the last two policy years. The situation in claims in the last two years has improved on the back of a collapse

of the shipping market, particularly the large claims, compared with recent years such as 2006 and 2007.

We see a lot of opportunities for de-veloping our business. Actually, prior to the renewal we had entered few new mutual members with new buildings or newly purchased young tonnage. In view of the favorable environment, we expect a healthy expansion in our P&I business in Asia.

Alotofopportunitiesinsight

Hong Kong from Victoria Peak.

Clubinformation | News from Asia

PHo

to: iStockphoto


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2009 Was a year when all three insurance classes, Protection & Indemnity, Hull & Machinery and Freight Demurrage & De-fence, as well as the investment portfolio contributed positively to the result. The overall surplus for the Club was USD 14.8 million and at the end of the year the free reserves were at USD 121.7 mil-lion, an all time high in the Club’s long history.

Gross premiums amounted to USD 150 million, a reduction by 5% compared to last year (net of supplementary call). The reduc-tion reflects the impact of lower vessel values in Hull-related insur-ance types, rather than any losses in market shares. The underwrit-ing produced a surplus of USD 7.8 million, far better than the budget of USD 0.7 million.

Loss ratio – a key figureClaims incurred net of reinsurance totalled USD 79 million (2008: 80), generating a loss ratio of 76% for the period. Loss ratio is a commonly used key figure in insurance business, measuring claims cost in relation to premium income. The combined ratio, which is the loss ratio plus the cost ratio, was 94% - anything below 100% implies an underwriting surplus. For our reinsurers it was also a good year, with lower claims costs than expected.

Major P&I …On P&I we had four claims in 2009 in excess of USD 1 million, which was in line with expectations. However, the average size of these major claims was much lower than the last five-year aver-age. In the years 2004-2007 we were hit by some very severe P&I claims; like the Selendang Ayu, Rokia Delmas and New Flame. Now we have been preserved from pool claims during the last two years. In addition, we have been able to reduce the estimate for the CMA CGM Aegean claim from USD 15.0 million to USD 7.0 million as a result of a settlement with the charterers’ of the ves-sel. This positive development has improved our pool balance. As a result, our cost for pool claims was reduced by about USD 2.4 mil-lion compared to the budget for 2009. It will also have a positive impact for this year.

… and Hull claimsOn Hull we had five claims in excess of USD 1 million. The big-gest claim was the total loss of W-O Budmo, USD 4.9 million including IV loss of USD 2.2 million. The vessel ran aground off Taiwan in a typhoon. Compared to recent years, only five claims in excess of USD one million is a satisfactory result. In both 2007

and 2008 we had eight claims in excess of USD 1 million. For both those years the average severity of the major claims was also higher than for the 2009.

A pleasant resultThe net internal operating expenses, that is total operating ex-panses less direct brokers’ commissions, were USD 3 million less than last year and also below budget. The reason for the positive outcome is explained by an average lower exchange rate for SEK, the original currency for most of our operating expenses. Exclud-ing exchange rate changes, the operating expenses were at the same level as 2008. We see this as a pleasant result at a time when many insurance companies have had double-digit cost increases.

The portfolio produced good surplusesThe Club’s investment portfolio totalled USD 239 million at the end of the year. 18% of the investments were kept in equity funds and 82% in bonds and money market funds. The financial result for the year was USD 7.0 million (2008: -31.9). The investment portfolio was shaky at the beginning of the year, but produced good surpluses from March and gave a total result of almost USD 10 million for the year.

Second lowest general increaseWe appreciate the good result for 2009 in general and especially the underwriting surplus. A sound business portfolio can help us to keep the insurance costs down for our members by offering low and competitive premiums. This was clearly shown at the P&I re-newal on 20 February this year, where with 2.5% we offered the second lowest general increase among the International Group of P&I Clubs. This should be seen in light of the fact that we already offer our members the lowest P&I premium per GT, except for Ja-pan Club, within the group.

Free reserves boostedby strong result

Jan RydenfeldtDirector Finance, IT & Reinsurance

Finance | Result 2009


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The Swedish Club approach

Finance | Risk management

Over the last five to six years there has been a relentless flow of consultation papers and opinion pieces explaining the workings and implications of the new Sol-vency 2 regulatory regime. Based on cur-rent projections we can look forward to another two years of the same, before it is even implemented.

The last thing you want is therefore to read another article on the issue, although it has to be admitted that the constant drumbeat prodding insurers and reinsurers into action is an important ingredient in ensuring a successful launch.

In this article we therefore take a differ-ent approach and describe how The Swed-ish Club is focused on building a tight risk management framework and an economic capital model whilst simultaneously build-ing a value creation oriented culture and a rich toolbox to support decision-making at all levels of the organisation. In this pro-cess, the Solvency 2 directive with its vari-ous supporting information is seen as valu-able guidance and roadmap rather than ultimate destination.

Expanding the toolboxThe tools available for modeling severity, frequency and correlation between the risk categories faced by an insurance company have significantly improved in recent years. As a consequence, the pecu-

liarities of the marine insurance world, such as the International Group pool and reinsurance structure, incidents with several vessels and in-sured interests, the interlocking conditions of Hull and Increased Value (IV), and the mutu-ally exclusive relationship between IV and Loss of Hire, have all been modeled in detail by the Club. Our efforts have been significantly helped by our unique historical experience in working with these issues due to our broad product of-fering and integrated organisational structure.

As a significant improvement from most economic capital models that were developed in the past, The Swedish Club’s model includes an economic scenario generator, “what if ” and sensitivity testing functions to assess the con-sequences of exceptionally adverse economic scenarios, such as a sudden increase in the cor-relation between asset classes, or the likelihood of multiple counterparty bankruptcies, for in-stance among the Club’s reinsurers.

Although it would be prohibitively expensive to protect against all negative outcomes, sensi-tivity testing and a thorough understanding of

tail risks allows the Club to be more proactive through risk mitiga-tion and cycle management.

The Club is also developing increasingly sophisticated insurance pricing tools derived from claims prediction models covering the main product lines, such as Hull, Loss of Hire, IV and P&I. The ever closer integration of the economic capital model with these

“Our economic capital model allows us to make stochastic forecasts up to five years into the future, which is wellbeyond what regulators and rating agencies expect to see.”

The Swedish Club is in the

midst of a range of project ac-

tivities focused on best practice

risk and value management

with significant impact on

decision-making at all levels

of the organisation. While the

primary objective is enhanced

security and value creation for

the membership, an added bo-

nus is that the Club finds itself

in an excellent position ahead

of the expected introduction of

the new Solvency 2 regulatory

regime in 2012.

Per-Erik Jornert Project ManagerSolvency 2

Lars NilssonReinsurance Manager

Mats Lindau Project ManagerEconomic Capital Model


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tools will assist the Club in managing risk exposures that ensure consistency between the Club’s overall capital target, risk tolerance per risk category, and the individual risk limits at the operational level.

The way we run our businessOur economic capital model allows us to make stochastic forecasts up to five years into the future, which is well beyond what regula-tors and rating agencies expect to see. As the model is constantly tested, tuned and verified it will have a growing role in the Club’s annual cycle of management processes, such as strategic and finan-cial planning, the allocation of capital between lines of business, strategic and tactical investment allocation decisions.

The overriding objective is therefore to constantly improve the risk adjusted return on the capital employed on behalf of the mem-bership. At the same time we want to make sure that our policy holders are protected against the extreme events that seem to hap-pen more frequently than anyone expected. As a still vulnerable world is emerging from the credit crunch and the ensuing reces-sion, lessons are still being drawn, and captured in The Swedish Club’s rapidly evolving economic capital model.

Redesigned reinsurance structure – an early winA particular area of focus over the last six months has been the evaluation of various alternative reinsurance structures, as the Club has sought to reduce dependence on reinsurers, and reduce operational risk through a simplified structure where many rein-surance layers are now shared across the product lines. Through detailed stochastic modeling it has been possible to compare a wide range of alternatives, and subject them to stress tests, such as the

repeat of a period with particularly elevated claims in the past or a future adverse shift in claims frequency or severity. This work has benefited from data and parameters from the Club’s well estab-lished claims prediction models, and validation through coopera-tion with external parties such as the reinsurance broker and an independent actuarial consultant.

In addition to achieving the benefits mentioned above, the new reinsurance program structure is expected to improve the Club’s operating performance on a risk-adjusted basis, and is a good ex-ample of how The Swedish Club’s hands on business approach to risk management and economic capital modeling is influencing the direction of the Club and producing real economic benefits in the process.

Impact on Solvency 2 preparationsWhile many organisations are looking at Enterprise Risk Man-agement and Solvency 2 as predominantly compliance issues, The Swedish Club already from inception set up an economic capital model project to run in parallel with the Solvency 2 implementa-tion project. The Club recently submitted a pre-application to the Swedish financial regulator for approval of the Club’s economic capital model instead of the standard model for European insurers, and the Club is hoping to start regular reporting to the regulator on the basis of the economic capital model well in advance of the implementation of the Solvency 2 regime expected in 2012.

All policy holders can therefore rest assured that The Swedish Club is being as Proactive, Reliable and Committed as ever to en-sure continued value creation and security in a fast changing envi-ronment.

Risk management and economic capital modeling increasingly underpin The Swedish Club's key business decisions.

Reinsuranceprogram

TSCInsurance

Model

Economicand FinancialMarket Data

Financial Plan,Balance Sheet

andActuarial Data

EconomicModel

and ScenarioGenerator

Allocationof capital and

profit targets to lines of business

Analysis of alternativereinsurance

structure

Analysisof totalrisk and

capitalisation

Analysisof alternative

asset allocations

Capital allocation

Risk policy/profileand capital

Investmentpolicy

Dynamic Financial Analysis of Profit & Loss Account and Balance Sheet, overall and per Line of Business


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the last COuPle of years have been truly testing for most companies. The shipping industry has experienced some radical shifts in its operating environment from the bonanza of early 2008 to the extremely harsh conditions of late 2008 and 2009.

Owners and charterers have literally taken the elevator straight down to the basement without stopping at any of the floors in-between. Some have managed to get back into the elevator and ascend one or two levels again as some segments seem to have re-covered slightly.

No doubt massive challenges still lie ahead and the road quite frankly looks both uncertain and bumpy. Luckily, equity markets have recovered faster than even most experts have expected, and interest rates are still at historically low levels. This hopefully offers at least some relief to owners and charterers.

An encouraging resultFor The Swedish Club recent years have also been challenging, and we have been forced to both put on the brakes in some areas and to accelerate in others. As we have annual accounting, we have closed the policy year 2009 with effect from 31 December 2009.

More detailed information about the result can be found on page 9 and in our Annual Report, but from our recent Press Re-lease dated 19 March 2010 (see www.swedishclub.com) you will see that both the insurance and financial results are satisfactory. In short, we will add capital to the free reserves and going forward we are even better prepared to tackle the notoriously volatile marine insurance market and better equipped to continue to offer stability to our members.

Cut a path and leave a trailAs a mutual company, our task is to serve our members, and our ambition is to constantly improve our delivery in every contact with our stakeholders. With that mission before our eyes, we have in the last year also put a lot of effort into further developing our

people, systems, underwriting and marketing strategy going for-ward. So far, into 2010, we are encouraged to see the anticipated synergies starting to materialise and continuing to develop, and the future outlook for the Club now looks really promising.

Our tools are today sharper than ever before, and the Club and its people have stepped up the pace with the aim not to follow in everybody else’s footsteps, but to cut a path and leave a trail behind us.

Hull and P&I moving fast in the right directionOur “Hull Action Plan” is performing well and ahead of schedule, which is very much down to underwriting discipline and refined tools for evaluations. Having had to reduce our portfolio mainly in respect of following lines in order to reach this result has been tough but no doubt necessary.

More encouraging is that we have lately seen a renewed interest in the Club and our Hull offering from owners as well as from our business partners, the brokers. This is especially true when it comes to the claims and rating lead position.

For P&I the recent renewal turned out to be advantageous. This is mainly because of our reinforced and renewed marketing initia-tive, coupled with hard and dedicated work from all the people in our teams. Our common efforts resulted in a very good P&I renewal for the Club, with 16 new mutual P&I members and a healthy growth in our Charterers’ Liability portfolio. We now have a larger P&I portfolio than ever before.

Moving ahead with confidenceAll in all, The Swedish Club is fit, healthy, geared-up and ready to continue to provide a service second to none. But first and fore-most we will continue to be a truly mutual club and, rest assured – “we are with you all the time and all the way”.

To our existing members we say – thanks for your continued support! And to our new members and members to be – welcome to The Swedish Club!

Stepping-up the pace and sharpening our tools

Henric GardDirector, Marketing & Business Development

Market | State of the Market


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GreeCe’s fInanCIal problems have been headline news all over the world in the last few months and newly elected Prime Minister Papandreou did not have much of a honeymoon after taking office in the autumn. His task is a diffi-cult one, as foreign debt holders and pro-viders of new loans are putting on a lot of pressure to reduce the current budget deficit of 12.7% of BNP to single digits and eventually to the 3% that is allowed by the EU.

The proposed measures are nothing but shock therapy, with many different taxes being increased in a second wave, and with salary freezes and an increase in the retirement age of state employees.

The enforcement of tax laws as well as a drive to reduce corruption amongst state agencies are other measures that will be

taken to satisfy current and future buy-ers of Greek debt. Strikes and demon-strations have followed, as most people will be affected by the stringent plan.

Amongst this mayhem, I have to say that, no matter how bad things are or will get, Greece is one the most beauti-ful places that I have ever been to, and with a climate and culture that is second to none. If you include the food and our great members and good colleagues, and I am starting to take a great liking to life and work in Greece.

As we finish another chapter in the book of renewals, I have to say that this one gave me and the company one of the warmest feelings in many years. After a number of years with hard and diligent work to upgrade and improve ourselves in every aspect of what we do and stand

for, at this renewal we received a great vote of confidence and approval from both our current members, brokers and from the shipping community in gen-eral. We renewed all the fleets we wished to renew and we added some that we have been trying to attract for quite a few years.

Coming in as the new guy with com-petition trying to take every advantage they could of the transitional period, I can only say that our members and bro-kers showed us great support this year. We will not relax nor rest as the mem-bership satisfaction and the process of striving to increase the membership has just begun for the Greek office.

Tord NilssonGeneral ManagerPiraeus

The port of Piraeus.

Clubinformation | News from Piraeus

Notimetorelaxortorest!

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Claims Report | New FlameClubinformation | Anniversaries

2010 – a very special year f or The Swedish ClubThis is a significant year in the long history of The Swedish Club. We will be celebrating no less than three anniversaries: our centenary as a P&I

provider, the 30th anniversary of our office in Piraeus and, thirdly, the 10th anniver-

sary of our highly successful Marine I n - surance Course.

It may well be another challeng-ing year on the economic front, but that will not stop us mark-

ing our three anniversaries in an appropriate way!

The Swedish Club began life as a Hull insurer on 13 December 1872, by writing the Hull & Machinery policy for the recently-built vessel

Orvar Odd. The Club was established to func-tion as a specialised mutual, providing Hull cover

for a radical new technology … steamships! Sweden’s ex-isting marine insurers were less than enthusiastic about the new-fangled steamships; their reluctance was to be The Swedish Club’s gain!

Another 38 years went by before The Swedish Club became involved in P&I. Once again, there was a wider context for this next stage in the Club’s development.

By 1910 there was strong demand within the Swedish shipowning community for “Protection” cover (P&I), against a small range of third party liabilities developing.

A new entity with a catchy titleThe Swedish Club gave the matter lengthy consideration and eventually decided to offer P&I cover. On 8 December 1910, a new entity was founded, with the catchy title Sveriges Ångfartygs Assurans Fören-ings Delägares Ömsesidiga Försäkrings-bolag Protection & Indemnity. The first vessel entered for P&I was the Håkan – a steamship, of course!

We now look forward to marking the Club’s P&I centenary in June, at the 2010 Annual General Meeting.Naturally, there will be a competition designed to test our Members’ ability to pronounce that venerable and easy-to-remember title.

Another milestone in 1950 and in the early 1970sReturning to the history, it was in 1950 that we reached another milestone. The P&I Club and Hull Club were

merged – providing the “all-in-one” cover now so famil-iar to Members. This concept of total service remains our lynchpin for the second decade of the 21st Century.

We reached a further landmark in the early 1970s, at a time when many Swedish owners sold vessels and went for chartered tonnage. The Swedish Club evolved rapidly into a fully international marine mutual. Two overseas offices were opened: Piraeus in 1980 and Hong Kong in 1982. During 1981 we also took another significant step. The Swedish Club became a full member of the Interna-tional Group of P&I Clubs. We remain strong supporters of the International Group and we regard the IG-admin-istered Pool system as by far the best way to address large claims.

Anniversary in GreeceIn maritime circles, there is a long-standing special rela-tionship between Sweden and Greece. This was under-lined by a long period during which many Greek own-ers placed orders with Swedish yards. Given the Club’s growing international character, it was decided to open overseas offices and Greece was to be the first. The open-ing of Piraeus office in 1980 demonstrated our long-term commitment to one of the world’s most significant ship-owning communities.

Greece – a central position n global shippingGreece, of course, has always occupied a central position in the global shipping arena and it will continue to do so. Today, Greek shipowning interests account for some 25 per cent of The Swedish Club’s entire business portfolio.

Lars RhodinManaging Director

Einar Lange, was the Managing Director of The Swedish Club from 1908-1943.

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to: iStockphoto


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2010 – a very special year f or The Swedish ClubWe made this commitment to direct service and

close relationships with the Greek shipowning com-munity three decades ago. We have been richly rewarded by the tremendous loyalty shown by our Greek Members. Indeed, many of the Club’s Greek “Founding Fathers” remain prominent Members.

The value of close contact with Greek membersPiraeus General Manager Tord Nilsson now has responsibility for Greece, Italy and the Middle East. He appreciates the value of close con-tact with our Greek members and prospective members. The past three decades have witnessed several cycles of good and bad times. When the going gets tough, as it is today, these direct relationships assume an even greater importance. We need to assist each other.

New offices in 2007During 2007 we decided to move to new offices in Piraeus, very close to the premises which served us so well, for so long. We needed more space and we found it on Akti Miaouli – Pi-raeus’ main shipping avenue. We needed room to grow. Our Piraeus office opened 30 years ago with a small team of three. This office is now manned by a multi-disciplinary team of 14.

Sharing knowledge and expertise at the MICOur third anniversary this year concerns the Club’s highly success-ful Marine Insurance Course, a week-long, annual event bringing together people from around the world who wish to share knowl-edge and expertise on maritime law, insurance, risk management and loss prevention matters.

Opportunities to learn and make new acquaintancesThe Marine Insurance Course was introduced 10 years ago, to cre-ate a new opportunity to learn more about a wide range of marine insurance topics, spanning P&I, H&M and FD&D. This course is open to all but, naturally, we give priority to members. Typi-cally, around 30 participants, from 10 or more countries, attend every year representing shipowners, ship managers and brokers. The course is held in Gothenburg annually, but we have also held two courses in Asia: in Hong Kong in 2004 and Zhuhai, China, in 2007.

The Marine Insurance Course deals with a range of key issues, from terms and conditions to claims handling and loss preven-tion. The range of subjects is ambitious, including underwriting, reinsurance, collisions, cargo liabilities, pollution and measures to avoid recurrence. We look forward to hosting the 2010 course in Gothenburg during early May.

The above document, dated 26 November 1910, is an invitation to sign up for membership in the new company Sveriges Ångfartygs Assurans Förenings Delägares Ömsesidiga Försäkringsbolag Protection & Indemnity.


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The year was 1910 and the demand for insurance to provide protection against personal injury, death and collision liabilities was rapidly in-creasing among Swedish shipping companies. So the Board together with the well-known shipowner Dan Broström (our Board chairman at the time) and our managing director Einar Lange decided that we should make the move into the world of Protection & Indemnity. That proved to be one of the most impor-tant decisions in our history.

the fIrst to join up was the steamship Håkan. The vessel had been built in 1880 by J.T. Eltringham for the shipping firm of Fischer, Renwick & Co. in Newcastle, then named the Marie Fleurie. According to a bill of sale dated 21 November 1902, she was sold on for GBP 4,500 to Ång-fartygs AB Avanti in Gothenburg, which had the vessel registered on 3 January the following year under the new name of Håkan, named after the Board’s alderman Håkan August Frick.

thefirstP&IinsuredshipoftheSwedishClub

Clubinformation | Anniversaries

S/S Håkan had a 2-cylinder, 280 HP steam engine, measured 508 GRT (gross register tonnes), 290 NRT (net regis-ter tonnes) and carried some 800 DWT over her length of 50.18 metres.

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In 1910 Avanti chose to insure her for Protection & Indemnity with The Swed-ish Club, or Sveriges Ångfartygs As-surans Förenings Delägares Ömsesidiga Försäkringsbolag Protection & Indemnity (literally: Sweden’s Steamship Insurance Association Joint Owners’ Insurance Company Protection & Indemnity), as we were called back then. That was probably considered only natural, given that the ves-sel had been insured with us for Hull & Machinery since 1908.

In January 1915 a new board of di-rectors was announced in the shipping company, which on 20 February of that same year sold the vessel to Ångfartygs AB Kepler in Gothenburg. They wanted to rename her Märta, but failed to gain the approval of the Royal National Board

of Trade, which ruled on the issue, so the name remained Håkan.

On 5 April 1916 the vessel was captured by English naval forces off the Norwegian coast during a voyage between Haugesund and Lübeck. She was taken to an English port, where the vessel, with her load of 3,232 barrels of pickled herring, was con-demned as prize. Håkan was then insured with us, but according to our archives no insurance proceeds were paid out in con-nection with the event. The vessel retained its name under the English flag and was managed by E.R. Newbigin in London.

In 1921 the steamship was sold to A. McKay in Belfast, Ireland, and renamed Ferndene, only to be sold again in 1927 – this time to W. Satorsky & P. Vivat in Riga, Latvia. On a journey with a cargo of timber between Riga and the continent, while passing through the ice in convoy, she sprang a leak near the Markgraf in Riga Bay and sank to a depth of 25 fathoms. The crew was rescued by vessels nearby, how-ever.

Carola WeidenholmCorporate Communications


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Claims Report | New FlameUnderwriting | Renewal

the hIstOrIC reason as to why 20 February is the date when P&I insurances are renewed is that this was the time of the year when the Baltic was expected to be free from ice and a new trad-ing season could begin. Yeah, right! Looking out my window there is absolutely nothing indicating that the Baltic should be ice-free. We will probably be happy if the ice is gone by 20 April. This win-ter global warming has, at least in our part of the world, suffered something of a setback.

One could say though that the weather conditions are rather indicative of the state of the shipping market. Cold winds are still blowing and many relationships are becoming frostbitten as a re-sult of the financial crisis. Owners have yet to endure a very chal-lenging market before spring arrives.

Can you really combine the two?Going through a renewal, which aims at achieving financially sustainable result for both owners and the Club, sounds like a con-tradiction in terms; - Can you really combine the two? – Yes, you can, and yes, we have! The Club is delivering healthy technical underwriting re-sults, and we are confident that as far as what is “manageable” we are in bet-ter shape than ever before. We have taken the Club to the next generation in respect of Enterprise Risk Manage-ment, and in the long-term perspec-tive this will have a positive impact on our members.

Needless to say, we have enjoyed some positive volatility as regards larger claims, but in that respect we are not different than our competi-tors. In addition, the recovery of the financial markets during 2009 gave us, in addition to a surplus on the un-derwriting side, a healthy contribu-tion to last year’s positive result.

The Club’s growth is very pleasingAll in all, the Club’s financial standing indicated that only a mod-est General Increase would suffice. As it turned out, this was in-deed welcome news in the market. During the past year the Club added to our portfolio of Owners P&I another 1.5 million gross tonnes and, when closing our books on 20 February this year, we are expecting another 3 million gross tonnes to attach during this coming year. Size is important only if sustainable in the long-term perspective.

The Club’s growth this renewal is very pleasing and again it dis-plays the most profound support and genuine commitment to the Club from owners and brokers. For this year and the years to come we will continue our growth, but only as long as we can do it sus-tainably.

H&M Renewal 1.1.2010As the H&M renewals have over the years gradually become spread out over the year, the significance of the 1.1 renewal is today somewhat less than it used to be. Having said that, some of the Club’s most important members renew their insurance cover on this date. Property insurance is the shipowners’ most basic protec-tion against unwanted fortuitous incidents. Having experienced some years of ever increasing Hull values, we are now seeing a rath-er sharp depreciation of these.

To some extent this is a reflection of the true market value of ships and to some extent this is the result of a cost cut-ting exercise. The amount of support you can afford to give members as a mutual organisation is very much correlated with the long-term sustainability of the differ-ent classes of insurance the Club engages in. The Club has been on a path of cor-recting the rating structure on the prop-erty side, and it is encouraging to see that, through reaffirmed and loyal support from our members on the property side of our business, we have ahead of time made the property business profitable again.

Again, it needs to be said that we should be humble enough to acknowl-edge the positive effects of a significantly reduced frequency of larger H&M claims as a result of declining shipping activi-ties. We expect that shipping activities, especially within certain segments, will

stay low for the next year to come. In the light of that scenario, the Club was able to manage members’ expectations in connection with the 1.1 renewal.

“Size is important only if sustainable in the long-term perspective”In terms of volume, the Club is again starting to move forward. We do, however, need to be clear and repeat what we stated in con-nection with the P&I and FD&D renewal; “Size is important only if sustainable in the long-term perspective”. The statement actually carries more weight and relevance on the property side as this line of business for obvious reasons is far more commoditized than is the liability side.

Happy New P&I and FD&D Year!

“Cold winds are still blowing and many relationships are becoming frostbitten as a

result of the financial crisis. ”

PHo

to: Stefan Eliasson

Lars MalmDirector, Risk & Operation


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9/11. dO yOu reMeMber where you were that day? Most of us do. I will never forget. I had just walked out of the South Tower approaching the end of my morning commute when at that instant a large bang was heard and paper started to fly around like confetti in a ticker tape parade. It was a crystal-clear gorgeous September morn-ing with the air so crisp it almost snapped as it rustled the leaves on the trees. When I arrived at my office on the 34th floor of 60 Broad Street I was looking out my 5 foot square window at the smoke billowing out of the North Tower, when in an almost surreal scene from a movie, I could see United Airline Flight 175 banking around from the South and hitting the South Tower generating a ball of fire, the likes of which I have never seen before or since.

The world had changed forever that day and the incident led to a stream of new regulations designed to protect the borders of the United States. New agencies such as the Department Of Homeland Security were formed and tasked with, among other things making certain that aliens were carefully scrutinized before they would be given access to the US. These regulations applied to all aliens and certain specific regulations were leveled at the maritime industry.

An expensive fishing trip…It was in violation of one of these regu-lations that three crew members found themselves in when they left a Swedish Club entered vessel to go fishing on a Cor-pus Christi pier. You see they were not in possession of the required”D-1” Visa and therefore had been given a “Detain On Board” order by Customs and Border Pro-tection (CBP). The vessel’s agent had some

Compulsory visa systemin US waters

AftergraduatingfromtheNewYorkStateMaritimeCollegeandsailingbothinlandanddeepsea,DonMessickhasrepresentedtheSwedishClubasaUSGeneralCorrespondentfor35years.

Don MessickPrincipal Claims ConsultantIndependent Maritime Consulting Ltd., Southport, USA

misgivings the first time that CBP inter-viewed the Master since the Master hardly spoke any English at all. Apparently, the CBP officer was also unsure if the master understood the previous directive since they returned the following day and this is when the fisherman were found. A fine of USD 3300 per man was imposed, more about that later.

The Immigration and Nationality ActThe regulations which the crew members had violated are found in the Immigration and Nationality Act. The first immigra-tion act was passed in 1952 and has been amended and modified many times since. The present version incorporates the En-hanced Security and Visa Entry Reform Act of 2002, enacted in the first session of the 107th Congress.

The act requires, among other things, that all visas have a biometric indicator. In the past, the State Department could issue a single Crew List Visas, which would al-low all crew members shore leave. The State Department concluded that Crew List Vi-sas would necessarily be eliminated by the 2002 Act. As a result, the regulations now provide that any foreign crew member who

wishes to be granted shore leave within the United States territorial waters, must request such leave and be in possession of a valid D-1 Visa as outlined in 8 US C § 1101(a)(15)(D)(i) of the Act. Crew mem-bers who leave the vessel and return home by any other means of transportation other than the vessel which they arrived on, must have a valid D-2 Visa, and those seamen who were entering the US in order to join a ship already within US territorial waters must have a valid C-1 Visa in accordance with the same regulations quoted above.

The US requirement for a vessel to ten-der a 96 hour notice of arrival was in part, promulgated to allow various federal and state agencies the opportunity to compare the vessel’s crew list against a “lookout” database to determine whether or not a particular individual would be considered a security risk and therefore detained on board.

Requirements to obtain VisaThe application for the Visas must include a personal appearance before a US consul where an interview will be conducted in order to determine whether or not the granting of the D-1 Visa is in order.

Among the requirements which must be met in order to obtain the Visa is evidence sufficient for the local consul to be confi-dent that the crew member will be allowed to return to his country of origin at the expiration of the 29 day authorized period as prescribed by the regulations. Travel documents such as passports will also be required but the nature of the regulations give the consul broad discretionary powers when determining whether or not the ap-plicable standards are met. Upon establish-ing to the satisfaction of the local consulate

P&I | Visa requirements in the US


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that the issuance of a Visa would be appro-priate, and after paying the applicable fees, the Visa is issued.

The cost of the Visa can be separated into the application fee, which is a nonre-fundable fee of USD 131.00 in advance, and the issuance fee, the amount of which depends upon the crewmembers country of origin. It is usually a function of what that country charges US citizens for similar visas. As an example, a crew member from Russia would pay a USD 100 issuance fee on top of the application fee.

“Detain on Board” orderThe issuance of the Visa does not in and of itself entitle the crew member to shore leave in the United States. The regulations require that all crew members be detained on board upon arrival in US waters un-til they are cleared by CBP and officially granted shore leave. If at some point dur-ing the interview The Customs and Border Protection officer feels that there is justifi-

cation to issue a “Detain on Board” order (DOB), then this will be done. Of course if no Visa is possessed than a DOB automati-cally remains in full force and effect.

Once a Detain On Board order is is-sued the director of the local CBP office will decide whether or not the man or men must be guarded and if so whether or not the guards must be armed. The authorities have broad discretionary powers here al-though internal guidelines do exist as does certain other agreements between the CBP and the USCG. The criteria used in mak-ing this decision does not appear to be a matter of public record although the Cus-toms and Border Protection Field Inspec-tion Manual seems to indicate that factors to be considered will include the vessel, and owner’s violation history, the number of crewmen to be detained, the nationality of the crewman or men who are detained, and the prior criminal record of the crew-man or men. Suffice it to say that the vast majority of DOB’s will be accompanied

by a directive for round the clock armed guards, at a cost of approximately USD 2000 per 24hour period per guard.

The fishing trip resulted in…Once a violation of the Act occurs a fine WILL be imposed as the Act specifically mandates such fine to be USD 3,300 per violation, hence the USD 9,900.00 fine imposed on our above mentioned fisher-men. The Act does however allow for the mitigation of the fine and in the case of our unwary fishermen a lengthy letter of miti-gation ultimately resulted in a fine of USD 1650.00 being imposed. A healthy reduc-tion but still an expensive fishing trip.It can be seen from the above that allcrew members, be they the wiper or themaster are required to have the ap-propriate Visa when entering the territo-rial waters of the United States.

”all CreW MeMbers, be they the wiper or the master, are reQuIred to have the appropriate Visa when entering the territorial waters of the United States.”

PHoto: iStockphoto


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How fit is your crew?

In the Swedish Club Letter 2-2009 or to be more precise in the article entitled “The Swedish Club Pre Engagement Medical Ex-amination (PEME) scheme”, we ended on a positive note, hoping that we would be able to report back to you within the not too dis-tant future, and further that the hope and plan was for The Swed-ish Club PEME Scheme to be launched in the autumn of 2009. At that time we were unaware of the forthcoming proposed amend-ments to the Migrant Workers Act 1995.

Amendments to the Migrant Workers Act 1995The amendments introduced in the Philippines included three major areas of concern affecting the seafaring industry, namely the designation of clinics where seafarers will undergo health examina-tions, the designation of training institutions where the seafarers will undergo training and seminars, and finally the introduction of additional insurance.

As far as PEME was concerned, the proposed amendment would prohibit requiring seafarers to undergo health examinations at spe-cifically designated clinics, the result being that the seafarer would be at liberty to choose his own PEME at a clinic of his choice. Needless to say, this would be against vessel interests as manifested in The Swedish Club PEME scheme, the purpose of which is to enable our members to require their potential seafarers to undergo The Swedish Club PEME in designated clinics with whom we have an agreement, confirming the quality required to be deemed fit for sea service in accordance with the criteria and medical policy set by The Swedish Club.

For the purpose of clarification and in order to avoid any conflict with the Philippine authorities, it must be emphasised that a sea-farer who does not fulfil the medical criteria set out in our medical policy is not categorically declared unfit for sea service, but unfit in accordance with The Swedish Club medical policy hence PEME.

An extremely important exemptionThe penalty for acting in violation of the proposed amendment referring to PEME was severe and could lead to liability for the of-fence of illegal recruitment, with a penalty of imprisonment of 6 to 12 years and a considerable fine.

This meant that we were unable to pursue our scheme until the legal position in the Philippine had been clarified. The proposed amendments to the Migrant Workers Act 1995 came into force in

March 2010 but with an extremely important exemption as con-cerns the PEME. It is thus prohibited to “impose a compulsory and exclusive arrangement, whereby an overseas Filipino worker is required to undergo health examinations only from specifically designated clinics, institutions, entities or persons, except in the case of a seafarer whose medical examination cost is shouldered by the principal/ship owner”. Our correspondents in the Philippines, Del Rosario & Del Rosario were highly influential in this process.

Letters of Intent have now been signedFollowing the above very welcome exemption, we were able to pur-sue our work and are pleased to report that Letters of Intent have now been signed with two clinics who are presently reviewing The Swedish Club Handbook setting out our medical policy and the criteria decided upon in order for a potential seafarer to be assessed fit for sea service on board a vessel insured by the Club.

At the time of the publication of this article we are hopeful that the medical work is concluded and agreements signed with the relevant clinics. At this point of time and for various reasons the identity of the clinics selected by the Club remains confidential. We would, however, like to emphasise that the five clinics care-fully selected for our project all maintain a very high standard, which would justify their involvement in The Swedish Club PEME scheme. The scheme as well as the two clinics selected to partici-pate, will be subject to thorough and continuous review to ensure that the medical policy and criteria set by the Club are upheld to guarantee a high quality service to our members.

How fit is your crew?To return to the title of this article – how can you determine the physical and mental status of your crew? The number of claims caused by illnesses, many of which could have been detected in an enhanced PEME, have increased dramatically both in number and value. For The Swedish Club the average cost and frequency of ill-ness claims with a value exceeding USD 5,000.00 have increased by more than 100% between 2004 and 2008.

A fit crew is a safe crewShipping companies are in business to make a profit. It goes with-out saying that a fit crew is a safe crew, which is critical for the sound operation of the vessel. It thus follows that ensuring the physical health and mental welfare of the crew is of vital impor-tance from many perspectives, as well as being commercially vi-able. The best way to safeguard the sound operation of the vessel in today’s stressful and demanding climate, where a harsh economic reality prevails, is to make certain that only crew of a good physical and mental status is employed on board your vessels.

An enhanced PEME is a very important tool in that selection process. You may not be looking for super-fit crew, but merely selecting those who are sufficiently fit to do the job they are em-

Birgitta HedSenior Claims Manager Team Göteborg III

Crew | Pre Engagement Medical Examination


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ployed to do and to remain healthy in the environment that seafar-ing requires. Costs saved may include, but not be limited to, devia-tion expenses, medical costs, repatriation and substitute expenses, compensation due under contracts of employment, loss of time, disruption and in the end higher P&I premiums stemming from crew claims.

The Handbook sets out what is acceptable and what is notAn important feature of the Club’s enhanced PEME is The Swed-ish Club’s Handbook setting out the Club’s medical policy and specific criteria as to what is acceptable and what is not acceptable. The Handbook will be provided to medical professionals at the designated clinics only. Most of the clubs who have introduced en-hanced PEME schemes have merely specified the various tests that in their opinion need to be done. Without setting specific criteria in respect of the results of those tests, it is not sufficiently effec-tive to disqualify potential seafarers who are not fit for sea service,

”We will not be among the first Clubsto introduce an enhanced PEME

but in our humble opinion and at this point of time we dare to say

that our scheme is the best. ”

the predetermined criteria is likely to be the mechanism by which most of the disqualifica-tions will be made.

Parallels with the airline industryParallels can be made with the airline in-dustry, where a simple list of tests to be performed would never be acceptable. Yet,

that is common within shipping! Shipping is, regrettably, behind the airline industry in many

respects, and one may ask oneself why it should not be equally important to make certain that the crew onboard a vessel is properly medically examined as it is to ensure the medical health of an airline pilot.

From a physical standpoint, seafaring is a far more physically demanding occupation than flying an aircraft. From a safety per-spective an aircraft is rarely more than an hour from a point of di-version to seek medical assistance, with the exception of flying over the major oceans.

A vessel, on the other hand, is frequently days away from profes-sional medical assistance with all the elements of risk entailed for instance in cases of stroke and heart disorders, where early access to medical care is crucial for survival. Setting criteria is in our view vital for an effective PEME.

Keep an eye on our website!We are looking forward to being able to offer the service of our enhanced PEME to our members. We will not be among the first Clubs to introduce an enhanced PEME but in our humble opinion and at this point of time we dare to say that our scheme is the best. As soon as agreements have been signed with the relevant clinics and reporting systems proofed, our PEME scheme will be formally launched. So do keep an eye on our website!

PHo

to: iStockphoto


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Claims Report | New FlameCargo | Direct Reduced Iron (DRI)

Major revison to BC code schedulefor the carriage of DRI and derivatives by seadrI Is PrOduCed by passing hot re-ducing gases such as hydrogen, methane and carbon monoxide over iron ore (oxide), which is usually in the form of pellets or lumps. Although the process is conducted at high temperatures, these are still sub-stantially below the melting point of iron. This means that the lumps and pellets retain their original shape, but are con-siderably lighter owing to the removal of oxygen from the ore. Therefore, the pellets and lumps have a hugely porous structure, which makes the material extremely reac-tive and prone to re-oxidation on contact with air and/or moisture. These oxidation reactions cause self-heating in the stow, which can lead to auto-oxidation in which cargo temperatures in excess of 900oC can be generated.

Moreover, contact with moisture evolves hydrogen, an extremely flammable and sen-sitive gas that has caused explosions in the holds of several ships following its ignition.

The Adamandas and the YthanIn 2003 the Adamandas was deliberately sunk by the French Authorities following overheating of her cargo of 21,000 MT of DRI pellets.

On 28 February 2004, hydrogen explo-sions in four of her cargo holds caused the total loss of the Ythan off Colombia, to-gether with the deaths of six of her crew in-cluding the Master. The hydrogen had been produced from a cargo of damp DRI fines.

Mandatory 2011In the wake of this incident, a paper was submitted to the IMO Maritime Safety Committee (MSC) by the Marshall Is-lands, and the topic has been discussed at subsequent meetings of the Sub-commit-tee on Dangerous Goods, Solid Cargoes and Containers (DSC).

Eventually, new schedules were agreed in September 2008 and were adopted by MSC Resolution in December 2008 as part of the new IMSBC Code, which was pub-lished in 2009. The Code has been recom-mendatory from 1 January 2009, but will become mandatory on 1 January 2011.

Three types of DRIThe IMSBC Code now categorise three types of DRI. The first, type DRI (A), is the less reactive, high-density variety of DRI that is known as Hot Briquetted Iron HBI, or Hot Moulded Briquettes HMB. The second type, DRI (B), is highly reactive, low density DRI in the form of lumps and pellets and cold moulded briquettes. The schedule now includes a new entry DRI (C), which is described as By-product fines and is intended to include all the materials generated as by-products in the manufacture and handling process of DRI (A) and/or DRI (B).

DRI (B) may now only be carried under an inert gas atmosphere, and DRI (C) is subjected to the same requirements as DRI (B). The main changes to the Code are summarised on page 23.

CAVEATThe IMSBC Code provides for the require-ments of carriage of any cargo covered by the Code to be varied by consent of three competent authorities:1.5.1 Where this Code requires that a particular provision for the transport of solid bulk cargoes shall be complied with, a competent authority or competent authori-ties (port State of departure, port State of

arrival or flag State) may authorise any other provision by exemption if satisfied that such provision is at least as effective and safe as that required by this Code. Acceptance of an exemption authorized under this section by a competent authority not party to it is sub-ject to the discretion of that competent au-thority. Accordingly, prior to any shipment covered by the exemption, the recipient of the exemptions shall notify other com-petent authorities concerned. (emphasis added).

The door is therefore open for parties to seek exemption from any or all of the requirements for the carriage of this or any other cargo.

The author is aware that “High Moisture” DRI Fines containing up to 12% moisture and 75% metallic iron are being offered for carriage without inert gas on the basis that the hydrogen that will be generated in the holds will be removed using the ship’s mechanical ventilation. However, sea trials showed that hydrogen accumulated in the holds in explosive concentrations when the ventilation was suspended for a short pe-riod of time, as would be expected during bad weather. Moreover, the recommended ventilation regime would not have prevent-ed the explosions that caused the loss of Ythan. Members are therefore urged to be cautious when such a cargo is offered.

Additionally, the author is also aware that some manufacturers are blending quantities of DRI fines with fines recov-ered from the un-reduced iron ore, and offering them as (non hazardous) iron ore fines. Again, members are urged to be dili-gent and to exercise caution.

On the other hand, many grades of iron ore are prepared specifically for reduction in DRI furnaces, and are often referred to as “direct reduction iron ore pellets”, or similar. These do not require any special provisions for transport by sea, and can be differentiated from DRI (B) by their chemical composition. Expert advice can be sought from the Association on this or any other matter.

DrMitchesongainedaBachelorsdegreeinMechanicalEngineeringin1974andunder-tookindustrialtrainingatRolls-Royce(Aero-engineDivision).Hewasawardedaresearchscholarshiptoundertakeresearchintogasexplosions,whichledtotheawardofthede-greeofPh.Din1977.HejoinedtheconsultingpracticeofDrJHBurgoyneandPartnersinthatyearandwasmadeaPartnerin1983.

Dr Alan MitchesonPartner Dr J H Burgoyne & Partners LLP, Ilkley office, UK


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Major revison to BC code schedulefor the carriage of DRI and derivatives by sea

The main changes to the Code

All types of DRI

8Fines are now defined as particles up to 6.35mm (¼”) in size.

8The carrier’s representative is to have reasonable access to stockpiles and loading installations for inspection.

8The cargo temperatures are to be monitored during loading and recorded in a log.

8The ship shall be provided with a detector suitable for measuring hydrogen in an oxygen depleted atmosphere and for use in a flammable atmosphere.

8Cargo temperatures and hydrogen concentrations in hold atmospheres are to be monitored on voyage.

8The hydrogen concentration is to be measured in holds prior to opening hatch covers.

8All records of measurements are to be retained on board for two years.

DRI (A), Briquettes, hot-moulded

8The maximum limit on the moisture content is 1%.

8The cargo is to comprise essentially whole briquettes.

8Surface ventilation only shall be conducted as necessary. When mechanical ventilation is used, the fans shall be certified as explosion-proof and shall prevent spark generation. Wire mesh guards shall be fitted over inlet and outlet ventilation openings.

DRI (B), Lumps, pellets, cold-moulded briquettes

8The average particle size is from 6.35mm to 25mm.

8Loading conveyors are to be dry.

8Prior to loading, an ultrasonic test or another equivalent method with a suitable instrument shall be conducted to ensure weather tightness of the hatch covers and closing arrangements.

8The moisture content must be less than 0.3% and must be monitored during loading.

8Any cargo that has already been loaded into a cargo space and which subsequently becomes wetted, or in which reactions have started, shall be discharged without delay.

8Carriage is only permitted under an inert gas blanket.

8The ship shall be provided with the means of reliably measuring the temperature at several points within the stow, and determining the concentrations of hydrogen and oxygen in the cargo space atmosphere on voyage whilst minimizing the loss of the inert atmosphere.

8The ship shall be provided with the means to ensure that the requirement to maintain the oxygen concentration below 5% can be achieved throughout the voyage. The ship’s fixed CO2 fire-fighting system shall not be used for this purpose.

8The ship shall not sail until the master and a competent person are satisfied that:

All loaded cargo spaces are correctly sealed and inerted,

The cargo temperatures have stabilised at all measuring points and are less than 65oC, and

The concentration of hydrogen in the free space has stabilised and is less than 0.2% by volume (i.e. 5% of the lower explosive limit, LEL).

8The ship shall be provided with a detector suitable for measuring oxygen in a flammable atmosphere.

8The oxygen concentration shall be maintained at less than 5% throughout the duration of voyage.

DRI (C), By-products, Fines

8The average particle size is less than 6.35mm, and there are to be no particles greater than 12mm in size.

8“The reactivity of this cargo is extremely difficult to assess due to the nature of the material that can be included in the category. A worst-case scenario should therefore be assumed at all times.”

8The carriage requirements are identical to those for DRI (B), including the 0.3% limit on moisture.

Type DRI (A), is the less reactive, high-density variety of DRI that is known as Hot Briquetted Iron HBI, or Hot Moulded Briquettes HMB.

The second type, DRI (B), is highly reactive, low density DRI in the form of lumps and pel-lets and cold moulded briquettes.


24


Photograph of iron ore fines showing spatter on the side of the hold caused during loading by excess moisture in the cargo.

Cargo | Iron Ore Fines

‘fInes’ Is a General terM used to indicate the physical form of a mineral or similar cargo and, as the name suggests, such cargoes include a large proportion of small particles. The transpor-tation of iron ore fines by sea from the Indian subcontinent has proved problematic in recent years when the moisture content has been too high at the time of loading. As a consequence the solid cargo has behaved as a liquid, sometimes with alarming results. This phenomenon is called liquefaction and leads to stability prob-lems whereby the cargo can shift at sea under the influences of the motion of the vessel and the effects of vibration. Shifting can be sudden or progressive and lead to a ship developing a severe list, sometimes resulting in a capsize.

Cargoes from the Indian sub-continent have been particularly prone to this phenomenon in the monsoon season (June to Sep-tember) because the fines are stored outside very often with no pro-tection from heavy rain. Also, cargoes transported long distances by rail from mines to ports are prone to similar exposures. How-ever, as explained below, such problematic cargoes would never have been loaded if properly sampled, tested and assessed before loading commenced. It is worth noting also that stockpiles can remain moist if left out in the open after the monsoon season. As such, care needs to be taken at all times and close attention paid to preloading test procedures. Liquefaction can occur in a cargo that outwardly appears dry on the surface or essentially so; it does not have to be ‘running wet’ with water for it to have the propensity to liquefy.

LiquefactionIn a dry, granular, well-trimmed cargo the individual particles are in contact with each other such that frictional forces prevent them sliding over one another. However, if there is enough moisture present then there is the potential for the cargo to behave like a liquid. This is because settling of the cargo occurs under the in-fluences of vibration, overstowage and the motion of the ship. As such, the spaces between the particles reduce in size with an ac-companying increase in water pressure between the particles. This results in a reduction in friction between the particles and can al-low the cargo to shift suddenly.

Testing the FinesObviously, before a cargo is loaded the owners and charterers need to be satisfied that it is safe to carry. The International Maritime Solid Bulk Cargoes Code, published by the IMO in 2009, address-es this by requiring that the shippers ensure it is properly sampled, tested and assessed before it is loaded. Cargoes that are capable of liquefaction are classified Class A cargoes. The Code is mandatory under the provision of the SOLAS Convention from 1 January 2011, but may be applied on a voluntary basis until then but with the recommendation that it be adopted by governments before 1 January 2011.

The Code requires that the cargo be assessed by determining a property known as the flow moisture point (FMP). This is the lowest moisture content at which the material under test begins to exhibit flow (liquefaction). The Code requires that whatever the value of the FMP, it is reduced by 10% so as to incorporate a safety factor. This lower figure is then adopted as the Transportable Moisture Limit (TML) for the cargo; TML = 90% of FMP.

As such, tests to determine the actual moisture content of the cargo must then be carried out on a representative sample before it is loaded. If the moisture content is at the TML or exceeds it then the cargo should be declared unsafe and rejected. It is important to note that the moisture content determination on the cargo to be loaded must be carried out no more than seven days before the loading commences. Moreover, if there has been significant rain between the time of testing and loading then further tests must be conducted to ensure that the moisture content of the cargo is still less than the TML (Section 4.5.2 of the IMSBC Code).

The IMSBC Code sets out at Appendix 2 the proper Labora-tory Test Procedures, Associated Apparatus and Standards. The test should be carried out by a competent laboratory, although in India there is currently no accreditation scheme. As such, Masters

Graham CharltonPartner, Dr J H Burgoyne & Partners LLP,Kenilworth office, UK

GrahamCharlton joinedBurgoynes in1984andhasworkedsinceintheirofficesintheUKandHongKongspecialisinginfireandexplosioninvestigation.Hehasundertakenawidevarietyofinvestigationsonmarinecraftrangingfromyachtstolargecommercialshipssuchasgeneralcargo;containershipsandtankersofvarioustypes.

Liquefaction of Iron Ore Fin es from India


25


Summary Advice for Masters8Follow the IMSBC Code 2009 requirements in relation to Class A

cargoes.

8Ensure that certification showing the moisture content of the cargo and the TML are presented before loading commences.

8The cargo shall only be accepted if the moisture content is below the TML.

8Confirm that the certification is from a reputable laboratory and that the moisture content determination was carried within a week of the start of loading. If it has rained in that intervening period then further laboratory tests should be carried out to establish the moisture content of the fines to ensure that it is still below the TML.

8Be vigilant during loading and watch out for any signs of wetness in the cargo. If unsure of the state of the cargo undertake a ‘can test’ which may assist in determining whether the cargo is at or above the TML. If any doubts remain then the Master should seek advice from

the responsible person ashore.

8Once a cargo is on board it will be difficult to discharge at the load port as it will almost certainly be regarded as having been exported from India.

should be wary of the provenance of test results. It is understood that the Indian Authorities are currently looking at developing an accredi-tation scheme, in light of the recent problems.

Documentation and Checking by the MasterThe IMSBC Code requires that the shipper shall provide certification to the Master to confirm the TML and actual moisture content of the cargo before loading can commence. Only if the cargo has a moisture content that is less than the TML can it be offered for safe carriage by sea (IMSBC Code Section 7.3.1). Masters should be vigilant and ensure that cargo is inspected for any signs that it may be above the TML. For example, free-standing surface water, or spattering of cargo as it lands in the holds with resulting run marks are clear warning signs.

The IMSBC Code states that a Master may undertake his own check test, often referred to as the ‘can test’. If he considers that the cargo may not be as dry as is being claimed then he can adopt a com-plementary test procedure as outlined in Section 8.4 of the Code.

Section 8.4 states that the test is to check for “approximately deter-mining the possibility of flow on board ship or at the dockside by the following auxiliary method: Half fill a cylindrical can or similar contain-er (0.5 to 1.0 litre capacity) with a sample of the material. Take the can in one hand and bring it down sharply to strike a hard surface such as a solid table from a height of about 0.2m. Repeat the procedure 25 times at one- or two-second intervals. Examine the surface for free moisture or fluid conditions. If free moisture or a fluid condition appears, ar-rangements should be made to have additional laboratory tests con-ducted on the material before it is accepted for loading.” It is worthy of note that if the result of the ‘can test’ is negative this is not proof that the cargo is below the TML.

BASIC FACTSper 1 April 2010

Liquefaction of Iron Ore Fin es from India

NEW MEMBERS

FC = Charterer’s Freight Demurrage & DefenceFO = Freight Demurrage & DefenceHM = Hull & MachineryLH = Loss of HirePI = Protection & Indemnity TL = Charterer’s Liability

ClubInformation| Basic factsNew members

Angel Shipping (Hong Kong) Co Limited China PI, FO

Brightoil Shipping Limited Hong Kong HM

CR Power MarineTransportation (Tianjin) Co China PI

CSIC-IMC Shipping Ltd China PI, FO

Da Sin Shipping Pte Ltd China TL, FC

DS Tankers GmbH & Co, KG Germany HM, LH

EE Shipping AB Sweden PI

Farglory Shipping Singapore Singapore PI, FO

Fortune Ocean Shipping China PI

Fujian Lucky Sea Shipping Ltd Hong Kong PI, FO

GC Tankers Ltd Singapore TL

Genoa Maritime S.A. Greece PI, FO

J. Lauritzen A/S Denmark HM, PI, FO

Larvik Shipping AS Norway HM, LH

Minelco AB Sweden TL

Northstar Maritime S.A. Greece PI, FO

Omniblue Shipping Inc. Greece LH

Orion Bulkers Gmbh & Co KG Germany HM, PI, FO

Parsam Shipping United Arab& Shipmanagement Ltd Emirates HM, PI

Phoenix Bulk Shipping Ltd China TL

Reederei J. Ohle KG Germany HM, PI, FO

Reederei M Lauterjung GmbH Germany HM, PI

Seatrek Trans Pte Ltd Singapore TL

South Ocean Shipping Co Ltd China PI, FO

TDM Carriers Ltd Greece PI, FO

Transcenden Global Pte Ltd Singapore TL

Wah Shun Shipping Co Ltd Hong Kong PI, FO

Winson Oil International (HK) Ltd Hong Kong PI

Protection & Indemnity (including Charterer’s Liability)Number of vessels 1,303Average age 11.0GT (million) 40.8

Freight Demurrage & DefenceNumber of vessels 665Average age 8.6GT (million) 26.0

Hull & MachineryNumber of vessels 1,378Average age 10.6GT (million) 55.4

Loss of HireNumber of vessels 428Average age 8.5GT (million) 19.5


26


Introduction to China’s newMarine Pollution Prevention Regulation

1 The official English version except the title is not published yet. 2 For an overview, please also refer to the Club’s circular of 2488/2009. 3 Article 90 and 66. 4 Article 50 and 53. 5Article 56. 6 The Administrative Regulation of Preventing Pollution from Dismantling and Repair of Ships and The Administrative Regulations on Dumping Wastes at Sea. 7 Article 14. 8 Article 68, with the present currency rate, the amounts equal to 1,464 and 7,322 US dollars. 946 CFR Parts 10, 12, 16. 10 Article 36. 11 Please refer to the Club’s circular 2492/2010; hopefully, when the circular is published, the postponed period should have been settled. 12 Article 50. 13 51. 14 53. 15 The Civil Liability Insurers for Oil Pollution Approved by The People's Republic of China Maritime Safety Administration for Chinese Registered Ship. 16 Article 52. 17 The CLC limitation is the same with LLMC 1976 to which China is a member state.

the reGulatIOns on Prevention of Pollution from Ships at Sea of the Peo-ple’s Republic of China1 (the Regulation) were promulgated last September2. This article tries to provide some information on its background and main issues. The Regulation was described by some people as China’s “OPA 90”. Doubtless, concerns arise because it is the first and very strin-gent legislation on marine pollution China has ever made in one law. After viewing the whole scheme of Chinese marine pollution legislations, it is apparent that the Regula-tion is just one piece of a massive jigsaw puzzle.

BackgroundChina has long determined to construct its own anti-pollution legal system. A Chinese Ship Pollution Damage Compensation and Indemnity Scheme ad hoc team was established by Ministry of Transportation (MOT) in 1997. The efforts also include China ratifying the MARPOL 73/78, the 1992 CLC and 2001 Bunker Convention and accordingly made significant revisions to the Marine Environmental Protection Law (MEPL) of PRC in 1999 so that the conventions request the state parties to give full effect to the convention under na-tional law. In the hierarchy of the system of Chinese legislation, basically there are two layers that are Laws (with more principles) and Administrative Regulations or Rules (with more administrative details).

The Regulation is a very important part in the scheme, specifying the principles in the MEPL, transforming the conven-tion obligations into operative domestic legislation. The strict liability, compulsory insurance and direct suit against insurer, as the corner stones laid by the CLC and followed HNS, Bunkers conventions have been embedded into the Chinese scheme. The strict liability and compulsory insur-ance are echoed in the MEPL3 and the Regulation4; the Rules of Implementation

on Liability Insurance (under draft) will solve the question of how the liability in-surance is provided; the direct suit against the insurer is regulated in the Special Mari-time Procedure Law of the PRC.

Although China has not adopted the Fund convention for some reason, a domes-tic Fund is around the corner. The Regula-tion provides that the receivers of persistent oil cargoes that have been transported by sea to a Chinese port are required to con-tribute to a fund for the compensation of ship-induced oil pollution5. How the fund will be financed, used and managed will be regulated in the Rules on Management on Ship Oil Pollution Compensation Fund levy and Use, which is currently being drafted jointly by the Ministry of Finance and the MOT, and will be delivered soon.

On board emergency response plansChina has put the majority of MARPOL 73/78 related rules into the Regulation and two other administrative regulations.6 The regulation requires that the shipown-ers, operators and managers must have emergency response plans ready on board; we believe the SOPEP manual should suf-fice for the purpose of the regulation.7

The Clean-up planThe most contentious provision for the shipowners, operators or managers in the Regulation is article 33, which requires

that operators of all ships carrying hazard-ous and polluting cargo in bulk, and all other ships of 10,000 tons or more, must conclude a clean-up contract with China Maritime Safety Administration (“MSA”) approved contractors prior to entering any Chinese port. Any vessel in violation of this requirement will be fined from RMB10,000 to 50,000.8 The modelling legislation of the clean-up plan should have been the US OPA 90, in which the owners will identify and ensure the availability of private personnel and equipment neces-sary to remove the “worst case discharge” to the “maximum extent practicable” by the “contract or other approved means”9. It means that a listing of salvage and oil spill response organizations (OSROs) with whom the owner has a service agreement for handling a cleanup should a spill occur must be in place.

Four categories at the listThe Regulation lists four categories of ac-cident by size of direct loss.10 It transpires that the regional MSA will take more time to figure out the lists of the competent OSROs for each category at their region/ports. This work will not be finished by 1 March, and therefore we can reasonably expect an extension to be given by MSA Beijing with a formal notice.11 Except for the list, it will also take some time for MSA to prepare the standard contract and clean up the tariff rate as well. For the time being, IG group and ITOPF are trying to put some input regarding the contract and the rate.

Does not define operatorsIt is not clear who will conclude clean-up contract with OSROs because the Regula-tion itself does not define the “operators”. Some suggests that the MSA will make it clear at later stage in the Rules of the Im-plementation of the Regulation. The defi-nition of operators has never been formally

Julia JuClaims Executive Team Asia

”It is apparent that theRegulation is just one pieceof a massive jigsaw puzzle. ”

Legislation | Pollution


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Introduction to China’s newMarine Pollution Prevention Regulation

1 The official English version except the title is not published yet. 2 For an overview, please also refer to the Club’s circular of 2488/2009. 3 Article 90 and 66. 4 Article 50 and 53. 5Article 56. 6 The Administrative Regulation of Preventing Pollution from Dismantling and Repair of Ships and The Administrative Regulations on Dumping Wastes at Sea. 7 Article 14. 8 Article 68, with the present currency rate, the amounts equal to 1,464 and 7,322 US dollars. 946 CFR Parts 10, 12, 16. 10 Article 36. 11 Please refer to the Club’s circular 2492/2010; hopefully, when the circular is published, the postponed period should have been settled. 12 Article 50. 13 51. 14 53. 15 The Civil Liability Insurers for Oil Pollution Approved by The People's Republic of China Maritime Safety Administration for Chinese Registered Ship. 16 Article 52. 17 The CLC limitation is the same with LLMC 1976 to which China is a member state.

established in Chinese law before. There are only two occasions when operators ap-pear in the laws and regulations, but none with a definition. Article 204 of China Maritime Code, (CMC) provides for the shipowners the right of limitation of li-ability, and the definition of shipowners includes the charterers and the operators. Hopefully, the rules of implementation can give it a third try. Anyway, it will only make sense that the company owning, op-erating or demise chartering the vessel are able to make themselves the operators in order to conclude a contract with OSROs.

Strict liabilityThe liable party for a pollution accident will be obliged to clean it up and will be li-able for any losses and damages arsing from it. This is so called strict liability. No fault on the part of the liable party is required. Only four exceptions are acceptable, inter alia: third party solely wilful misconduct or negligence, war, force majeure and neg-ligence of a department responsible for the maintenance of beacons or other naviga-tion aids. The strict liability and the range of exclusions is the same as those in MECL and CLC.

Insurance The Regulation provides that the insurance must be provided by an entity approved by the China MSA.14 The draft Rules of Im-plementation on Liability Insurance will provide specific criteria, setting conditions for the eligibility of the insurance provid-ers.

On the current list15 published by MSA on 1 February 2010, 13 principal Interna-tional Group P&I clubs are confirmed by the MSA Beijing as eligible to be the liabil-ity insurance providers for Chinese regis-tered ships. The blue card issued by those P&I clubs will support the owners in ob-taining the CLC certificate and the Bun-ker Convention certificate. So far hopeful-

ly it would not make any difference for the IG clubs to continuously be the competent institutions providing insurance to all the ships trading into Chinese waters.

LimitationThe liable party can limit its liability to the China Maritime Code (CMC) limita-tion, which is the same with LLMC. But limitation for persistent oil carried on ship as cargo is being referred to the CLC Con-vention.16

Article 55 of the Regulation has proved rather contentious. It provides that MSA-organised pollution control expenses must be paid before all other pollution damages. The clean-up costs not organised by MSA, even also for the sake of averting or mini-mising pollution, have no such priority. When article 33 remuneration also falls within article 55, some commentators be-lieve it is not limitable.

The reason is that article 33 remunera-tion is, in the nature of debt of contract, made between the operator of the ship and the OSROs. In plain legal language, article 207(2) of CMC deprives the person liable of the limitation right to the claim for the remuneration in a contract: “… However, with respect to the remuneration set out in sub-paragraph (4) for which the person liable pays as agreed in the contract, in rela-tion to the obligation for payment, the per-son liable may not invoke the provisions on limitation of liability of this Article.”17

But it is well limitable where CLC con-vention is applicable, because article 208(2) of CMC excludes the application of article 207(2) in this circumstance. It is improb-able but not impossible that article 33

remunerations could exceed the very high limitation in the CLC Convention, bear-ing in mind the astronomical figure spent on cleansing in the casualty of Hebei Spirit and even Exxon Valdez. The pollution of hazardous and noxious substances could be as disastrous as the persistent oil pollution. When such substance spills, the possibility that article 33 remuneration exceeds the CMC (LLMC) limitation could be much increased.

SummaryAs an important link in the marine pol-lution prevention scheme, the Regulation incorporates almost all import issues in marine pollution in one regulation. It helps us to know how the MSA deals with the pollution incident. It specifies the re-quirements on the shipowners/operators in preventing and reporting the accident. It reiterates and clarifies the Chinese position on the strict liability, limitation insurance, and domestic fund. As usual practice in China, the rules of implementation of the regulations will resolve some unclear ques-tions. Fingers crossed that the implement-ing rules, the ORSO list, contract and rates will go well.

Should you have any question on this topic, please feel free to send an e-mail to [email protected]


28


the P&I Clubs in the International Group of P&I Clubs rely heavily on the worldwide network of P&I correspond-ents. Correspondents are the Clubs’ “eyes and ears”. The main purpose of the guide-lines is to provide the foundation for a common approach to the handling of in-cidents and to encourage a consistent re-sponse by all Correspondents representing an International Group Club.

First NotificationApart from being notified by the Club, a correspondent may receive notification of a potential or actual claim from a number of different sources: the vessel, the vessel’s agent, the vessel’s owner, the charterer, or directly from a claimant or the claimant’s underwriters.

In instances where the first notification to the correspondent has not originated from the Club, it is critical for the corre-spondent to:8Promptly ascertain the identity of the

Club holding the vessel’s entry,8notify the Club, and8seek confirmation from the Club that

the vessel is entered with the Club for the liability in question.

GuaranteesUnder appropriate circumstances, the Club may issue a Letter of Undertaking or other form of guarantee to secure claims that fall within the scope of cover.

A correspondent has no power to issue a Letter of Undertaking or other form of se-curity without the express authority of the Club. The provision of Club security is dis-cretionary and will depend upon a number of considerations.

Once a security demand has been made

Anders HolmbergSenior Claims Manager and Correspondent ManagerTeam Göteborg I

The International Group of P&I Clubs has, through its Representation Sub-Committee, issued a pamphlet, “Guidelines for Correspondents” which has been distributed to all correspondents appointed by the IG Clubs. The booklet is presently subject to revision, and once a new edition has been issued, it will be distributed to correspondents.Some of the more important issues raised in these guidelines are outlined below. Addi-tionally, the guidelines also contain information as regards invoicing, etc.

Correspondent | Guidelines

known to the correspondent, the Club will need to be informed as soon as possible of the quantum and form of security that is being requested by the claimants, in order to consider whether it is appropriate to ar-range the provision of security.

ReportingAll reports to the Club should be ad-dressed to the person handling the file (once known) and should also include, as a minimum requirement, the Club file refer-ence and the name of the vessel.

In the initial period following an inci-dent, reports will be required on a more frequent basis, including but not limited to:8Cause of the incident.8Specific details identifying the property

damaged/person or persons injured etc (as applicable).

8Steps which may need to be taken lo-cally or otherwise to protect the Mem-ber’s position, including but not limited to measures required to preserve the Member’s right of regress against third parties.

8Claimed amount and correspondent’s or expert’s assessment of quantum (sub-sequent updates should include any ma-terial changes)

8Current status of any authorized nego-tiations with claimants or their repre-sentatives.

Claims HandlingShould a correspondent receive claims documents, he should notify the relevant club office and seek instructions. The club or member may wish to handle a claim themselves. In other cases the correspond-ent may be authorized to enter into nego-tiations locally, in order to settle the claim

amicably. Should the correspondent be asked to handle the case, she/he should provide her/his best monetary estimate of the likely liability with a separate rough estimate in respect of legal and other costs likely to be incurred due to services to be rendered by the correspondent, lawyers, surveyors, experts and other third parties. If the claimant starts legal proceedings, the Club should be advised immediately.

The Correspondent should not enter into settlement negotiations or agree to any settlement proposal on behalf of the Club or its Member without having re-ceived express authority to do so from the Club. No time extension is to be granted to any party without the Correspondent having received express authority from the Club or from the Member.

Claims SettlementAll settlements must include the return of any Club or Bank Guarantees. A suitably worded Receipt and Release document, which should be submitted in draft to the Club for approval, must be obtained. As Clubs are Indemnity Associations, settle-ment funds are likely to be forwarded di-rectly by the Member; there may, however, be some exceptional occasions when the Club itself will settle directly.

A tool for consequence


29


Depressed marketsand busy lawyersfd&d Is a GOOd indicator of the state of the shipping markets. After all, cargo claims, pollutions and groundings hap-pen, irrespective of whether freight rates are high or low (although admittedly the Club has seen a decrease in navigational casualties following a reduction the speed of vessels). However, in times of poor mar-kets and in particular shifting markets, the members’ needs for legal services tend to increase.

Hard working lawyersThe past years’ market turbulence has, therefore, proved to be a challenging test for the FD&D insurers. London Maritime Arbitrators Association has reported that there was a 37% increase in disputes from 2007 to 2008 and then yet another 20% increase from 2008 to 2009. The number of appointments in 2008 reached a 10-year high (3,684) and the trend continued in 2009 when 4,445 appointments were

made. Lawyers have been and con-tinue to be busy, which is a sign of that our members are struggling. The need for a legal cost insur-ance is great.

”Lawyers have been and continue to be busy”

Anders LeissnerFD&D Manager Team Göteborg III

FD&D | Market update

Depressed markets create certain type of problems. Several of the Club’s mem-bers suffer from having their vessels on charter either directly or via sub-charter-ers to entities who, for various reasons, cannot pay their way, sometimes resulting in the collapse of long contractual chains. It is apparent that shipping sometimes is a house of cards, where parties depend on each other’s wellbeing. This does not only entail claims for unpaid hire and other losses, but also practical problems when,

for instance, bunker

providers are not paid. It is clear that legal default has severe operational and com-mercial implications that also need to be addressed. Hence, the correct legal answer is not the complete answer in many situa-tions.

Others may increase premiums…Several of our competitors have chosen to

meet these challenging times by imposing significant increases in the Freight Demur-rage & Defence premiums. That will not happen to the members of The Swedish Club in 2010, who should continue to ex-pect to receive the best of services in these troubling times. The Club has had a stable growth of its FD&D portfolio over recent years, and the number of insured vessels today totals 665. This represents about half the Club’s P&I fleet.

On this note, we are pleased to publish two FD&D related articles on some highly topical issues – off-hire and termination of charter-parties. Indeed, knowing your

rights is a condi-tion for mak-ing the right decision for the right rea-

sons.

PHoto

: iStockphoto


30


Tejpal DhesiBarrister and FD&D Manager Team Piraeus

”We frequently hearmembers say that they wish to bring the contract to an end”

In the PrevIOus edition of our Swed-ish Club Letter, issue No 3 of November 2009 we did say, as the market develops highs and lows, so too does the law. More decisions are being rendered in London Arbitration and the High Court of Justice in England and Wales. The effect is that we need to be clear on the parties’ intentions and on the terminology being used.

Renunciation is another wordA term we will now hear more than ever is with reference to bringing the contract to an end: termination, or even repudiation. Alternatively, to use a different word which we have rarely seen or heard, renunciation?

Renunciation is another word for where a party shows that it does not want to be bound by the contract anymore. How will it show this? Spoken words can be easiest to identify but written words are better still. The parties do not want to appear to have terminated a contract and, more importantly, to be responsible for all the consequences that may follow. So rarely do

we see written words of such a nature that allow the contract to be brought to an end forthwith, without any consequences for either side.

If it is not a) spoken or b) written words, then a renunciation of the contract most probably will be shown by c) actual con-duct of one or other of the parties. Relying

upon the third option is considered to be the most difficult area of showing what a party’s true intentions were in bringing a contract to an end and hence in pursuing a claim in damages.

The meaning of renunciationOf note, SK Shipping v Petroexport Ltd (The Pro Victor) (2009 EWHC Comm) heard by Mr Justice Flaux on 4 & 5 No-vember 2009, provides us with clear guid-ance on what is meant by a renunciation.

The MV Pro Victor was voyage char-tered to carry a cargo of naphtha from Karachi to Taiwan, Korea or Japan. How-ever, after having concluded and agreed upon a contract, the owners became suspi-cious about whether charterers’ intended to perform the contract or renounce it. To answer this question, we had to look at exchanges of correspondence and tel-ephone calls between both parties. Sub-stantial witness evidence was presented to Mr Justice Flaux, his views on this make interesting and colourful reading from

FD&D | Withdrawal from charter

We need to be clear on inte ntions and terminology

hOWshouldthisbedone?

Significant Q&A before You take actionWhywouldwewishtobringthecontracttoanend?

Whenshouldwethereforebringthecontracttoanend?


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Paragraphs 6 onwards of the judgment. Apart from oral evidence, much was sub-

mitted by owners of the charterers’ wish to bring the contract to an end:a) the charterers tried to convert the voy-

age charter into a time charter,b) the vessel was ordered to slow steam,c) on arrival at loading port, having slow

steamed, she was ordered to wait at the outer anchorage,

d) the charterers failed to provide a signed copy of the charter, which was needed in order to load the cargo from Karachi,

e) the charterers again tried to change the contract into a 6-month time charter,

f) the owners were repeatedly contacted by charterer’s representative, advising that no cargo could be stemmed. After such incidents, the owners contacted the charterers asking for clear advice in writing as to their intentions for load-ing this particular cargo.

g) the charterers responded simply saying “they ( i.e.. the charterers) may declare

force majeure”. The charterers avoided giving any clear answer.

Unequivocally and unconditionallyThe owners persisted and requested the charterers to confirm in writing “unequiv-ocally and unconditionally” that a cargo would be provided. If they did not, the owners would assume the charterers were renouncing (repudiating) the contract, hence bringing it to an end. The charterers were given a clear time limit within which to reply; they did not do so and the owners treated their conduct as a repudiation of the contract.

It is worth noting that all the evidence clearly evinced an intention by the charter-ers not to be bound by the contract and hence the owners were correct to hold them in repudiatory breach.

Get clear legal advice – promptly!Mr Justice Flaux used an interesting anal-ogy. He said the individual bricks of a) – g) may not have individually given rise

to a renunciation (i.e. repudiation or ter-mination) but the wall formed by all the bricks was convincing in itself. Members may frequently have experienced or seen a brick i.e. one of the items listed in items a) –g), but close scrutiny is needed to look at which of the bricks was needed to form the wall. This would be a question of fact for each and such dispute.

In the current market, the lessons to be taken on board are: to look clearly at the evidence, this may or may not evince an in-tention to be bound by the contract. Clear records and notes of all events, commu-nications must be kept and recorded for future use in settlement discussions or actual proceedings. But it is important to get clear legal advice on such a termination and to do so promptly!

Members are encouraged to immedi-ately contact their Freight Demurrage & Defence department at the Club for legal support and assistance.

We need to be clear on inte ntions and terminology

AS MEMBERS WILL SEE in the judgment we discuss in the article above, namely that of SK Shipping v Petroexport Ltd (The Pro Victor) of November 2009, Mr Justice Flaux specifically states that the wishes of both owners and charterers were very clear early on in the charter. There seemed to be clear evidence that there was no intention to be bound by the contract. That being the case, the les-

son to be learnt from this observation/comment is for all parties to look closely and promptly at what is being proposed or offered. If it is not acceptable commercially or as a matter of English law, and termination is indeed the only option, the respective parties should look at termina-tion and mitigating their losses promptly.

WE STRONGLY ADVISE that any such advice or discus-sion should be put in writing. It is good practise to always follow up any phone conversation with a written note. Mark it without prejudice, if you really do not want it used against you at a later stage. But the immortal words” with-out prejudice” do not necessarily guarantee that it will never be used in future correspondence or proceedings.

English law very closely scrutinizes the parties’ inten-tions and whether indeed the document marked without prejudice should be treated as such. Frequently it is these highly sensitive messages that tell the whole story. So a degree of common sense is required in knowing when and where to insert the words “without prejudice” and al-low the evidence to be considered or not.

BECAUSE the market rate is no longer considered to be operating favourably. Maybe a spot charter is preferred to a long-term period charter. But equally a word of cau-

tion, terminating the charter must be done in a legitimate manner.

Significant Q&A before You take action

PHo

to: Stefan Eliasson


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Claims Report | New FlameFD&D | Off hire clauses

shIPs break dOWn. Machinery goes wrong. Other factors can affect op-erations. If a ship is under time charter such problems may indicate a breach of charter by owners and if charterers have suffered a loss they may have a claim for damages. But proving a breach may be dif-ficult. Obligations as to seaworthiness and maintenance vary. The law is complex and predicting an outcome may be uncertain. Even proving what loss has been suffered may not be easy. And what if a breach can-not be proven? Must a charterer still pay for a ship if he cannot use her or, because of some deficiency, she is not what he thought he was paying for? Off-hire clauses go some way to addressing these questions.

There is often a tailor-made clauseIn one form or another, an off-hire clause will appear in most time charterers. There is generally a printed clause and there is often an additional tailor-made clause ap-plying to special circumstances – for exam-ple covering time the ship might spend in drydock. The purpose of an off-hire clause is to relieve the charterer of having to pay hire in circumstances where use of the ship is compromised and without any need to prove breach of charter by the owner. As there is no need for a breach, the off-hire clause is therefore not a liquidated dam-ages clause (unlike as a demurrage clause in a voyage charter). However, not all off-hire clauses are equal and sometimes it is the circumstances of the charterer rather than the ship that decide if such apply.

Clause 15 – a classic off-hire clauseA classic off-hire clause is that in clause 15 of the (1946) New York Produce Exchange time charter. This provides that ‘…in the event of loss of time from deficiency of men or stores, fire, breakdown or damages to hull, machinery or equipment, grounding, deten-tion by average accidents to ship or cargo, drydocking for the purpose of examination or painting bottom, or by any other cause

preventing the full working of the vessel, the payment of hire shall cease for the time thereby lost; and if upon the voyage the speed be reduced by defect in or breakdown of any part of her hull, machinery or equipment, the time so lost, and the cost of any fuel con-sumed in consequence thereof, and all extra expenses shall be deducted from hire.’

In applying such a clause to particular circumstances, the court or arbitrators begin with the principle that under a time charter ‘the risk of delay is fundamentally on a time charterer’ so it follows that the charterer ‘remains liable to pay hire in all circumstances unless the charterer can bring himself within the plain words of an off hire provision’ [The Doric Pride – 2006]. The charterer must prove that the clause ap-plies and any benefit of the doubt is given to owners.

Full working of the vesselThe next point to note is that, for hire to cease, there must have been something preventing full working of the vessel. Un-less this is so, there is no need to consider if this had a relevant cause. The question was there some failure in the full work-ing of the vessel requires a practical rather

than theoretical enquiry. It is necessary to look at the next operation required of the vessel [The Berge Sund 1993]. If the vessel has a broken crane but this has no effect on the time she takes actually to discharge her cargo or her engines are under repair but this does not affect her actual loading time, or a breakdown means she cannot for a time load any cargo but no cargo is ready for loading, then full working of the vessel – in terms of the service actually required of her – is not affected.

Also, if the vessel is performing a nor-mal operation she will not be regarded as being prevented from working. Where a master overloads his ship and is required to lighten her (say because the Panama Canal is fresh water) and then re-load her, the process of lightening and re-loading may delay the ship but full working of the ves-sel has not been affected [The Aquacharm 1980] so there is no off-hire. In such cir-cumstances, charterers may have to resort to considering if they can bring a claim for negligence.

A fully efficient ship might beprevented from full workingOn the other hand, just as a defective ship might not be prevented from full work-ing (as required at the particular time) so a fully efficient ship might yet be. If a vessel is required to sail but the local authorities prevent such, full working of the vessel may have been prevented and the vessel may be off-hire [The Roachbank 1987] which may then send owners to checking the law on unsafe ports. (Other charters such as the Shelltime 3 and 4 refer to the efficient working of the vessel. In such cas-es, any bureaucratic or legal impediments would not be relevant unless related to the actual (or perhaps suspected) physical con-dition of the ship itself.)

Finally, preventing the full working of the vessel does not mean that the vessel must be wholly prevented from operat-ing for there to be off hire but rather the

Off-hire clauses and how to read themTime charters and how to e nd them

Colin FerrisPartnerKeates Ferris, London

ColinFerrisstudiedlawatoxfordUniversityandqualifiedasasolicitorin1984.Colin'spracticeinvolvesdisputesinvolvingallman-nerofcharterpartyandcargomatters;com-mercialjointventuresandshipbuilding;usedshipsales;oilsalesandfuturesandcom-moditiessales.Recently,hehasbeenmoreinvolvedinnegotiatingtheprematureendoflongtermcharters.


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opposite – that even a slight inefficiency may make the vessel wholly off-hire. This appears to make no sense inasmuch as the owner has no interest in working the vessel partially if hire is not being earned at all and even has a vested interest in not work-ing at all until the vessel is fully efficient full hire can once more be earned. The ap-parent toughness of this clause is qualified however by the fact that the clause only permits hire to be deducted only to the extent that a loss of time has really been suffered.

Looking at loss of timeAssuming that the full working of the ves-sel has been prevented and by a cause fall-ing within the clause, the last question is whether and if so how much loss of time there has been.

There are two ways of looking at loss of time: from the owners’ perspective – for how much time has the vessel been pre-vented from working; or from the charter-ers’: by how much time has its adventure been delayed. The Baltime, Shelltime 3 and 4 and New York Produce Exchange charters’ off-hire clauses are all interpreted as net loss of time clauses. This means that it is not enough (as it would be under a period off-hire clause) simply to identify the length of time the vessel was not fully working by reason of one of the required causes. Instead, in addition to this, char-terers must establish the loss of time they have truly suffered – the real delay to their adventure [The Pythia 1982].

So for example, if during discharging, a vessel’s crane breaks down, the vessel is no longer fully working but unless that break-down adds real time to the discharging, there is no net loss of time so no off-hire. If discharging does take longer as a result of the breakdown then it is necessary to calculate by how much as being the per-mitted off-hire. But the obligation to pay hire is also only suspended for as long as the off-hire event applies. So if the vessel’s

deficiency is cured, hire can no longer be deducted even if, as a result of the original inefficiency, the delay to the charterers’ ad-venture is still continuing. Again, if char-terers seek additional compensation they must find a breach of charter and claim damages.

Benefit to ownersThe final irony of the net loss of time clause is that it most benefits owners when char-terers are already worst off. If charterers have no employment for the vessel and so their non-existent adventure is not in any sense delayed, then no matter how ineffi-cient the vessel, she will not be off-hire. So charterers will have to pay hire when had they been earning freight they would have been relieved from doing so. Charterers may of course seek to improve their po-sition by agreement. They may amend or supplement the basic off-hire clause – perhaps with a period clause to cover routine or emer-gency drydocking or repairs not necessarily in drydock. Or charterers may add a clause to make continuing delays off-hire where the off-hire event causing those delays has ended.

What is essential is that the off-hire pro-visions not be dismissed as irrelevant boiler plate but that they be understood before committing to the fixture in the first place and that such should be negotiated to meet both parties’ reasonable expectations.

How to get out of the charterOf course the desperate time charterer may wish to get out of the charter altogether. He may have a defaulting sub charterer or difficult finances or there may simply be an unsustainable disparity between the hire he has agreed to pay and what he can hope to earn. In such circumstances a charterer

may take the legal route – relying on a real or invented breach by owners to justify his treating the charter as terminated.

By walking out on a charter, the char-terer essentially presents owners with a fait accompli – shooting first even if he is will-ing to negotiate afterwards (and whilst the owner is mitigating his loss). The prospect of being dragged through arbitration or the courts and with whatever uncertainty there is as to recovery from charterers may make owners more realistic in their expec-tations.

Negotiate from the beginningA charterer who has a care for its reputa-tion or real assets (so that any award or judgment against them is likely to be re-

coverable) may be more cautious. In such circumstances it may be more produc-tive to negotiate from the beginning. The charterer may find that the owner (with his own financing requirements and new-building commitments) may be as keen to get an early cash settlement as the charterer is anxious to curtail his own losses. Both sides may even benefit from such a restruc-turing.

In such a negotiation (just like all nego-tiations) the charterer must do its best to show – even if the owner has difficulty in recognising it – that if a bird in the hand is better than two in the bush, the bird in the hand is not the set of paper obligations contained in the charter, but is in reality the settlement proposal now being made as an alternative.

Off-hire clauses and how to read themTime charters and how to e nd them

”Must a charterer still pay for a shipif he cannot use her or, because of somedeficiency, she is not what he thought he was paying for?”


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the Club reCently issued a circular to its members about pending legislation in the United States that, if enacted, may have severe adverse implications for shipping, including P&I clubs and their members. The legislation aims at obstructing Iran’s import of refined petroleum products by way of, inter alia, making it illegal for non-US companies to participate in and insure such activities. The circular may be found on the Club’s homepage. As mentioned

there, the situation is being closely monitored, and

proper guidance will be provided to members as soon as that is possible. In particular, efforts

are being co-ordinated

within the Inter-

national Group and

shipowner associations

with regard to the drafting of

relevant charter-party and bill of lad-

ing clauses in order to protect the members’

interests.

Political sanctions and Shipping

Regulations | Sanctions

Anders LeissnerFD&D Manager Team Göteborg III

In the interim, however, there has been an increased flow of in-quiries to the Club’s FD&D lawyers from members who are con-cerned that their trade or business partners could be involved in prohibited trading activities and hence put them in trouble. In par-ticular, queries have concerned the Islamic Republic of Iran Ship-ping Lines (IRISL) who appear on various black lists in the US and UK. In order to shed any light, if at all possible, on the issue about Iran, the position as of March 2010 in very broad terms may be summarised as follows.

Islamic Republic of Iran Shipping Lines (IRISL) IRISL ended up on UK and US black lists for having been in-volved in shipping nuclear and ballistic missile material in defiance of five UN Security Council Resolutions. In the UK, the Financial Restrictions (Iran) Order 2009 prohibits UK regulated banks and insurance companies from having “transactions” and “business relationships” with IRISL. The Order does not apply to vessels that are beneficially owned by IRISL but independently operated. In the US, however, the prohibition is more far-reaching. The Treas-ury Office of Foreign Assets Control (OFAC) has put IRISL and 18 affiliated companies on a list of Specially Designated Nationals (SDN). The SDN list is found at the following link www.treas.gov/offices/enforcement/ofac/sdn/index.shtml.

In essence, any entity which falls within the category of being a “US person” is prohibited from having dealings with any company on that list. To this end, a US person includes (a) US citizens and permanent residents, wherever they are located, (b) anyone physi-cally in the US and US branches of foreign companies and (c) US organised entities including their foreign branches. In addition, OFAC has jurisdiction over the remittance of funds to any listed company, in the event the transaction has a nexus or connection with the US or US persons. The SDN list is updated on a regular basis, and any member who may fall within the category of “US persons” is advised to monitor developments closely.

The US Iran Sanctions Act Of wider and greater concern and impact, however, is proposed

legislation to amend the US Iran Sanctions Act of 1996. The purpose of the amendments is to enhance US diplomatic ef-forts with respect to Iran and expand economic sanctions against Iran. Two similar but not identical pending bills in

Congress (H.R.2194 and S.2799 both confusingly titled the Iran Refined Petroleum Sanctions Act), if passed, would seek

to impose new trade sanctions on Iran focused specifically on the exportation of refined petroleum products to Iran. Sources say the bills may result in new law before summer in 2010. One thing that makes the proposed legislation different from previous US sanction regulations is that it is intended to apply to non-US com-

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Political sanctions and Shippingpanies. In practice, this means that it will apply to any company in the world.

The bills provide for the imposition of a variety of new sanctions against any company that knowingly:8Provides goods or other sup-

port that would allow Iran to maintain or expand its domes-tic production of refined petro-leum products.

8Supplies refined petroleum products to Iran.

8Provides ships and shipping serv-ices, including insurance, for the supply of refined petroleum prod-ucts to Iran.

Marine underwriters couldbe directly exposedAs can be seen, apart from shipowners and charterers, marine underwriters could be di-rectly exposed to sanctions under the proposed legislation. Potential sanctions for transgres-sion could include the barring of sanctioned persons/companies from access to US financial institutions and the blocking of assets and dollar transactions by an offending party located within or routed through the US.

The EU aspect It is perhaps not surprising that extra-territorial laws imposed by the US are not appreciated by everyone. The EU, for instance, is not happy that the US unilaterally purports to restrict business for EU-regulated companies and has as a result in place a “blocking statute” (Council Regulation 2271/96) which makes it illegal for any EU company to comply with specific US sanctions legislation. In prac-tice, this means that those in the EU affected by extra-territorial leg-islation must not comply with such legislation, whether actively or by omission. Whilst one can see the political rationale behind this step, the practical consequences are rather awkward – if a company does not comply with a specific US sanction law, there will be a breach of US law, but if the company complies, there will be a breach of EU law. Sources have indicated that the EU has deliberately created a Catch-22 situation, which is usually resolved in that the exposed company contacts the authorities both in the EU and US and then obtains a permit or a licence from one of them. At the time of writ-

If a company does not comply with a specific US

sanction law, there will bea breach of US law, but if the

company complies, there will bea breach of EU law.

ing this article, it is not clear whether the EU blocking statute will apply in respect of the proposed US legislation.

To conclude, it is difficult to foresee the practical implications of the proposed US legislation. However, it would appear that marine underwriters including P&I clubs and their members need to assess what risks their operation potentially may entail if the legislation becomes reality, in which case issues probably need to be addressed and resolved with the assistance of the relevant authorities on both sides of the Atlantic.

Sanctions and P&I insurancePending further news about the US legislation and also further considerations by the industry of how the situation should be ad-dressed, it is advisable to keep in mind that sanctions imposed against a member for being involved in unlawful trade are not covered by the P&I insurance (Rule 11:2 k) and also that P&I insurance for a vessel may cease if a vessel is knowingly engaged in unlawful trade (Rule 26 e). However, whether breach against a specific US sanction would de facto qualify as “unlawful trade” is too early to say. That will probably have to be decided in the light of the prevailing circumstances and what further advice and recommendations the Club will issue on the subject.


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the hIstOry of maritime arbitration in Sweden goes back many centuries. In fact, the Maritime Code of Visby of 1667 contained a provision on arbitration. But Sweden’s reputation in arbitration circles is not so much linked with maritime disputes as with international commercial arbitra-tion, especially the ones conducted under the auspices of the Arbitration Institute of the Stockholm Chamber of Commerce (SCC). The popularity of Sweden as an international arbitration venue came to the fore during the Cold War, when ar-bitration in Sweden became the favourite choice for parties involved in East-West trade. The SCC’s caseload has continued to increase, and in 2009 some 215 cases were registered. The number of ad hoc arbitra-tions and arbitrations administered by other institutions is much more difficult to assess, but could at a rough estimate be at least the same number. Only a small por-tion of these arbitrations arise out of ship-ping contracts.

The proceedingsSweden adopted a new arbitration act in 1999, which conforms closely to the UN-CITRAL Model Law on Commercial Ar-bitration. This act provides the legal frame-work for arbitrations in Sweden, but also allows for considerable flexibility for the parties and the arbitrators regarding the conduct of the proceedings. This flexibility

Maritime Arbitration in Swe den– a reliable, swift and relatively cost-effective service

JonasRosengrenisapartnerinAdvokatfir-manVingeKBandspecialisesinmaritimelawanddisputeresolution.HeisaMemberoftheCharteredInstituteofArbitrators,andhasexperienceofmaritimearbitrationsundertheICC,SCCandLMAArulesaswellasadhocarbitrations.

Jonas RosengrenAdvokatfirman Vinge KB Göteborg, Sweden

Sweden has become one of the leading venues in the world for international commercial arbi-tration. However, arbitration in the maritime sector has not followed the developments in mainstream commercial arbi-tration, and London’s position as the power house of mari-time arbitration is unlikely to be seriously challenged in the foreseeable future. This article seeks to give some flavour of what the parties who seek an alternative ar-bitration venue can expect from a maritime arbitration in Sweden, to explain how the proceedings may differ, and to suggest some reasons as to why parties might consider it appropriate to resolve their disputes here.

Although arbitrations in domestic cases with Swedish and Scandinavian parties are certainly influenced by the Swedish rules of procedure, this does not apply to the same extent in international disputes. The arbitration proceedings are generally adapted to bridge the gap between par-ties from different legal backgrounds who may well have different expectations of the procedure. If the arbitration is conducted in English (which accounts for most inter-national arbitrations in Sweden), it would cause no eyebrows to be raised if a party is represented by a foreign counsel or ap-points a non-Swedish arbitrator.

Types of dispute arbitrated in SwedenWhen it comes to maritime arbitration, Sweden cannot even compare to the caseload of the LMAA. An account of maritime arbitration in Sweden will nec-essarily be tainted by anecdotal evidence and the experience from my own practice. Most of the maritime arbitrations in Swe-den are ad hoc arbitrations and involve parties in Scandinavia or foreign parties with a business relationship with parties in the region. However, in recent years arbitration in Sweden appears to have be-come an increasingly popular choice for shipping companies with no relation to Sweden from countries with a traditional bias towards SCC arbitration, especially Eastern European and Chinese parties. International parties seem more inclined to provide for arbitration in Sweden in bespoke contracts, shipbuilding contracts and contracts in the offshore sector than in standard form charter parties.

Cost and efficiencyThere is at least a perception that London arbitration is expensive and sometimes slow due to the workload of popular ar-bitrators. The possibility to appeal on a point of law in England, which may cause a dispute to run through three court in-stances, may of course result in something very different and more costly than the

Legal | Arbitration

makes any generalisation dangerous when conducting a comparison with London arbitration. However, as a general observa-tion, the arbitrations conducted under the rules of the London Maritime Arbitration Association (LMAA) remain very much English-style arbitrations in the common law tradition. The maritime arbitration service in London has been described by a distinguished English judge as a “domestic arbitration service for the world”. Sweden is a much smaller country and has been forced to have a more international out-look. We cannot adopt the adage “when in Rome, do as the Romans do”.


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parties expected. But, when big sums are at stake, an arbitration will of course be costly anywhere. Although lawyers’ fees are generally higher in London than in Sweden and the dual profession with solici-tors and barristers may escalate costs, it is fair to say that this does not always mean that a maritime arbitration in Sweden will be cheaper. However, for disputes between Scandinavian parties, there seems little point in going to London to resolve their disputes. The LMAA has been successful in establishing cost-efficient small claims procedures for claims of lower value and complexity.

The corresponding “fast-track arbitra-tion” in Sweden would be the SCC Ex-pedited Arbitration Rules, according to which the dispute will be decided by a sole arbitrator and the award rendered within three months. Many parties adopt a com-bined clause which makes the Expedited Rules the default choice unless the dispute exceeds a certain amount, or the SCC sec-retariat, taking into account the complex-ity of the case, the amount in dispute and other circumstances, determines that the ordinary arbitration rules of the SCC shall apply.

Applicable lawThe Swedish legal system can best be de-scribed as being somewhere in between common law and civil tradition. The mari-time laws in all Nordic countries are very similar, and case law from other Nordic countries carries considerable weight in Sweden. English case law is frequently re-ferred to by the parties, even when Swedish law applies to the substance, especially in charter party disputes. Even in arbitrations conducted in Sweden, English legal materi-als need not be translated into Swedish.

The parties are, of course, free to choose a law other than Swedish law to apply. I have, for instance, been involved in Swed-ish maritime arbitrations where the con-tract, by accident or by design, has been governed by English law. Whether it is

Maritime Arbitration in Swe den– a reliable, swift and relatively cost-effective service

wise for the parties to make such a choice is, of course, another matter.

ArbitratorsApart from the qualities that one would normally seek from an arbitrator in any in-ternational commercial arbitration, parties in maritime disputes expect the arbitrators to have a knowledge of maritime law and the shipping industry. Most arbitrators in maritime disputes would normally be prac-ticing lawyers or academics specialising in maritime law but, in a panel with three arbitrators, the chairman is sometimes a court judge or an arbitrator with no ship-ping experience. As the maritime laws and the legal traditions are very similar in all the Scandinavian countries, lawyers from Norway, Denmark and Finland often serve as arbitrators on Swedish panels. In maritime arbitrations with international parties, the arbitrator could, of course, be from any part of the world (for instance, London QCs occasionally sit as arbitrators in Swedish maritime arbitrations).

Arbitration clauseWhen the Swedish Maritime Law As-sociation discussed how best to serve the shipping industry with arbitration services, the members were decidedly against the idea of establishing a niche maritime ar-bitration centre, and it was recommended instead that the parties should refer to the rules of the SCC. This should ensure that the parties obtain the benefit of updated

arbitration rules and reliable institutional support. According to the standard SCC rules, the arbitrators must render their award within six months, and it is possible to calculate their fees in advance. The rules and proposed arbitration clauses are avail-able via the SCC’s website www.sccinsti-tute.com. The parties should also specify in the arbitration clause where they want the proceedings to take place. Apart from Stockholm, the city of Gothenburg is a popular place for arbitration in maritime disputes, being the home of the biggest port in Scandinavia and of many shipping companies. Incidentally, it is also where The Swedish Club’s headquarter is situ-ated.

Final wordsIt would of course be a mistake to claim that arbitration in Sweden will always be a better, more efficient or cheaper alternative than arbitration in London, New York or any other maritime arbitration venue. On the contrary, for some types of disputes ar-bitration in Sweden may not be the natural choice. However, parties in the shipping industry are encouraged to make an in-formed choice rather than going for the de-fault options in the pre-printed forms, and do so by considering what kind of arbitra-tion service they want and what would be the most appropriate for their contractual relationship. If they opt for Sweden, they can expect a reliable, swift and relatively cost-effective service.

BesPoke

contractsshIPBuIlDIngcontracts oFFshorecontracts

typical swedisharbitrationcases


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A facelifted Stowaway ClausebIMCO’s Stowaways Clause for Time Charter Parties 2009 was published on BIMCO’s website in January 2010. The clause is drafted for time charter parties with a focus on clarifying the apportionment of responsibility and liability between the owners vis-à-vis the charterers in connection with stowaways. BIM-CO explained the need for a new clause by stating that “...the previous wording did not always adequately address current stowaway situations.

It was felt that the clause could be phrased more clearly in respect of the allocation of responsibility and liability for costs for stowaways”.(Spe-cial Circular No. 1 January 2010).

At a first glance the new clause reveals quite a substantial face-lift, in-cluding a new general provision for security. The clause is drafted more succinctly than its predecessor and is divided into two paragraphs. The first paragraph deals with the charterers’ responsibilities and liabilities, and the second paragraph deals with the owners’ corresponding respon-sibilities and liabilities. The second paragraph is drafted broadly, cover-ing all responsibilities and liabilities that do not fall under paragraph one. It is worth noting that the charterers’ responsibilities and liabilities are no longer based on a test of due diligence, but have been replaced by a strict liability regime. The clause can be downloaded from BIMCO’s website.

Extraordinary handling coststhe sWedIsh Club managed to settle a claim on behalf of a member, being the owners of the vessel, from cargo interests concerning extraordinary handling costs. Cargo interests had rejected the cargo due to off-spec al-legations, purporting that the cargo had an increased level of moisture. The cargo was consequently stored in shore tanks at the port of delivery for approximately four

months before being sold at a price equivalent to the invoice value. Car-go interests initiated proceedings against both the owners, in New York court proceedings, and against the sub-charterers, being the contractual carriers, in New York arbitration.

The relevant legal questions were whether the storage costs were rea-sonable, considering that the cargo in the end was sold without a finan-cial loss, and whether cargo interests had mitigated their losses. Owners were in a position to use a demise and time bar defence, due to cargo interests’ inability to pursue the correct owners. However, The Swedish Club took a pragmatic approach in the matter in order to minimise le-gal costs, which, at the end of the day, would have been added to an an-ticipated indemnity claim from the charterers. The matter was referred to a mediation session in New York and The Swedish Club, on behalf of the owners, successfully managed to reach a favourable four-party set-tlement with cargo interests, charterers and sub-charterers.

”Violent robbery”in new Piracy Clause

HARBORPOlICe

HARBORPOlICe

early In 2009 BIMCO presented a new Pi-racy Clause for Time Charter Parties. Follow-ing concerns that the clause was perceived to be too much in favour of owners, amendments were made in order to address these concerns. A key feature of the clause is that – as opposed to BIMCO’s Conwartime clauses – its operation does not depend on an escalation of the piracy risk between the time of entering into the charter party and the time of the clause being invoked. However, BIMCO has been careful to emphasise that the threshold for invoking the clause is set high, requiring the Master or owners to make

a careful assessment of the particular factors and risks at hand – it is not meant to be a carte blanche for owners to

refuse charterers’ orders at their convenience. A further difference from the Conwartime

clauses is the definition of “Piracy”, which for the purposes of the clause encompasses “actual, threatened or reported acts of piracy and/or vio-lent robbery and/or capture/seizure (author’s emphasis).” The pronounced purpose of the addi-tion of “violent robbery” is for the clause to cover attacks in Nigerian waters, which are often politi-cally motivated and thus go beyond what is said to be the conventional definition of piracy; the wording is of course capable of covering such at-tacks occurring elsewhere as well.

One issue of obvious interest to owners and charterers is, of course, payment of hire – the clause stipulates that, if the vessel is attacked by pirates and seized, the vessel will remain on hire throughout the seizure, with the consequence that the charterers’ obligations under the char-ter party remain unaffected. However, in order to address concerns raised by charterers, the revised clause stipulates that the specific obliga-tion to pay hire will cease as of the 91st day after the seizure, and will only resume once the vessel is released. The somewhat arbitrary period of 90 days was chosen because it is roughly the average period during which vessels have been held by Somali pirates.

One further addition to the revised clause, highlighted by BIMCO as catering for charterers’ interests, is a provision stipulating that charter-ers shall not be liable for late redelivery under the charter party, if this results from seizure by pirates.

Clubinformation | Notice Board


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Claims Report | New FlameClubinformation | History of Triton

Protector of the seas

the stOry of the merman Triton takes its start-ing point in ancient Greece, where he was the son

of the sea god Poseidon. For almost 50 years he has acted as a label and a uniting symbol for The Swedish Club. You see

him in our logotype for example and now we have also named our magazine after him.

When we decided to introduce a new graphic design in 2010 we si-multaneously decided to change the name of The Swedish Club Let-

ter; so from this issue forward it will be called The Swedish Club Triton.

“It comes naturally to apply our symbol in a wider sense – especially as Triton is so closely connected to water, and

according to Greek mythology, represents calm oceans for seafarers”, explains Henric Gard, Director of Marketing & Business Development

and also responsible for the design makeover project.

Rescuer of the EarthTriton was the son of Poseidon and Amphitrite and lived with them in a golden palace in the depths of the sea. Like his father, he carried a trident – a three-pronged spear used for fishing. However, Triton’s special attribute was a twisted conch shell, which he blew like a trumpet to calm or raise the waves. Its sound was so terrible, that when blown loudly, it even put the giants to flight, as they imagined it was a roar of a huge wild beast. Triton is represented as having the body of a man with

the tail of a fish, but sometimes also with the forefeet of a horse. Triton was the messenger of his father and got involved in a

number of dangerous ventures, such as when Zeus was threatening to flood the world and Triton intervened by bringing his sea shell

into action, thereby saving the Earth. In later times there was a multiplicity of Tritons, each attending the

various divinities associated with the sea.Triton has, since 1962, served as a symbol for Sveriges Ångfartygs Assurans-

förening – The Swedish Club.

Triton is also:

A MOTOR CYCLE hybrid built of an engine from a Triumph and a frame from a Norton

A FOUNTAIN, by Gianlorenzo Bernini, Rome

THE SEVENTH AND LARGEST MOONS of Neptune, discovered by W Lassell in 1946

A HOTEL in Hurghada, Egypt

A SCIENCE FICTION NOVEL from 1976 by the author Samuel R. Delany

A SWEDISH SWIMMING CLUB founded 1963

THE NEW NAME of The Swedish Club’s magazine, published 3 times a year

Carola WeidenholmCorporate Communcations


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the hIstOry of Vasaloppet (‘The Vasa Race’) began as early as 1520, when Sweden was in a union with Denmark. The 24 year-old Gustav Eriksson Vasa had been imprisoned in Denmark as a result of his opposition to the Danish king. But Gustav man-aged to escape. After landing in the south of Sweden, he began a long and hazardous march northwards.

After about a month into his flight, the Danes were in pursuit of Gus-tav in Dalarna, and he was forced to continue his escape by skiing to-wards Norway. A few days later news of the Danish king’s brutal ravages throughout Sweden reached Mora in Dalarna. Mora’s two best skiers, Lars and Engelbrekt, were sent to catch up with the fugitive Gustav Vasa, which they did in Sälen. They persuaded Gustav to return with them to Mora to lead the fight against King Chris-tian of Denmark.

In 1521, with the men of Dalarna at the head of his forces, Gustav began his revolt. It took two and half years before the war was over and Sweden was a free country. On 6 June 1523 Gustav Eriksson Vasa was elected King of Sweden. Now he is a symbol of the biggest ski competition in the world – “Vasaloppet”!

“Vasaloppet“– a part of swedishhistoryThe first “Vasa Race” was performed on 19 March 1922 with 119 skiers. Now it is the biggest ski competition in the world – 90 kilometres and nearly 16 000 skiers!

Clubinformation | Out and About

Mr Björn Laike, MD of Transbulk 1904 AB, in the ski track for the 34th time.

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Lars Rhodin, MD of the Club, finally crossing the goal in Mora, Dalarna after 10 hours skiing.

havInG hiked and struggled against the harsh environment for almost five days and gained some 1,400 meters in altitude, Anders Holmberg, Senior Claims Manager in Team Göteborg I, and his fiancée Annica Eringe eventually reached Uhuru Peak, Kilimanjaro 5,895 metres AMSL (Above Mean Sea Level) on 15 January 2010.

“Once in a lifetime, never again” says Anders, while Annica says “You should never say never”.

on top of kilimanjaro

Lars Rhodin, accompanied by Birger Simonsson (Salén Staff Founda-tion, Stockholm) one of the veterans who finished the race for the 30th time.

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Claims Report | New FlameClubinformation | In Memoriam

PerErikHedborginMemoriamMy PredeCessOr’s predecessor, as I used to call him, Per Erik Hed-borg, has passed away peacefully at the age of 93. Rarely did he show his age; he always maintained his youth-ful temperament, his great interest in the world around him, and he dis-played an excellent memory.

About fifty years ago, Per Erik was appointed Managing Director of The Swedish Club. He succeeded

Mr Carl Erik Åhmansson, a rather stern and military figure. In Per Erik, the Club had landed a very different kind of leader, circumspect, analytical, friendly but still with roots in the ‘old’ Sweden. During his time the use of titles was abolished and everyone in the office was encouraged to call each other by their given name. We may, however, assume that it took some con-siderable time before the boss was universally addressed as ‘Per Erik’.

On many occasions Per Erik related in some detail the proc-ess that preceded his employment. One of the most critical moments was supposed to be when one of the Board Directors asked whether ‘Mr Hedborg mastered the English language’. The answer was yes and without further ado, the fifth managing director of The Swedish Club had been selected.

Leadership for almost 20 yearsThe Club had the benefit of being under Per Erik’s leadership for almost 20 years. During this period the management’s ca-pacity for survival was put to the test more than once. There were advanced plans to merge with another influential hull insurer, and in the wake of the serious shipping crisis of the sev-enties, some of the most lacerated owners demanded that the Club should be liquidated in order to distribute the assets to the profusely bleeding members. In both cases the proposals fell and the Club could continue to prosper and maintain its inde-pendence.

Internationalisation of the ClubUntil the mid seventies The Swedish Club had exclusively in-sured Swedish vessels. The crisis of that time meant, however, that a large number of Swedish shipping companies either ceased operating or significantly cut down their tonnage. This

meant, in turn, that premium income was reduced and the de-pendence on Swedish insurers only would have had disastrous consequences. Fortunately, under Per Erik’s supervision the internationalisation of the Club had already begun and the con-siderable loss of Swedish tonnage was, in the long term, com-pensated by foreign risks.

His incomparable interest in the ClubIn 1997 I took up my appointment as Managing Director of The Swedish Club and almost directly I resumed the contact I had established with Per Erik as a young man back in 1975. Immediately I felt his unreserved support, his vast knowledge and his incomparable interest in the Club. He was a welcome guest at the office; he kept himself updated on our development, offered his views on issues of importance, and proved to be a complete reference book on the history of The Swedish Club. He was the first person to call to give his comments on our an-nual report, and he often found a small error or something that could have been explained a little bit better.

Presided over the Club PensionersHe presided with great pride over the Club Pensioners’ bian-nual gatherings, invited them to an aperitif in his and Sigbrit’s beautiful apartment in town, and made sure that the menu at the dinner that followed was tastefully composed. He made the old girls and boys feel at ease, and they were all given the oppor-tunity to render their impressions and experiences of a bygone working life.

I have lost an old friendIn the company of his dear wife Sigbrit, he almost always par-ticipated in the Club’s traditional arrangements. At the mag-nificent annual dinners, at which he belonged to the important group of ‘Oldies but Goldies’, he enjoyed mixing with members, former colleagues and business associates. With his erect car-riage, his natural elegance and great kindness he enjoyed re-spect, admiration and appreciation in all quarters.

Despite the difference in age, I feel as if I have lost an old friend. I shall always remember Per Erik with great warmth and gratitude both for what he has meant to me personally and for what he has meant to The Swedish Club.

Kivik, January 2010Frans Malmros

MD The Swedish Club 1997-2008


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HEAD OFFICE GÖTEBORG

Joakim Andersson has resigned from his position as Claims Executive in Team Göteborg I. We wish him all the best in his future career.

PIRAEUS

Kjell Augustin joined Team Piraeus on 1 February 2010 as Technical Advi-sor. Kjell was previ-ously employed by the Club as Techni-cal Manager during

1996-2004, partly with our Piraeus office. HONG KONG

Jason C.Y. Wu joined the Club’s Hong Kong office on 15 December 2009 as Assistant Claims Ex-ecutive. Jason holds a Maritime law degree from Shanghai Mari-

time University and a Master degree from Southampton.

Fiona Li has resigned from her position as Claims Executive. We wish her all the best in her future career.

JanKällssoninMemoriamWe have the sad duty of informing you that Mr Jan Källsson, former chairman of the Board of The Swedish Club, passed on 13 January.

Mr Källsson served as a highly valued board member for several years during an important period in the Club’s his-tory in the 1980’s. He served his second term on the Elec-tion Committee.

In parallel with his management position at Erik Thun AB, located in Lidköping, Jan Källsson was deeply in-volved in general Swedish shipping matters. He had con-tributed to several national government commissions

aimed at increasing safety in, and reducing the environmental impact of, the marine industry.

StaffNews

Clubinformation | In Memoriam / Staff News

JanAhlgreninMemoriamjan ahlGren, employed by The Swedish Club 1949 – 1984, passed away on 20 November 2009 at the age of 89. Jan started working in the P&I Department when the Club was located at Skeppsbron 56 in Göteborg, and became head of department when the office moved to Bar-lastgatan 2 in 1960. He handled one of the Club’s more spectacular cases, the collision between the Stockholm and the Andrea Doria in 1956, which caused many deaths and injuries to passengers and crewmembers. Jan amended the rules for P&I Insurance, which came into force in Jan-uary 1978. He also paved the way for the Club’s P&I loss

prevention program by introducing lectures for sea-going personnel in Göteborg.

*I met Jan for the first time in the summer of 1973 as a trainee in the P&I depart-ment. Jan gave me some of his most voluminous files and asked me to read through them and propose a solution. I spent the better part of that summer trying to un-derstand what P&I was all about, but I must have made some impression since a few years later Jan called me and offered me a job.

I had the privilege of working closely with Jan during my first years at the Club and got to know him as a much respected maritime lawyer. Jan loved the French lan-guage, which he spoke fluently, and took every opportunity to speak with his French business contacts. His greatest interest was music and he was a frequent visitor to Göteborg’s Concert Hall. Jan was very sociable and met many people in the busi-ness, who also became his personal friends after his retirement from the Club.

Fredrik KruseSenior Claims Manager

Team Göteborg III


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CLUB CALENDAR

2010 3-7 May 2010 Marine Insurance Course, Göteborg

17 June 2010 Annual General Meeting, Göteborg

A TRIPLE TO CELEBRATE 100 30 10 years of P&I in Greece ... Triton 1-2010.pdf · Examination 20-21 |...

Documents

Transcript of A TRIPLE TO CELEBRATE 100 30 10 years of P&I in Greece ... Triton 1-2010.pdf · Examination 20-21 |...