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SKULD.COMSKULDMAGAZINEDECEMBER 2008 / ISSUE 192FIGHTINGSPIRITACHILLEAS APPEAL / 14BUNKERS CONVENTION / 17

VIEWPOINTDouglas JacobsohnPresident & CEOSKULD.COMLONG-TERMSTRATEGYAs we go to press, the financial market crisis clearly emphasises thenecessity for Skuld’s long-term strategy of not relying on investmentincome to cover running expenses and underwriting losses.Long-term impacts are hard to predict. However, we can expectthe financial sectors to be trimmed down with a greater focus beingplaced on business regulation as the world moves forward. We arecommitted to stand by our long-term investment policy while keepinga close watch on the risk-bearing capacity of the club.BEACON DECEMBER 2008 / ISSUE 192NEW SKULD PROFILEThis is the first issue of Beacon in the new Skuld style. We are nowbringing the magazine in line with Skuld’s new corporate identity– as seen already on our website. In addition to the new look, weintend to focus on topics that affect shipping and our industry inthe hope of initiating an industry dialog.FIGHTING SPIRITOne of these topics is the approach to emergency response andmanaging risk. This issue’s cover story features the Hebei Spirit oilspill on the coast of South Korea last December, as well as Skuld’shandling of the case throughout 2008. Our swift and professionalhandling of the incident has won positive responses from bothauthorities and the shipping community.Other topics in this Beacon include the Bunkers Convention,and the general issue of compulsory insurance – and a behind thescenes look at this summer’s landmark decision by the House ofLords in the Achilleas Charterers Appeal.We wish you good reading.13DOUGLAS JACOBSOHNSERVICE AFTERSIGNINGFor three days in early October, over 100shipping people came together with a commonpurpose – to expand their knowledge of P&IInsurance. The Skuld School team was there.SKULDMAGAZINEBEACONDECEMBER 2008 / ISSUE 192BEACON (SKULD MAGAZINE) is the official publication of Assuranceforeningen Skuld (Gjensidig)ADDRESS P.O. Box 1376 Vika, NO-0114 Oslo, Norway, Tel +47 22 00 22 00, Fax +47 22 42 42 22E-MAIL ingeborg.berge@skuld.com EDITOR IN CHIEF Ingeborg Berge CONTRIBUTING EDITOR BradLarson EDITORIAL STAFF Lise Larson LAYOUT Creuna AS REPRO AND PRINTING 07 Group FRONT PAGEHebei Spirit, Photo: ©ITOPF BACK PAGE Photo: ©Hiroshi Watanabe/The Image Bank. Entire contents©2008, all rights reserved. Reproduction in whole or in part, without written permission fromSkuld, is prohibited. Opinions expressed by writers in Beacon are not necessarily those held bySkuld. Skuld assumes no responsibility for unsolicited material WWW.SKULD.COM

CONTENTSA DAY IN THE LIFE OF SKULD4 Fighting Spirit – Handling the Hebei Spirit incidentCURRENT10 Organising for major incidents – Adding Value forour members12 The New Generation P&I Club13 Skuld School – Service after SigningLEGAL ISSUES14 ACHILLEAS Appeal – Landmark House of Lords decision16 Compulsory Insurance – a look at the IMO Conventions17 Bunkers Convention – Meeting the November deadline4FIGHTINGSPIRITIn heavy seas off the South Koreancoast, a massive crane barge rammedthe fully laden VLCC oil tanker HebeiSpirit in what was to become one of thelargest spills of recent times.NEWS18 Personnel news19 News14LANDMARKHOUSE OFLORDS DECISIONThe decision by the House of Lordsfollowed an original arbitration andsubsequent appeals – during whichSkuld stood by our member. Witha difference in damages of overUSD 1 million.

A DAY IN THE LIFEHEBEI SPIRIT INCIDENTThe Korean military collected tar in huge vatson the South Korean Taean Coastal shorelineas part of one of the most massive clean upefforts of modern times. PHOTO: ITOPF4 BEACON / DECEMBER 2008

A DAY IN THE LIFEHEBEI SPIRIT INCIDENT /FIGHTINGSPIRITAT 0700 IN THE MORNING LOCAL TIME ON FRIDAY, DECEMBER 7LAST YEAR – IN HEAVY SEAS OFF THE SOUTH KOREAN COAST– A MASSIVE CRANE BARGE RAMMED THE FULLY LADEN VLCC OILTANKER HEBEI SPIRIT IN WHAT WAS TO BECOME ONE OF THELARGEST TANKER SPILLS OF RECENT TIMES.BEACON / DECEMBER 2008 5

A DAY IN THE LIFEHEBEI SPIRIT INCIDENTFIGHTINGSPIRITCONTRIBUTIONS BYPaul Bo Lange Skuld OsloSandro Vuylsteke Skuld CopenhagenNicola Mason Skuld Hong KongSebastian Walldén Skuld OsloBrad Larson Skuld OsloNearly 11,000 tonnes of oil spilled in what was South Korea’s worst pollution incident ever.What sort of challenges did Skuld, the Hebei Spirit’s P&I insurer, face in the first hours and daysafter the incident? And what can we learn from Skuld’s proactive approach to handling this case?“It was the smell that got to us,”observed Paul Bo Lange, Skuld’sHead of Loss Prevention & RiskManagement, based in the Skuldhead office in Oslo. “Suddenly,even though we still had sevenkilometres to go on our trip to thecoast on that first morning afterthe incident, there was alreadythe overwhelming smell of oil.”Despite many years of experiencewith maritime casualties,the four passengers in the carwere hardly prepared for the sightthat met them as their vehiclereached the Korean Taean Coastalshoreline.“At the coast you normally seea mass of blue-green broken up bywhite,” said Paul. “What struck uswas there was only black as far asthe eye could see.”ITOPF SUPPORTTwo of the passengers in the carwere representatives from theInternational Tanker OwnersPollution Federation (ITOPF).They had flown out from Londonthe day before after being notifiedof the accident by Paul at around0400 that morning. They teamedup with Paul in Frankfurt, wherethey were also joined by SandroVuylsteke, a maritime lawyerworking for Skuld in Copenhagen,who would be providing the initiallocal legal support on the incident.The four arrived within 24 hoursof being notified of the accidentby Nicola Mason in Skuld’s HongKong office.ITOPF’s priority service isresponding to accidental marinespills. The organisation’s team ofhighly experienced technical staffare at a constant readiness to travelanywhere in the world at a fewhour’s notice. Since 1978, ITOPFstaff have attended on-site atapproximately 600 incidentsaround the world, giving theorganisation unparalleled practicalexperience in the realities ofcombating major marine spills.“IN SUCHCIRCUM-STANCES,HOURS ANDMINUTESCOUNT”The Hebei Spirit is a Skuld Memberthrough the Hong Kong Syndicate.Nicola – who is Vice Presidentand Deputy Head of the Far EastSyndicate, as well as a maritimelawyer – was therefore appointedCasualty Coordinator for theincident.HOURS AND MINUTESIn such circumstances, hoursand minutes count. Following thecollision at 0700 in the morninglocal time, the owners of the HebeiSpirit contacted Skuld within twohours. Skuld Hong Kong initiatedthe casualty response by 0920(1020 in Hong Kong and 0220 inOslo) and Skuld’s local lawyers andour South Korean correspondentsent instructions to the owner andcrew on a preliminary approachto the incident.By 1300 local time (0400 in Oslo),the Skuld on-site team establishedcontact with ITOPF. Skuld alsocontacted the International OilPollution Compensation (IOPC)HOUR BYHOURTHE HEBEI SPIRIT INCIDENTFRIDAY 07:00DECEMBER 7, 2007A massive floating crane barge ramsthe fully laden VLCC oil tanker HebeiSpirit in heavy seas off the South Koreancoast. This is one of the largesttanker spills of recent times. At 09:00(local time), the owners of the HebeiSpirit contact Skuld.6 BEACON / DECEMBER 2008The spill occurred near Mallipo Beach,in Taean County, considered one of SouthKorea’s most beautiful and popularbeaches. PHOTO: KOREAN NEWSPAPER,DAEJONILBO.COMFRIDAY 09:20DECEMBER 7, 2007A casualty response is initiated (10:20in Hong Kong and 02:20 in Oslo) andlocal lawyers retained by Skuld andour correspondent from the closestport send instructions to the ownerand crew on a general approach tothe incident.FRIDAY 13:00DECEMBER 7, 2007(04:00 in Oslo) The Skuld on-site teamestablishes contact with ITOPF, whogive support on pollution response,and then with the IOPC representativeswho handle one of the Fundsfor making reimbursements to thoseaffected by the spill along with Skuld.

A DAY IN THE LIFEHEBEI SPIRIT INCIDENTMore than 50,000 volunteers worked perday – with this number passing the 1 millionmark in early January. No detail wasoverlooked in the massive clean up effort.PHOTO: ITOPF“THIS NOVELAPPROACHWAS A WIN-WINAGREEMENTFOR ALLPARTIES”was released, leaving for international waters and repairs in China.Both the owners and the managers of the Hebei Spirit expressed theirappreciation for Skuld’s proactive approach to the negotiations withthe Korean Government.Korea is a party to the international system of compensation for oilpollution by tankers established by the Civil Liability Convention (CLC)1992 and the Fund Convention 1992. Under these conventions, paymentof proper claims is guaranteed by the insurer of the ship and by theIOPC Fund.PRESSURE ON THE CREWOne aspect of the situation was disappointing. Even though clear compensationprocedures are recognised under international conventions,the Korean Government moved to arrest the Hebei Spirit and beganauction procedures on the vessel – undoubtedly responding to heavypolitical pressure.“Skuld took immediate action, suggesting a high level meeting inKorea with the Government, the IOPC Fund, ITOPF and Skuld whereit launched the idea of entering into a cooperation agreement with theGovernment,” says Nicola Mason. “This move recognised the intensepressure the government was under to secure funds for environmentalcleanup and hardship payments for all those whose livelihoods wereaffected by the spill.”SECOND COOPERATION AGREEMENTA landmark Second Cooperation agreement was signed with the KoreanGovernment on July 4, 2008. Thisagreement ensures that Skuld isable to pay compensation to thevictims of the Hebei Spirit incidentquickly, while working within theframework of relevant internationalconventions and local law.Such an unprecedented agreementavoided a payment problem.Skuld’s proactive assistance tothe Korean Government enabledall parties to find a way aroundcompensation difficulties in anextremely complex case. Underthe agreement, Skuld complieswith its obligations under theCLC Convention and Korean law– and is able to make swift andefficient payments to the victimsrather than having to tie upcompensation funds in the court.“The natural tendency is to wishto pay full compensation as soonas possible,” Nicola observes,“although there were a numberof hurdles to overcome.”She explains that due to nationallegal requirements and the internationalconventions regardingthe overall limit of payments,ordinarily only a percentage ofthe total compensation could bemade available immediately.This is to avoid the risk that earlyclaimants get full payment, whilethose coming later receive littleor no compensation because thereare no more funds – a situationthat would be patently unfair.The risk was that Skuld couldhave been required to make apayment equal to the Civil LiabilityConvention (CLC) into court. Thiswould mean that Skuld would notMONTH BYMONTHTHE HEBEI SPIRIT ACCIDENT»Many different oyster rack structureswere oiled in the spill – with many fisheriesand marine culture farms losing theirstocks. PHOTO: ITOPF8 BEACON / DECEMBER 2008JANUARY 14, 2008The Hebei Spirit Centre is established,facilitating the first hardship paymentsin the case. As of today, about 50 peopleare involved in processing claimsestimated to reach more than 100,000claimants and total more than USD550 million. The Centre can be inoperation for up to four years.FEBRUARY 5, 2008USD 12 million is dispursed to over150,000 people in payments in supportof the clean-up effort and also hardshipcases. Many of the local fishermenwho were victims of the spill wereutilised and paid to take part in theclean-up operation.The first step on the road to recovery is awell conducted clean-up operation. Manylocal fishermen were paid to take part.PHOTO: ITOPF

A DAY IN THE LIFEHEBEI SPIRIT INCIDENT/“WE WANT TOGET CLAIMSMADE ANDPAYMENTSSETTLEDSWIFTLY”be allowed to make payment tovictims. It then might take severalyears before the courts are in aposition to distribute the funds– an obviously undesirable situation.STATUS – THE MASTER & CREWSkuld’s support for the Masterand crew has been greatly appreciatedby the owners and managersof the Hebei Spirit. All the crewexcept the Master and ChiefOfficer have been released. InJuly this year the Master andChief Officer were found innocentof all charges of violating thenation’s ocean pollution lawfollowing the oil spill.However, despite their acquittal,the Korean courts have still beendetermined to detain them – foras long as a year – depending onfurther hearings. Organisationsfrom across the world’s shippingindustry issued a vigorous jointprotest to what they have calledthe continuing unjust and unreasonabledetention of the twomerchant ships’ officers. Skuldcontinues to work for the officers’release.THE HEBEI SPIRIT CENTRE“We in Skuld feel a real admirationfor the Korean people, includingthe many volunteers cleaning thebeaches who have dealt with thistragedy in such an honourableand courageous manner,” saysSebastian Walldén, a ClaimsExecutive with the Oslo officeand – along with Sandro Vuylsteke– part of the team running theHebei Spirit Centre and managingclaims payments.“We feel sympathy for all thosewhose livelihoods were affectedby the tragic event, and are alsosaddened by the environmentaldamage that resulted,” he added.“It’s still encouraging to see theprogress that is being made withthe clean-up efforts. Our motivationis to get claims settled and paymentsmade as swiftly as humanlypossible.”As of last month, the clean-upoperations were completed onthe shorelines polluted by theHebei Spirit incident. “We’d alsolike to express our appreciationto our correspondents and surveyorsin South Korea,” saysSebastian. “They have done animpressive job in difficult anddemanding circumstances.”Today, about 50 people areinvolved in processing claimsestimated to reach more than100,000 claimants and totalmore than USD 550 million.READ MOREwww.iopcfund.orgwww.itopf.orgwww.wikipedia.orgwww.youtube.com (search Hebei Spirit)/ THE KOREAN SPIRITTHE KOREAN PEOPLE JOINED IN A HUGEMANUAL CLEAN-UP EFFORT10,000Up to10,000 localvillagersand fishermena daywereinvolved50,000More than50,000volunteersworked perday, withvolunteerstopping the1-millionmark in early20,000The cleanup utilisedover 20,000vesselsdays350Morethan 350helicopterflights andnearly30,000heavymachineryunit-days1,000’sThe Koreanmilitarycontributedthousandsof mandaysoverthe courseof sixweeksJanuarywere used/FACT FILEINTERNATIONAL COMPENSATIONFUNDS & PAYMENT TO VICTIMS140P&I COVERAGE10ADDITIONAL INTERESTPROVISION180IOPC FUND330TOTAL P&I PAYMENTS& FUNDS450-500+ESTIMATED TOTAL COSTOF THE INCIDENT/ITOPFMILLION USDUnder International Conventions, Skuld– backed by the International Group ofP&I clubs – funds 100% of all claims upto a limitation of USD 140 millionSkuld has also allocated additional funds asnecessary for interest on claims that coversthe period between the incident date ofDecember 7 last year and the payment dateThe International Oil Pollution Compensation(IOPC) Fund then compensates 35% of theclaims up to their limit of approximatelyUSD 180 millionSo the total funds available for compensationreach around USD 330 million. The KoreanGovernment is not a signatory to a conventionthat would have provided even morecompensation coverageAs the cost for compensating victims ofthe incident will go over USD 330 million,the Korean Government, under the SecondCooperation Agreement with Skuld, hasagreed to guarantee payment of allcompensation above that amountINTERNATIONAL TANKER OWNERS POLLUTION FEDERATIONJULY 4, 2008The landmark Second CooperationAgreement between Skuld and theSouth Korean Government is signed.Its unique approach makes it possibleto pay compensation to the victims ofthe Hebei Spirit incident quickly whileworking under the framework of internationalconventions and local law.Skuld and the Korean Government representativesshake hands following theunique Second Cooperation Agreement./ LONDON-BASED ITOPF is arespected non-profit organisationinvolved in all aspects of handlingspills of oil and chemicals in themarine environment./ ITOPF was originally establishedin 1968 following Torrey Canyonincident to administer the voluntarycompensation agreementcovering those affected by oil spills./ NOW HAS OVER 5,000 tankerowner-members who operate8,800 vessels with a total grosstonnage in excess of 252 million gt.Other types of ships with a tonnageof more than 405 million gt areassociate members./ DEVOTES CONSIDERABLEeffort to a wide range of technicalservices – the most importantis responding to spills of oil andchemicals – its response teamis at constant readiness to assistat marine spills anywhere in theworld./ ALSO PROVIDES damageassessment, claims analysis,contingency planning, trainingand database information.BEACON / DECEMBER 20089

CURRENTORGANISING FOR MAJOR INCIDENTSADDING VALUEFOR OURMEMBERSTHE SKULD VALUE CHAINA major incident can strike anyone. Shouldsuch an event happen, Skuld will be there.Our Casualty Response system is a dynamicand flexible organisational tool for dealingwith the crucial early stages of a major event– and then following it through the entire lifecycle of the incident.›1PHASE2PHASEASSESSINGTHE RISKWe offer innovativeinsurance productsand servicesSERVICEAFTERSIGNINGWe offer fast,personalised,professionaland hands-onsolutionsLet’s take a closer look at howSkuld adds value for its members.Its Value Chain includes fivephases – from risk assessmentand service after signing, throughclaims and incidents, major incidents,and finally re-assessment.Skuld’s handling of the HebeiSpirit case falls mainly in Phase IV– the major incidents phase.Our members can draw on animpressive combination of bothin-house legal talent from manyjurisdictions, as well as those withextensive seafaring experience.The resulting Skuld team worksto minimise the negative impactof the incident while co-ordinatingand controlling the overall responseto a casualty, establishing clearlines of communication with themember and public authorities,and helping to manage relationswith the media.EXTENSIVE EXPERIENCEExtensive experience handlingmajor incidents over the past 20years – such as the Braer (1993),the Estonia (1994) and the SeaEmpress (1996) – has given Skuldvaluable insight into handling“OVER THEYEARS WE’VELEARNEDTHAT THEWINDOW OFOPPORTUNITYIS SMALL”10 BEACON / DECEMBER 2008

By Claes WestmanExecutive Vice President, Claims, Skuldclaes.westman@skuld.comCURRENT/casualties swiftly and effectively.Over the years we have learnedthat the window of opportunity issmall and fleeting. We have to actfast with a hands-on approach.We also learned that we canrespond most swiftly and effectivelywith the use of fully empoweredinternal resources – and then callin other resources as necessary.With the Braer, we started thepractice of establishing a localclaims handling office near thesite in order to be connected tothe incident area and be closeto the claimants. We have alsoworked to facilitate mass productionof claims. And today’s ITsolutions have made it possibleto move even faster. In addition,we emphasise extensive useof dialogue with those involved– working for settlements andsolutions rather than litigationif at all possible.CASUALTY RESPONSEORGANISATIONSkuld’s casualty response organisationprovides fast, powerfulsupport. A flexible, dynamic approachmakes use of a CasualtyCoordinator from the member’ssyndicate. An initial on-site teamwill consist of a representativefrom the Skuld Risk Management& Loss Prevention Departmentand an internal Skuld maritimelawyer. They will be involved tocoordinate the surveying of thecasualty and work with externalresources – but even more importantly,assisting the member– in handling the incident.Other members of the Casualtyteam will include the relevantMember, representatives fromITOPF (International Tanker OwnersPollution Federation) and theIOPC (International Oil PollutionCompensation) Fund. In pollutioncases, ITOPF evaluates the overalldamage and consults on theenvironmental response. TheIOPC representative evaluatesthe level of compensation fromthe IOPC Fund, and in additionhas extensive experience inhandling such incidents.The Casualty Response Teamalso includes external local lawyersand specialised internationallegal support if necessary, andall other experts. The team willbe complemented by supportingresources from Skuld Head Officeor other Syndicates, as well as theSkuld EVP Claims, as necessary.This organisation allows Skuldto maintain maximum flexibilityas well as transferring and capitalisingon crucial emergencyresponse expertise within the Club.And this dynamic organisationpays off. Skuld was able to handletwo other major cases – Neftegaz67 and Und Adriyatik – at thesame time as we were managingthe Hebei Spirit.The Neftagaz 67, a supplyvessel, collided with a bulk carrieroff Hong Kong and rapidly sank,trapping a number of crew members.A complex wreck removaloperation followed.MEDIA RESPONSEIn cases of this size, mediaresponse is just as important ascasualty response. It is importantto get the story straight, especiallyunder pressure, where theperception of the shipowner’sreponse can affect the value andthe very survival of the company.This is another area where Skuldhas shown it can give strongsupport.READ MOREwww.skuld.com (Publications:Annual Review)3PHASECLAIMS &INCIDENTSWe help ourmembers improvetheir operationalperformance4MAJORINCIDENTSWe deal with thecrucial early stagesof a major eventand follow through5RE-ASSESS-MENTPHASEPHASEWe add to ourcase database andrefine our riskanalysis tools› ›BEACON / DECEMBER 2008 11

CURRENTBy Eric JacobsEVP Marketing and Communication& General Counsel, Skulderic.jacobs@skuld.comTHE NEW GENERATION P&I CLUBNAVIGATING RISK FOR THENEW GENERATION SHIPOWNERThe current financial crisis is only the latest in a number of risks facing international shipping.It comes on the scene just as a boom in shipping placed pressure on already existing shortagesof competent crew, increasing the need for an even greater focus on loss prevention and training.The situation is made even more complex by environmental challenges, as well as energyshortages and ever-more sophisticated national and regional governmental regulatory bodies.Last year we launched our goal of being the New Generation P&I Club,serving the needs of new generation shipowners. Our main aim is toprovide the leadership that will transform tomorrow’s marine insuranceindustry, as our CEO notes in his Viewpoint column in this issue.And as we note in our most recent Annual Review, published onthe Skuld website, our goal is to help the New Generation Shipownernavigate the risks arising out of the wide range of challenges facingthem in today’s fast changing environment.BALANCED APPROACH TO RISKIn earlier times, when evaluating risk, the future was only a mirror ofthe past. The measurement of future exposure to risk was based ona simple analysis of past risks.Today, Skuld’s approach to managing risk goes much further. Itbalances decisions based on a qualified and sophisticated analysis ofnumbers – determined by patterns of the past – with decisions based onmore subjective experience-based knowledge about what lies beyondthose statistics. In doing so, we help our members and clients to managerisk more effectively. This capacity to manage risk allows them tomake bolder decisions and forward-looking choices. In this way, weprovide one of the key elements of the energy that will drive the shippingindustry forward.“OUR AIM ISTO PROVIDETHE LEADER-SHIP THAT WILLTRANSFORMTOMORROW’SMARINEINSURANCEINDUSTRY”NEW GRAPHIC PROFILEAnd you will be seeing more ofus. We have now launched a“New Generation” graphic profileto emphasise how we live ourvalues in Skuld.Those of you who have visitedour new website will have noticedthe change. And will also havenoticed some new services, likethe online Bunkers Bulletin forkeeping you updated on the dailyand weekly developments relatedto the Bunkers Convention thatcame into effect in November.READ MOREwww.skuld.com (Introduction toAnnual Review)OUR VISIONOur new vision states that Skuld shall be a world leading maritimeinsurance provider – through innovation, financial strength and the talentsof our people. In short, we will continue to help our members and clientsbetter navigate risk and, in so doing, support them in making informedchoices.12 BEACON / DECEMBER 2008

By Lise LarsonMarketing & Communication, Skuldlise.larson@skuld.comCURRENT/SKULD SCHOOLVALUE CHAIN PHASE 2SERVICEAFTER SIGNINGFor three days during the crisp fall weather ofearly October, over 100 shipping people cametogether with a common purpose – to expandtheir knowledge of P&I Insurance. The Skuldteam was there.One of Skuld’s main goals is to provide the leadership that will transformtomorrow’s marine insurance industry so the support for SkuldSchool is not surprising.Our three-day course in P&I insurance help us to share knowledge.At the same time we maintain the closest possible relationship andcooperation with our owner and charterer members.A P&I Certificate is awarded following completion of the intensivethree-day course that covers the rudiments of P&I insurance. Thecourse, which is unique in the P&I industry, is also an excellentintroduction to the Skuld organisation.EVERYTHING YOU NEED TO KNOWSkuld School presentations in underwriting include owners’ andcharterers insurance, entry procedures and statistics, reinsuranceand additional covers. On the claims side, the presentations examinetypes and handling of claims andthen go into more detail on drycargo liabilities and extra-handlingcosts, defense insurance, tankand cargo cases.Sections on casualty response,loss prevention and risk managementare essential subjects. Andpresentations on personal injuriesand stowaways provide additionaldetail. The Skuld School agendaalso included a cargo and tankliability workshop for more handsonexperience – and it wouldn’t becomplete without a look at currentcases such as the Hebei Spirit.The presentations are in goodhands – Skuld’s own experiencedstaff membersRELAXED NETWORKING“I would like to thank Skuld fororganising such an inspiring andeducational course,” said one ofthe many participants of thisyear’s sessions.”Course participants also ratehighly the many possibilities forindustry networking in a relaxedand stimulating environment. Thecourse schedule is a balancedmix of professional content andinformal breaks. This year one ofthe tours included the recentlycompleted Oslo Opera House.And here is some additionalfeedback: “Impressively knowledgablyspeakers – everyoneperformed well. There was avery pleasant tone throughout.”“A very fine seminar! Being newin the industry, I really appreciatedthis professional overview.”“CLASSPARTICIPANTSALSO RATEHIGHLY THE MANYPOSSIBILITIESFOR INDUSTRYNETWORKING”SKULD SCHOOL: Sightseeing in Oslo was part of the networking opportunity offered by Skuld School. Here on the roof of the new Oslo Opera House we see many of this year’sparticipants.BEACON / DECEMBER 2008 13

LEGALISSUESBy Nicola MasonVice President Skuld Far East Syndicatenicola.mason@skuld.comACHILLEAS APPEALLANDMARK DECISIONIN THE HOUSE OF LORDSThe decision by the House of Lords followed an original arbitration and subsequent appeals– during which Skuld stood by its member. At issue: Should anticipated redelivery damagesfor an overrun charter period be based on the market rate or on an estimate of lost profit?The difference in damages in this case would have been over USD 1 million.In September 2003 our membershad a late redelivery dispute,where they quantified the anticipatedredelivery damages basedon the market rate for the overrunperiod. The estimatedamount owed: USD158,301.The owners, however, calculatedthe damages based on the loss ofprofit on earnings that they wouldhave made for the full duration oftheir follow on fixture at USD8,000per day for 192 days. Their estimatedamount owed: USD1,364,584.At the very least, clarity and pre -dictability was needed in the area.HOUSE OF LORDS JUDGMENTOur members finally succeededin their landmark decision in theHouse of Lords – in what hasproved to be one of the mostfascinating cases in recent years.Skuld supported its member’sunderstanding that this was asignificant dispute that neededto be clarified at the highest level.The House of Lords in a unanimousdecision in July this year upheldthe charterers’ Appeal. It affirmedthat it would be unfair for charterersto assume responsibilityfor any and all losses suffered bythe owners in their subsequentfixtures.NO RESPONSIBILITY WITHOUTCONTROLLord Hope agreed with the minorityarbitrator who had pointed outthat a party cannot be expectedto assume responsibility forsomething he cannot controland which he cannot quantify becausehe knows nothing about it.Lord Hoffman stated: “The purposeof the provision for timelyredelivery in the charter party isto enable the ship to be at the fulldisposal of the owners from theredelivery date. If the charterer’sorders will defeat this right theowner may reject them. If theorders are accepted and the lastvoyage overruns, the owner isentitled to be paid for the overrunat the market rate. All this will beknown to both parties.”LISTENING TO OUR MEMBER’SCONCERNSThroughout the judgments in theHigh Court and Court of Appeal anumber of questions were raisedby the members.If we redeliver just one day lateand the owners miss the sale ofthe ship, is that foreseeable?If the owners miss a drydock, isthat foreseeable? If the owners“A PARTYCANNOT BEEXPECTEDTO ASSUMERESPONSI-BILITY FORSOMETHINGHE CANNOTCONTROL”miss a ten-year time charter, isthat foreseeable? How late do youhave to be? Is one hour enough?How can we do a risk assessmenton our exposure? We cannot beexpected to know what the ownerswill do with the next fixture.Prior to the Achilleas, therecog nised measure of damagesfor late redelivery disputes wasthe market rate for the overrunperiod. There was a certainstability in dealing with thesedisputes. The House of Lords hasfinally returned that stability.READ MOREwww.skuld.com(Publications: BEACON no. 1–2007,issue 189)The “Achilleas” (2008) 2 Lloyd’sRep. 27514 BEACON / DECEMBER 2008

LEGALISSUES /Our members finally succeeded in theirlandmark decision in the House of Lords– in what has proved to be one of themost fascinating cases in recent years.PHOTO: DARREN ROBB/STONE

LEGALISSUESBy Jonathan HareSenior Vice President CounselMaritime Law & International Group, Skuldjonathan.hare@skuld.comA LOOK AT THE IMO CONVENTIONSCOMPULSORYINSURANCEThe need for Certificates as a consequence of the entry into force ofthe Bunkers Convention has created an additional workload for P&IClubs and members. But what are the Certificates for and what arethe implications for club exposure?INCREASED EXPOSUREMany members will be aware ofthe Bunkers Convention for onereason only, namely because theyneed to add the Bunkers ConventionCertificate to the long list ofdocuments which their ships mustcarry on board. However, lookingbeyond the paperwork, the entryinto force of the Convention marksa fundamental shift in the way inwhich P&I clubs operate.The purpose of the Conventionis to protect claimants who sufferpollution damage caused bybunker spills. The Certificateconfirms that the P&I Club namedin it accepts that claimants cansue the club direct and that theclub will be responsible for theshipowners’ liability for pollutiondamage.The club cannot refuse to payon the ground that the owner isin breach of his terms of coverbecause, for example, premiumsare not paid or the vessel is out ofclass. The club can only rely onone rarely used policy defence,that of wilful misconduct.MORE THAN 30,000 CERTIFICATESThis is nothing new in the sensethat this legal regime has appliedto oil tankers since 1975. However,the Bunkers Convention is still asignificant development. It is thefirst time that the industry as awhole outside of the tanker sectorhas been subject to the compulsoryinsurance regime of an IMOConvention.Although tankers are of coursea key part of any Club’s portfolio,they make up a relatively smallproportion of the world fleet. Incontrast, the number of shipswhich will require Bunkers Certificatesin the run up to 20 Februaryeach year is well in excess of30,000.MORE TO COMEThere is also more to come.There are three more IMO Conventionsin the pipeline whichhave the same insurance andcertification requirements (seeinformation on right). While theAthens Convention will only applyto passenger ships, it remains ofinterest to the entire industry inview of the potential reinsuranceimplications in the event of a majorincident. The remaining two will,like the Bunkers Convention,apply to a broad cross-sectionof ships.WHAT ARE CLUBS FOR?The system imposed by governmentsthrough the IMO meansthat claimants’ prospects ofrecovery are unaffected by theshipowners’ conduct or solvency.Clubs are in effect becomingguarantors. The clubs’ liabilitytowards the claimant dependsnot on the club Rules but on theprovisions in the Convention.This is far removed from thecomfortable days of the pay tobe paid rule when club existedto reimburse members and remainedlargely invisible to theoutside world. Clubs continueto protect and indemnify theirmembers but they are now alsorequired to fulfil a much broadersocial function and accept directresponsibility towards membersof the public who are affected bymarine pollution.IMO CONVENTIONS IN FORCECIVIL LIABILITY CONVENTION:Oil pollution from tankersBUNKERS CONVENTION:Pollution caused by bunkersIMO CONVENTIONS NOT YET IN FORCEHAZARDOUS & NOXIOUSSUBSTANCES (HNS):Damage caused by dangerous cargoesWRECK:Wreck removal costsATHENS CONVENTION:Passenger injury & deathREAD MOREwww.skuld.com“THECONVENTIONMARKS AFUNDAMENTALSHIFT IN THEWAY IN WHICHP&I CLUBSOPERATE”16 BEACON / DECEMBER 2008

By Jonathan HareSenior Vice President CounselMaritime Law & International Group, Skuldjonathan.hare@skuld.comLEGALISSUES/BUNKERS CONVENTIONMEETING THENOVEMBERDEADLINEThe industry has to live with the BunkersConvention and find solutions to the challengewhich it brings. We have kept you up to datewith our new web-based Bunkers Bulletin.To say the run up to the entry into force of the Bunkers Convention hasbeen hectic would be an understatement. The Certification requirementsin the Convention meant that a huge volume of issues needed to besorted out. Some of these have been obvious to members while othershave been dealt with internally within the International Group or byclubs individually.Problems have ranged from the purely practical to complex questionsof international law to tricky insurance conundrums. There have alsobeen serious logistical challenges for clubs, members and States.BLUE CARDSOn the practical side, one test was been the number of “blue cards”which our underwriters have had to issue. With good advance planning,our data systems functioned well and we were able to start issuingblue cards in August. We found that we were able to issue documentswithin a day or so of receiving the necessary information from membersor their brokers.The more serious challenges began once members, armed withtheir blue card, tried to obtain their certificate. These Certificates couldonly be issued by the authorities in one of the 26 states which wereparty to the Convention. This created an immediate problem for themajority of members whose vessels did not fly the flag of a state party.Eventually, after some anxious weeks, a few states agreed to issuecertificates to vessels not flying their flag. More states graduallyfollowed and the panic was off.DIFFICULT QUESTIONSEven with these administrative problems under control, difficultquestions still cropped up. States were in the process of setting uptheir own procedures, but it was essential for clubs that states adopteda common approach, as it would be impossible for clubs to followwidely differing practices for each individual state.There were also legal questions such as whether tankers neededBunkers certificates (the answer was yes). There were insurance mattersto be sorted out. The liabilities placed on the insurers under theConvention are in some respectswider than standard P&I cover,for example in relation to warrisks, so cover needed to be adjustedto bridge as much as possiblethe gap between standardP&I cover and exposure underCertificates.THE FUTUREThis reflects the far reachingnature of the compulsory insuranceregime in the IMO Conventions.Many must be wonderingwhether all this effort is worththe benefit which it brings toclaimants and whether much thesame protection could have beenprovided by a simpler system.But the reality is that theindustry has to live with theConventions. The clubs have– as usual – found solutions,even though the process hasbeen painful at times, and membershave learned to cope withthe paperwork.The signs are that the hecticactivity in recent months hasavoided a crisis on the 21 Novemberdeadline. The next challengeis to make sure that membersmanage to get new Certificatesfor the 2009 policy year on boardtheir ships by next 20 February.“THIS WASA SUBJECTPERFECTLYSUITED TOMODERNMETHODSOF COMMUNI-CATION”SKULD’S WEB-BASED BUNKERS BULLETINWith developments occurring on analmost daily basis, we realised earlyon that this was a subject perfectlysuited to modern methods of communication.We set up a central sourceof information on www.skuld.com inthe form of the Bunkers Bulletin whichwas constantly updated. We havereceived positive feedback to thisinitiative and definitely intend to furtherdevelop our use of web based communication.See www.skuld.comBEACON / DECEMBER 2008 17

PERSONNELNEWSNEW EMPLOYEES & PROMOTIONS/CHANGES1351602467 89/ TOTAL NUMBEROF EMPLOYEESIN SKULD:SKULDHAMBURG1 / Simone VitzthumCLAIMS EXECUTIVESimone Vitzthum (32) joined Skuldin June as Claims Executive inour Hamburg office. She is alawyer from Germany. Simonehas a Master of InternationalMaritime Law degree from theIMO International Maritime LawInstitute (IMLI) in Malta, andadditional experience from salesand purchasing in shipping.SKULDHONG KONG2 / Ho Keng HoongLAWYERHo Keng Hoong (34), introducedin the last issue of Beacon, hastransferred from Skuld Singaporeto the Skuld Hong Kong team.3 / Christian OttASSISTANT VICE PRESIDENTWITH SKULD HONG KONGChristian Ott (32) has acceptedthe position of Assistant VicePresident with Skuld Hong Kongas of October, when he rejoinedthe company following a yearworking for Clyde & Co HongKong.SKULDOSLO4 / Stefan GattbergTRAINEEStefan Gattberg (27), joinedSkuld in August as traineethrough the Norwegian Shipowners’Association’s MaritimeTrainee programme. Stefan isa lawyer who will be involvedin a wide range of work areas,mainly in underwriting and claims.5 / Marita MoCREDIT CONTROLLERMarita Mo (47), started work asCredit Controller in the CreditControl Department in August.Marita comes from an accountingposition in DSV Roads AS andhas extensive professionalexperience.6 / Ingeborg S. BergeVICE PRESIDENT MARKETING& COMMUNICATIONIngeborg S. Berge (50), hasbeen appointed Vice PresidentMarketing & Communication.She joined Skuld in 1997 andbecame Manager Marketing& Communication in 2002.Ingeborg has Master studiesfrom BI Norwegian School ofManagement and a Bachelor ofArts from the University of Oslo.7 / Christofer Kobro8 / Marcus LindforsCLIENT SERVICING AND MARKETINGEXECUTIVESChristofer Kobro (33) and MarcusLindfors (32) have been transferredto the Offshore Syndicateas Client Servicing and MarketingExecutives. Christofer has beena claims executive since 2005.He has two year’s officer trainingin the Navy and seafaring experience,and received a lawdegree from the University ofOslo, including maritime lawstudies from the University ofSouthampton. Marcus has alsobeen a claims executive since2004. He has a law degree fromLund University, maritime lawfrom the University of Oslo andan LLM Master of Law from theUniversity of Southampton.SKULDSINGAPORE9 / Alvin LooiLAWYERAlvin Looi (33), joined ourSingapore office as an in-houselawyer in September to handleboth P&I and FDD claims. Heserved as a shipping and litigationpartner at Rajah & Tann, LLP,which has the largest maritimelaw practice in Singapore. Alvinhas a law degree from theNational University of Singapore.18 BEACON / DECEMBER 2008

NEWSSOME CURRENT CASES FROM OUR SYNDICATES,NEWS FROM OUR CORRESPONDENTS ANDOTHER CONTACTS/ EARLY REDELIVERIES UNDERCHARTER PARTIESSkuld assisted and advisedMembers on how to protectthemselves and secure claimsarising from sudden large scaleearly redeliveries./ WATER FROZEN REEFER CARGODefrost water was spilled intothe hold, causing frozen krill tobe water frozen and partly demolishedbefore arrival at Vladivostok.Local surveyor appointed to inspectthe holds. Preparing forthe handling of resulting claims./ SHORT DELIVERY IN PAKISTANUnder Pakistani law, agents aredirectly liable to cargo receiversfor any short delivery. A vesselwas detained by local ship agentsdemanding security. To get thevessel released before an arrest,Skuld Singapore provided securityand started preparations to defendthe claims in Pakistani courts./ STOWAWAYS REPATRIATEDThree stowaways were picked upat Matadi, Democratic Republicof Congo. Skuld co-ordinatedthe prompt disembarkation andrepatriation in Senegal, resultingin minimal delay to the vessel anda controlled cost for the incident.FACTSThe five dominant vessel categoriesin Skuld today in percentages basedon the number of vessels entered:33%GENERAL CARGO20%TANK19%BULK15%CONTAINER CARRIER13%CHEMICAL TANKERSOURCE: SKULD UNDERWRITING/ TRANSFER OF SEAMAN FORSURGERYA Russian crew member on boarda German vessel had an examinationdone at a Puerto Ricanhospital and a serious diagnosisstated. Skuld Moscow was involvedin the transfer of the seamanback to Russia for surgery./ GERMAN CREW MEMBERHOSPITALISED IN NEW YORKSkuld Oslo cooperated withSkuld North America, followedup closely to support the crewmember and shipowner alongwith taking measures to monitorand contain medical costs./ COLLISION IN HORMUZ STRAITA member’s tanker vessel collidedwith a container ship resulting inminor personal injuries and bigdamages to the vessels. However,both vessels could still sail and nooil pollution occurred. Repair workwill be carried out, securitiesexchanged and the work dividingliability between the two vesselsis commencing.PIRACY/ GULF OF ADENAt present, 11 vessels and some300 crew members are held hostageby Somali pirates. Since thebeginning of this year about 48vessels have been attacked bypirates and 18 hijacked duringtheir passage of the Gulf of Aden.See more details in the Skuld Webonly Circular – Piracy Section.READ MORE www.skuld.comHOUSE OF LORDS/ ACHILLEAS DECISIONThis summer’s decision by theHouse of Lords in the Achilleascase followed an original arbitration(2005) and an appeal (2007)– during which Skuld stood by itsmember. The unanimous decisionupheld the Charterers Appeal.READ MORE Beacon, page 14SHIPPING ANDTHE ENVIRONMENTThe second edition of Shipping and the Environment: Law andPractice will be published early next year as part of the prestigiousLloyd’s Shipping Law Library. The book combines the legalexpertise and practical experience of two leading specialists– Charles Anderson, head of Skuld’s New York office, and Colinde la Rue, partner in the law firm of Ince & Co. in London.LIABILITYThe second edition examines liability for pollution from ships, both underinternational conventions and the US Oil Pollution Act of 1990, as wellas pollution prevention and response. Special attention is paid to problemsmost commonly encountered in practice, and to the many waysin which these can affect various parties engaged in maritime commerce.A series of chapters deal with the position of salvors, charterersand cargo owners, vessel managers and operators, and ship financiers.Insurance aspects are discussed which affect P&I Clubs and hullunderwriters.SUBSTANTIALLY REVISEDIt covers many developments since the first was published ten yearsago. Several chapters have been substantially revised, and others havebeen added to deal specifically with pollution from offshore craft, ownersof colliding ships, pilots and maritime authorities, limitation of liabilityfor pollution, removal of wrecks and dumping at sea, as well as shipmentof waste and dismantling of vessels. Enlarged chapters on regulatoryaspects now include ballast water management and air pollutionregulations, together with a more detailed review of law enforcementand criminal liability.READ MOREwww.skuld.comPHOTO: PANORAMIC IMAGESBEACON / DECEMBER 2008 19

SKULDMAGAZINENEXT ISSUEOUT MARCH 2009FINANCIALCRISISThe financial crisis is still unravelling.Initial actions are being initiated by responsiblestates. As a consequence, the financial sectorscould be trimmed down with a greater focus beingplaced on business regulation as the world movesforward. In our March issue we will be examiningthe effects on shipping and the P&I industry.ABOUT SKULDAs the New Generation P&I Club,SKULD provides liability insuranceto New Generation shipowners andclients in the shipping industry.The head office for our globaloperations is located in Oslo,with additional offices in Bergen,Copenhagen, Hamburg, Hong Kong,Moscow, New York, Piraeus andSingapore.24 HOUREMERGENCYNUMBER+47 952 92 200Call this number if you havean emergency incidentwhere Skuld can assist.BEACON BACK ISSUESFor back issues of Beacon, please go to the publicationssection of our website. You can print an entireissue or use the table of contents to select individualarticles. To find a specific topic, use the search field.ORDER BEACONwww.skuld.com(Publications: Beacon)RUSELØKKVEIEN 26NO-0251 OSLOP.O. BOX 1376 VIKANO-0114 OSLONORWAYTEL +47 22 00 22 00FAX +47 22 42 42 22SKULD.COM