TSC Triton no 1-2013 - The Swedish Club

The Swedish ClubNo. 1 - 2013 AprilBe awareof RETLAclauses inbills of ladingPage 7Sign up forthe MarinerAttitudeSurveyPage 13ARMEDGUARDSprotect German-flagged vesselsPage 16 -17Forum shopping in collision claims – know your limitsPage 10-13

THE SWEDISH CLUB TRITON 1-2013Content | No. 1 - 2013 April2Leader | Underlying drivers of casualty| cost escalation 3risk & operations | The ”off records” renewal! 4-5loss prevention | The Swedish Club's operations review| – SCORE 6P&I | Be aware of RETLA clauses in bills of lading 7FD&D | Re-defining the scope of an owner's| obligation to repair – The ”Kyla” 8-9Limitation | Forum shopping in collision claims – know| your limits 10-13The Swedish Club | The Academy invites companies to sign up forAcademy | the Mariner Attitude Survey (MAS) 13| New team member 13| New MRM licensees 13| Out and about with MRM 14-15PIRACY | German-flagged vessels guarded by private| security companies 16-17| Somali piracy – past, present and future 18-20LEGAL | Update 21FD&D | Irrecoverable costs in London arbitration:| the solutions 22-23Club information | Notice Board 24-25| Hans Filipsson & Tord Nilsson| Changing of the guard in Piraeus 26-27| Staff presentation:| Martyn Hughes – new FD&D manager 28| News from Gothenburg 29| News from Piraeus 30| News from Asia 31| News from Norway 32| Out and about 33| Staff news 34| Out and about 35| In memoriam Anders Holmberg 35| Club quiz 35| Club calendar 36The Swedish Club is a mutual marine insurancecompany, 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 anyadditional insurance required by shipowners.The Club also writes Hull & Machinery, War risks and Lossof Hire for Mobile offshore units and FPSO's.Head Office SwedenVisiting address Gullbergs Strandgata 6411 04 GothenburgPostal address P.O. Box 171se-401 22 Gothenburg, SwedenTel +46 31 638 400Fax +46 31 156 711E-mail swedish.club@swedishclub.comEmergency tel +46 31 151 328Greece 5 th Floor, 87 Akti MiaouliGR-185 38 Piraeus, GreeceTel +30 211 120 8400Fax +30 210 452 5957E-mail mail.piraeus@swedishclub.comEmergency tel +30 6944 530 856Hong Kong Suite 6306, Central Plaza18 Harbour Road, Wanchai, Hong KongTel +852 2598 6238Fax +852 2845 9203E-mail mail.hongkong@swedishclub.comEmergency tel +852 2598 6464Japan 2-14, 3 Chome, Oshimakawasaki-Ku, Kawasakikanagawa 210-0834, JapanTel +81 44 222 0082 (24-hour tel)Fax +81 44 222 0145E-mail mail.tokyo@swedishclub.comEmergency tel +81 44 222 0082Norway House of Business, 6th floorPostal address Tjuvholmen Allé 17N-0252, Oslo, NorwayTel +47 9828 1822/9828 0514Mobile +47 9058 6725/9486 1205E-mail mail.oslo@swedishclub.comEmergency tel +46 31 151 328The Swedish Club Triton is published three times a yearand distributed free of charge. The Swedish Club Tritonis an editorially independent newsletter and opinionsexpressed by external contributors are not necessarilythose of The Swedish Club. Articles herein are notintended to provide legal advice and the Club does notaccept responsibility for errors or omissions or theirconsequences. For further information regarding anyissue raised herein, please contact our head office inGothenburg.Editorial Advisory Board Maria Berndtsson, SusanneBlomstrand, Hans Filipsson, Birgitta Hed, Johan Kahlmeter,Anders Leissner, Lars A. Malm, Lars Rhodin, TonySchröder, Carola Weidenholm.Production co-ordinator Susanne Blomstrand.PR-consultant TRS Public Relations Ltd., London.Layout Eliasson Information, Gothenburg.Cover photo iStockphoto.Print PR Offset. 13055200B© The Swedish ClubArticles or extracts may be quoted provided thatThe Swedish Club is credited as the source.www.swedishclub.com

THE SWEDISH CLUB TRITON 1-2013Leader | MD Lars RhodinUnderlying driversof casualty cost escalationDear members and associatesThere is a lot of talk in the marine insurance industryabout major casualties and how underwriters respond tosuch events. Small errors or omissions result in significantincidents for shipowners and their insurance partners. Theconsequences of casualties are taking on new proportions.The public view is zero tolerance from an environmentalstandpoint and a “fix it” approach, whatever the cost mayentail. The “invisible” shipping industry has come into thelimelight again.Underwriters are concerned about cost escalation inassessing severity and exposure. Traditionally we generallyfollow inflation. Today’s claims will be three to four percent more expensive next year, everything else beingequal. This is a known fact. But, there are so many moreelements driving the escalation, which takes severity tonew heights. The equation is more challenging to makenowadays.The International Group has looked into the main costdrivers in casualties. It does not take rocket science todetermine that the geographical location of incidentsand the resources available to respond are absolutelydecisive. One should however not forget that governmentintervention plays a vital role. It is often not how yourespond and how effective the actions taken are, it is amatter of how you are seen to respond. There are plenty ofexamples supporting this.We will spend time on this subject at this year’s AGM,during the “members’ day” part of the event. It is beneficialfor all concerned to get a “feel” for the drivers to understandthe magnitude of the exposure we are up against.Studying root causes of casualties can be a complextask. At first sight, it is easy to ascertain that things havegone wrong. However, the more analysis carried outabout incidents, the more complicated matters get. Mostshipboard training programmes focus on behaviour.Behaviour is determined by attitudes though. If marinersLars RhodinManaging Directordo not have the required attitude, skills are less relevant.We have launched the “Mariner Attitude Survey” at TheSwedish Club Academy to supplement the MaritimeResource Management training programme. It is wellworth looking at.2013 will be a challenging year for both shipowners andunderwriters. Premium increases are unwelcome news foranybody, in particular during tough trading conditions.The Club was well served in 2012 by excellent investmentreturns, however, we cannot ignore the underlying driversof claim severity that we need to factor in. Sustainableunderwriting of exposure is the only way forward.We have spent a lot of time and effort recentlystrengthening our organisation with competence atall our offices. Running a members’ club is knowledgemanagement and a constant endeavour – there is nofinishing line! Perception of “service” is to know one’sability and have confidence. As a member and stakeholderyou should have confidence in that we are staffed to meetall needs going forward. We are ready to act.PHoto: Jonas Ahlsén3

THE SWEDISH CLUB TRITON 1-2013Risk & Operations | RenewalThe ”off records” renewal!As always the P&I renewal was challenging this year.It was even more so because of the un-supportivefreight markets. To add further insult the effectof the recent years’ catastrophic claims filteredthrough the system in the form of significantincreases in the International Group’s Excess Reinsurancecost. This is a cost which all clubs pass onto their members. The features of this renewal wereall about the principle of mutuality and the impactof large claims on the mutual system.All Clubs were exposed to very difficult renewals this year.Compared with previous years, the big difference with thisrenewal was that even though some owners could rationallyappreciate the long-term benefits of mutuality, some of themfelt compelled to take action as they simply had no other wayof meeting their overall”...there is a lack of fundsto cover the cost of allrecent catastrophic claims.”financial goals.Large claims betweenUSD 9-70 million aretreated differently thanother claims from arecords point of view. They are different in the sense thatwe only take into account a maximum of USD 3 millionon members’ records. The additional “off records” exposure(USD 67 million excess USD 3 million) is supposed to becovered by “P&I Pool Claim Allowance” and “P&I Abatement”.The former is there to also cover the exposure of otherclubs’ larger claims.Off records exposureIn a perfect world the charges applied by all clubs should sufficeto cover the expected claims. The problem is that recentlythe reality has been far worse than even the most conservativeestimates in this respect. The unfortunate consequenceis that there is a lack of funds to cover the cost of all recentcatastrophic claims. They have “outperformed” expectations,particularly in relation to severity.This additional “off records” exposure is intellectually challengingto “sell” to those owners with a benign loss ratio. TheLars A. MalmDirector,Risk & Operationsmajority of the Club’s members have a loss ratio below 70%.Whilst this is considered in the renewals, the fact remainsthat “lucky guys” need to contribute towards the misfortunesof the “unlucky guys”. It’s an important job that needs tobe done when we explain to our members that as far as theClub’s large claims go the principle of mutuality works andthat everyone needs to contribute.To argue that owners also need to approach other clubs’larger claims with the same open mind is equally importantbut due to a perceived greater remoteness of those claims,slightly more difficult.The principle of mutualityThe fact of the matter, which most owners will appreciateand accept, is that the International Group’s pooling mechanismis a most cost-effective way of sharing risk and over timethe cost will be even between clubs. It’s also a fact today thatmany members place their business in different clubs andto that end they are affected on a direct basis by more thanone club’s individual performance. The way to look at a largeclaims exposure for members has less to do with the individualclub entry and more to do with the overall level of largeclaims in the International Group system. It is clear fromhistoric data that pool claims in their nature are random andvolatile. The short-term effect on a single club can therefore besignificant. The long-term effect will be less and as mentionedpreviously will level out over time.The Swedish Club’s P&I renewalTurning to the Club’s own renewal this year you will appreciate,which is understandable, that most members wanted theClub to give due consideration for long standing loyalty and4

THE SWEDISH CLUB TRITON 1-2013Photo: iStockphotovery good performance. The Club gave due considerationbut as you will appreciate we need to strike a balance betweengiving consideration and managing pricing againstexposure.It is also safe to say that when a member is a bit “unlucky”they do not wish to pay a disproportionally highincrease. This would, however, be the unfortunate logicalconsequence of clubs giving too much consideration forbenign records.Again, this renewal and renewals to come will, to a muchgreater extent than before, be about the “off records” exposures.The International Group is the only viable alternativeand mutuality works. It is understandable that membersmay be less interested to some extent in listening toour arguments in this respect.This is understandable because shipowners’ business isnot insurance. Shipowners’ business is to keep their freightearning-machines doing good business. This is difficult intoday’s markets. If the income is not sufficient one has tolook at cost savings in order to meet budget targets.General reflection on the state of the Marineinsurance marketThe market as a whole had expected some reaction fromre-insurers (due to some large claims in the market), whichin turn might have had some impact on the direct side.No such effect has yet materialised. It has been said manytimes before, but we can again simply acknowledge the factthat there is still a lot of capacity willing to invest in Marineinsurance.Supply vessel at drilling rig.“We expect a lot moreto come from ourestablishment in Norway”The Swedish Club’s Marine Renewal 1/1 2013Our renewal at 1/1 was rather uneventful and as mentionedabove we had perhaps expected some impact fromthe large claims and that some capacity decided to withdraw.No real effect has materialised yet. We have to utiliseour strong position as a quality provider within this segmentto a greater extent than before, but we also need toadapt to the fact that in some cases we need to competewith pure capacity providers. As long as we can do thatprofitably, we will do so.Team Norway – more to comeWe expect a lot more to come from our establishment inNorway. Team Norway is slowly but surely building up afirmer long-term presence in Oslo. In due course the officewill be doing all classes of insurance from Oslo, but meanwhilethe Gothenburg office will support them. The Norwegianmarket has a lot of potential and to us it is still, to alarge extent, untapped. The core business of Team Norwayis Energy and associated with the Energy business is theOff-Shore Supply Vessel (OSV) segment of shipping. It is anatural step for us to make a proper assessment of whetherOSV is our next step in expansion for Team Norway.5

THE SWEDISH CLUB TRITON 1-2013Loss Prevention | SCOREThe Swedish Club’sOperationsReview – SCOREJoakim EnströmLoss Prevention OfficerInteractive root cause analysis (IRCA) has now been establishedfor loss prevention and is crucial in identifying root causes.Our hands-on loss prevention is effective at identifying problemsand recurring issues that we believe are not addressed or rectifiedcorrectly.To assist our members, we think it is important to take this astep further. We believe this can only be achieved by working even“SCORE will review the company’sprocesses and identify whether thereis an efficient safety culture in place.”closer with our members. This is why we are launching our newservice, called SCORE.The purpose of SCORE is to identify risk areas, where preventivemeasures need to be improved or implemented to minimise risks.Proactive safety culture can prevent most casualtiesWe strongly believe that a company with a dedicated organisationto improve safety can prevent most casualties. This can beaddressed with a proactive safety culture instead of a reactive one.Unfortunately, there is no easy solution for implementing an efficientsafety culture, as it is a slow and complicated process.SCORE will review the company’s processes and identify whetherthere is an efficient safety culture in place. This will be done incooperation with the company, as it is essential that the suggestedimprovements are tailored to the specific company.The importance of identifying risksIdentifying risks and implementing preventive measures will bebeneficial not only for us as an insurer but also mainly for the company,as a casualty is so much more costly than the insured value.Insurance will protect the member against financial disaster butit cannot protect against all other negative effects such as loss ofreputation, loss of business, negative publicity, injuries, loss of lifeand the resources that need to be allocated to handle the casualty.This is what we want to help prevent.Our goal is to assist the member/company in minimising the riskof a serious casualty and to reduce the claim frequency.Identified recurring issues:The crew does not follow company proceduresThe company has failed to implement procedurescorrectly Procedures were not sufficient in dealing withassociated risksThe Safety Management System (SMS) and otherprocedures overlooked important issues People do not recognise risks or believe it is acceptableto take risksThere is a lack of training both onboard and ashoreSCORE will include: Reviewing the company’s claim statistics Benchmarking the company against similarcompanies Visiting the office and vessels Verifying the SMS has been implemented correctlyonboard and in the office Has the company’s culture and goals beenimplemented within the organisation? Reviewing the company’s loss prevention programme Has the company implemented measures that addressthe identified problems?CertificationAfter a company has successfully completed SCORE, it will receivea certificate that is valid for five years. This will include an intermediatereview and if necessary an annual review. To be able to maintaina professional service there will be a nominal fee.For more information, please contact Joakim Enström, Loss PreventionOfficer, joakim.enstrom@swedishclub.com6

THE SWEDISH CLUB TRITON 1-2013P&I | RETLA clausesBe aware ofRETLA clausesin bills of ladingAnders LeissnerDirector,Corporate LegalCan an owner rely on a clause in a bill of lading that statesthat even if the bill provides that the goods were received in apparentgood order and condition, the goods were necessarily notreceived in apparent good order and condition? The answer to thisquestion is “no” according to a recent English court decision (Breffka& Hehnke GmbH & Co KG and others v. Navire Shipping Co.Ltd and others (Saga Explorer) [2012] EWHC 3124 (Comm).The case concerned a shipment of steel pipes loaded at Ulsan forcarriage to Los Angeles, San Francisco and Vancouver. The loadport survey contained a number of comments relating to rust stainingand surface oxidisation of the steel pipes, and recommendedclausing the bills’ and mate’s receipts. However, neither the mate’sreceipts nor the bills of lading were claused. Instead, upon the shipper’srequest, the owners agreed to issue clean bills of lading withthe usual statement that the goods were shipped “in apparent goodorder and condition” and in addition the bills of lading contained aso called RETLA clause (named after the US case, Tokio Marine &Fire Insurance v. Retla Shipping), reading as follows:“If the goods as described by the Merchant are iron, steel [or]metal..., the phrase ‘apparent good order and condition’ set out inthe preceding paragraph does not mean the Goods were received…free of visible rust or moisture... If the Merchant so requests, a substituteBill of Lading will be issued omitting this definition andsetting forth any notations which may appear on the mate’s or tallyclerk’s receipt.”Clause made bill falseNotably, RETLA clauses sometimes appear on the face of a billof lading where the carriage involves iron, steel, metal productsor timber. The aim of the clause is to qualify the term “apparentgood order and condition” by clarifying that, when the cargo wasreceived for shipment, it was not necessarily free of visible rust ormoisture, staining, chaffing etc. As a result, the carrier would beable to issue clean bills of lading even though the mate’s receiptshave been claused.When the cargo of the Saga Explorer was discharged the pipeswere found to be heavily rusted and cargo interests brought in aclaim under the bills of lading. There was no suggestion that therehad been significant deterioration in the condition of the cargoduring the voyage, so the main issue was the nature of the representationas to the condition of the cargo made by the owners onshipment. The owners sought to rely on the RETLA clause andargued that the clause should be interpreted as meaning that allsurface rust, of whatever degree and extent, was excluded fromtheir representation as to the apparent good order and condition ofthe cargo. However, the English court held that the RETLA clausecould only be a qualification regarding superficial rust but not theoverall quality. Hence, since the loaded cargo at the loadport was inworse condition than merely having superficial rust, the representation“apparent good order and condition” in the bills was held to befundamentally false and deceitful. The claim by cargo interests wasallowed.Unenforceable Letter of IndemnityThe decision highlights the master’s duty to record the cargo’sapparent order and condition accurately, based on his honest andreasonable opinion. There is no real substitute for clausing the billswhere the condition of the cargo at the time of shipment requiresit. Failure to properly describe the condition of the cargo leaves theowners open to allegations of being party to a misrepresentation.There was yet another adverse implication for owners followingthe court’s decision. The owners had namely agreed not to clausethe bills of lading in return of an LOI (Letter of Indemnity) fromthe shipper. At least under English law an LOI will provide norecourse for owners where they knew, through the master, of theactual condition of the cargo at the time the clean bills were issuedand the LOI given. In those circumstances, their actions will bedeemed wrongful and the LOI will consequently be unenforceable.Photo: Bananastock7

THE SWEDISH CLUB TRITON 1-2013FD&D | CharterpartiesRe-defining the scope of anobligation to repair – The “KWhere an H&M (Hull & Machinery)insured value is stipulated in a time charterparty,the English High Court has recentlyheld that the charterparty cannot befrustrated by damage to the chartered vesselwhich costs less than the H&M insuredvalue to repair. As a result of the case BungeS.A. v Kyla Shipping Company Limited[2012] EWHC 3522 (Comm) (The“Kyla”), shipowners may be obliged to carryout repairs which cost more than the vesselwould be worth once repaired.The damage to The “KYLA”On 4 May 2009, the 27 year old MV“Kyla” was struck by another vessel whileberthed at Santos, Brazil. The “Kyla” wasnot at fault for the collision. At the time ofthe collision, the vessel was just over threemonths into a 12-15 month time charterto Bunge. The vessel’s owners obtainedsurveyors’ reports following the collisionwhich indicated that the cost of repairingthe vessel would be in excess of both hersound repaired value and her insured value.On 3 July 2009, owners notified Bungethat the charterparty had been frustratedas a result of the collision. Owners alsodeclared the vessel a constructive total lossand abandoned the vessel to hull and machineryunderwriters. The vessel’s hull andmachinery insured value was USD 16 million.Bunge disputed that the charterpartywas frustrated and claimed against ownersfor the losses they had suffered as a resultof owners declaring the charterparty to befrustrated.The arbitration – charterparty frustratedby cost of repairThe claim went to arbitration in Londonin February 2011. The arbitrator held thatthe damage to the vessel caused by the collisionwould have taken approximately 180days to repair, and that this was insufficientto frustrate the charterparty. In relationto cost of repair, the arbitrator held repairswould have cost USD 9 million. The partiesagreed for the purposes of the arbitrationthat the vessel’s sound market value at thedate of the collision was USD 5.75 million.The arbitrator held that, in circumstancessuch as these, where the cost of repair farexceeded the value of the vessel, no prudentowner would repair the vessel. Performanceof the charterparty after the casualty hadbecome radically different to that whichthe owners had agreed, and the charterpartywas frustrated as a result of the collision.Charterers appealed the arbitrator’s decisionto the English High Court.The extent of owners’ obligation torepairThe charterparty between owners andBunge was on an amended NYPE (NewYork Produce Exchange) 1946 form, whichincluded the usual obligation on owners atClause 1 to “keep the vessel in a thoroughlyefficient state”. The charterparty also includedan express term at Clause 41 whichprovided:“41.1 Owners warrant that throughout thecurrency of this Charter Party the vessel shallbe fully covered by leading insurance companies/InternationalP&I Clubs acceptable tothe Charterers against Hull and Machinery,War and Protection and Indemnity Risk.[41.2]…41.3 Insurance full style and valueHull and machinery: USD16,000,000 London,Norway and USA Markets”Charterers argued before the HighCourt that Clause 41 formed part of ascheme in the charterparty requiring ownersto repair any damage to the vessel duringthe currency of the charterparty whichit would cost less than or up to the vessel’sinsured value of USD 16 million to repair.In this case, charterers argued, the charterpartyobliged owners to carry out the USD9 million repairs to the vessel and the arbitratorhad been wrong to say that the charterpartyhad been frustrated.Simon ChumasPartner,Holman Fenwick Willan LLP, LondonJenny SalmonAssociate,Holman Fenwick Willan LLP, LondonSimon Chumas and Jenny Salmon advisein relation to wet and dry shippingand insurance disputes, acting principallyfor shipowners and their insurers.They specialise in the investigation andhandling of all claims (wet and dry)arising out of marine casualties. In addition,they deal with the various contractualdisputes which regularly arisefrom casualties. They also handle bothhull and P&I marine insurance coveragedisputes.Holman Fenwick Willan is an internationallaw firm and one of the world’sleading specialists in shipping, maritimetransportation, insurance, reinsuranceand trade. Holman FenwickWillan’s shipping lawyers provide acomprehensive service to the globalmaritime business community, withover 200 lawyers worldwide specialisingin maritime law.Owners asserted that Clause 41 was notintended as an allocation of risk whichwould displace the principles of frustration.Rather, the insured value was stated in thecharterparty for charterers’ informationto allow them to calculate the likely costof any additional insurance premiums forwhich they were responsible.8

THE SWEDISH CLUB TRITON 1-2013owner’sYLA”The High Court – allocation of risk ofdamage to ownersThe High Court approached the questionby reviewing the terms of the contract todetermine whether Clause 1 NYPE 1946and Clause 41 of the “Kyla” charterpartyamounted to an allocation of the risk ofdamage up to the vessel’s insured valueto owners. In its judgment issued in December2012, the Court held that it did.The Court held that the presence of thewarranty at Clause 41 made it impossiblefor owners to say that what had occurred(namely a casualty giving rise to repair costsUSD 7 million less than the vessel’s insuredvalue) amounted to something radicallydifferent to the performance of the contractwhich had been contemplated whenthe contract had been concluded. The usualprinciple that insurance is irrelevant to thecharterparty contract had been displacedby Clause 41.In reaching this decision, the Courtsaid that the numerous practical difficultieswhich such an allocation of risk wouldcause to owners (such as having to fund therepairs themselves if insurers were slow topay or if the vessel’s mortgagee bank wereloss payee) were to be disregarded. It isnoteworthy that, in the case of the “Kyla”,owners did not receive payment from hulland machinery underwriters until over ayear after the incident. Owners should bearin mind that other concerns, such as theage of the vessel, should also now be consideredirrelevant.What does the decision mean forshipowners?It is likely to come as a surprise to shipownersthat reference to a chartered vessel’shull and machinery insured value in thecharterparty could affect their obligationsto charterers in case of serious damage tothe vessel. Clauses containing a continuingwarranty to insure at a specified insuredvalue (like Clause 41 of the “Kyla” charterparty)are common. The Court’s decisionPhotoS: By courtesy of Kyla Shipping Co Ltdin this case makes clear that, where a charterpartycontains such a clause, an ownercannot declare a charterparty frustratedwhere the cost of repair will be less thanthe vessel’s insured value. Instead, the shipownermust repair the vessel and continueto perform the balance of the charterparty,even if the repairs cost more than the repairedvessel will be worth such that noprudent owner would otherwise undertakethe repairs.The decision creates uncertainty, as thecircumstances in which the vessel’s insuredvalue will be taken as the benchmark forfrustration are not clear. It is possible thatthe “Kyla” principle will apply in everycase where there is a continuing warrantyto insure and charterers are aware that thevessel’s H&M insurance is likely to be onan insured value basis, even where the vessel’sinsured value is not stated in the charterparty.ConclusionShipowners should be cautious when theysee a continuing warranty to insure in aproposed time charterparty which specifiesthe vessel’s hull and machinery insuredvalue. In the event of a casualty, an ownermight find that as a result of the warranty,he has to carry out commercially uneconomicalrepairs to a vessel – even one nearingthe end of her trading life.Concerned shipowners should take legaladvice on any such proposed clause andconsider with their lawyers whether thewording of the clause can be amended toavoid such an outcome. In any given case,the question of whether a clause or clausesamount to an allocation of the risk of damageto the vessel to an owner will dependon the construction of the charterparty asa whole.The owners of the “Kyla” are seeking toappeal the decision. Simon Chumas andJenny Salmon acted for the owners in thiscase.9

THE SWEDISH CLUB TRITON 1-2013Limitation | Forum shoppingForum shopping in collisionAfter a major casualty, such as acollision, you in most cases lookto bring the matter to a jurisdictionmore favourable to you. Thisis often a quick affair where eachside scrambles for an advantage.The main reason being that thereare different limitation regimesaround the world capping theamount of the overall losses. Thenature of each loss which is subjectto limitation is also different fromcountry to country. In this article,to illustrate the dynamics of theseaspects, we present a somewhatsimplified “voyage plan” appliedto an imaginary scenario.ConventionShipLucky AHappy BTable 2.Lucky AUSD 5 million (repair costs,loss of hire and other consequentiallosses)USD 5 millionTable 1.Happy BUSD 15 million (for a totalloss of ship and other consequentiallosses)USD 50 million (costs forwreck removal)USD 65 million1957 1976 19962,333,450 SDR(about USD 3.5 M)1,133,390 SDR(about USD 1.7 M)5,718,500 SDR(about USD 8.6 M)2,922,500 SDR(about USD 4.4 M)Mats SegolsonSenior Claims Executive,Team PiraeusKnowyourlimits13,700,000 SDR(about USD 20.5 M)7,000,000 SDR(about USD 11.5 M)The case scenarioTwo ships, Lucky A and Happy B, collidewhile both in ballast. Both ships suffersubstantial damage and Happy B sinks as aresult of the collision, ultimately becomingsubject to a wreck removal order. Fortunately,all crew members are unharmed andthere is no apparent pollution.The claimsIt is important in collision claims to get anearly assessment of the nature and quantumof your claims. By the same token, andleaving aside liability for the moment, youshould make a similar assessment of theother ship’s claims.It should also be considered whetherthere could be any other potential claimants.In the above scenario, there was nocargo on either ship and no pollution. However,the authorities will normally requireHappy B to remove the wreck rather thanremoving it themselves. As a result, theclaim for the costs of the wreck removal willlikely be in the form of an indemnity claimfrom Happy B against Lucky A in proportionto the latter ship’s liability in the collision.There may also be an order to removeany remaining bunkers and other pollutantson board (which can translate into considerablecosts, perhaps under SCOPIC) but thiswill not be considered further in this article.Let us assume the above, very much simplified,claim figures. (table 1).Limitation of liabilityOnce there is a rough idea of the likelyclaim amounts you should be conscious ofwhether limitation of liability will comeinto play. There will probably be a first lookat this before any further detailed assessmenton the collision liability between theships is carried out.The concept of limitation is an importantaspect of maritime law. The limitationregimes are based on Conventions onLimitation of Liability for Maritime Claims(LLMC), which are mainly the 1957LLMC and the 1976 LLMC or the 199610

THE SWEDISH CLUB TRITON 1-2013Photo: TSCclaimsProtocol to LLMC 1976. The conventionscan be acceded to, and implemented intonational law, differently from state to state.IMO provides a general overview on itswebsite of the status of the conventions inindividual countries. There will also be anincrease of the limits under the 1996 Protocolbut this increase is not yet in force.The Conventions list what types ofclaims are capable of being subject to limitation(“limitable claims”). In principle,limitation applies to all limitable claimsarising in connection with one particularincident. Some claim items, however, typicallyclaims for pollution and salvage areusually not subject to this limitation. Limitationis calculated on the basis of a vessel’sgross tonnage (“GT”) but be wary of usingthe correct GT figure as it varies dependingwhether you apply the 1957 or the 1976Convention. The amount of limitation isexpressed in special drawing rights (“SDR”)where presently 1 SDR equals roughlyUSD 1.50.Limitation can be used as a defence tothe claim on another party (where thereare just the two parties involved) but it canalso be used in a “global” sense, i.e. to limitan owner’s liability to all claims that mightarise from multiple claimants in cases involving,for example, damage to anothership and her cargo. The size of the limitationfund is calculated in the same way butwith global limitation, of course, the fundis actually established in court and administeredby the applicable procedures of thatcourt.In the above scenario, there are no personalinjury claims and the calculationwould be for property claims only. In casethere had been personal injury claims thoseclaims would have been treated separatelyand calculated differently for the purposeof limitation. Assuming that Lucky Ahas a GT of 35,000 and Happy B a GT of17,000, the limitation amounts would, respectively,for each ship and for the threeabove limitation regimes, be as illustratedabove (table 2).Liability for the collisionWho is likely to be the receiving party andthe paying party of the two ships? It is importantto remember that in many casesthe collision liability between the shipswill often have a significant impact on whowill be on the paying and receiving end, inparticular when the claim amounts on eachside are more comparable.An assessment of the collision liability ismade based on the facts and circumstancesof the collision. A study of the vessel’s voyagedata recorder (“VDR”) and other contemporaneousevidence should give a relativelygood idea of this liability.Let us assume that liability is 60/40 infavour of Happy B. The liability apportionmentis applied to the claim amounts ofeach ship. In the above example Happy Bis liable for 40% of Lucky A’s loss of USD5 million, i.e. USD 2 million. Lucky A, onthe other hand, is liable for 60% of HappyB’s loss of USD 65 million, i.e. USD 39million. The two claims are then set-offleaving a balance of USD 37 million toHappy B. Of course that sum would becapped by any limitation Lucky A may relyon. This is how liability and limitation arenormally allocated and applied but it is advisableto be aware that under some legalregimes there may be a somewhat differentapproach, so do not always assume that theprocess will always be the same.It should also be considered whetherlimitation against either party can be brokenbut suffice here to say that in the vastmajority of cases you cannot break limitation.Therefore, it is clear that Lucky A willbe the paying party and the question is justhow much Lucky A has to pay given limitation.9continues on page 1211

THE SWEDISH CLUB TRITON 1-2013Limitation | Forum shopping9continuesfrom page 11The preferred limitation regimeLucky A will be on the paying end and will,therefore, attempt to limit its liability toHappy B to a smaller amount in a countryapplying the 1957 LLMC or the 1976LLMC. Lucky A will also attempt to find ajurisdiction that allows for limitation of thewreck removal claim and together with allother property claims.Happy B, on the other hand, will lookfor the exact reverse position. Happy B willconsider a limitation regime preferably in a1996 LLMC country, which would allow itto recover as much of its claim as possible.Happy B will preferably also look to combinethis with a jurisdiction where eitherlimitation does not apply to its indemnityclaim for the wreck removal costs, or wheresuch limitation is treated in a separate categorywith, in effect access, to an additionalfund for the same amount.Had cargo been on board and damagedthat may, suffice here to say, also have influencedthe choice of jurisdiction to anextent. The same may apply in case of anypersonal injuries. The race to establish jurisdictionis now on.Identify suitable jurisdictions –a checklistNow you have a good idea of what limitationyou are looking for, you should nextconsider accessing such limitation in an appropriatejurisdiction. A claim arising froma collision normally creates a maritimelien for which you can arrest a ship and,thereby, also create jurisdiction. You mayalso consider constituting a limitation fundaccordingly. Unless security has, or can beagreed on separately, a ship arrest will alsogive access to security for your claim.It is important to remember that thepreferred choice of jurisdiction depends onthe unique circumstances of each case, eachwith its own factual matrix.18 “way points” to consider1Where is your own ship currently berthedor anchored? If its position immediatelyafter the collision puts it in a positionwhere it can be arrested in an unfavourablejurisdiction then consideration needs tobe given whether she can be moved, even ashort distance, to remove that risk.2Where will the ships call next?3Will either ship call at an intermediate portfor repairs?4Will your ship call at a suitable jurisdictionwhere a third party (like cargo interests)may or may be induced to arrest your ship?5If you cannot, or prefer not to arrest at thenext port of call, what is the future scheduleor trading pattern of either ship?6Consider a sister ship arrest or associatedship arrest (e.g. in South Africa) if possible.7Consider filing a writ in rem against theopposing ship in a suitable jurisdiction beforeits arrival there. This may give you anadvantage on the basis of “first come, firstserved”.8Is there a “natural forum” for the collisionclaims? Did the collision occur in territorialwaters of any state and what nationalityare the parties are obvious questions?9What is the quality of the legal systemwhere you consider obtaining jurisdiction?You also need to consider foreseeability,costs and time in this respect.10If you are likely to be the paying party youcould seek to secure jurisdictions which areknown to be slow in progressing litigationfor obvious tactical reasons but, at the sametime, consider how they assess collision liability- not all countries apportion on a percentagebasis in increments of say 5%. Insome countries the division is much morecrude i.e. 50 / 50 or 100 / 0 which could,ultimately, end up being a poor option.11Are there any grounds for breaking limitationand if so where is this best tried? It isgenerally very difficult, if not virtually impossible,to break limitation but it may beslightly easier under the 1957 regime.12Consider attempting to establish jurisdictionby other means than a ship arrest, forexample where the owning company is registeredor where you already have disputewith say a cargo interest or a sub-charterer.13If the other side has already purported toestablish jurisdiction do you need to makean appearance in that jurisdiction to preserveyour rights and/or can you file anappearance under reservation to keep yourother options open?14Even if the other side has already obtainedjurisdiction, and constituted a limitationfund in a certain country, is this recognisedin other jurisdictions? Some countries(e.g. China) have not signed up to any ofthe limitation conventions but have onlyadopted their own version of the conventionlimits. As a result, other states may notbe bound to recognise a limitation fund inChina, as they otherwise would under theConventions (compare with Article 13 ofLLMC 1976).15If the other side has started an action alreadyin one country and you are contemplatingstarting proceedings elsewhere, willthe other country likely refuse jurisdictionin these circumstances as matter of internationalcomity (i.e. the desire to avoid conflictingdecisions of the courts of differentcountries)? Clearly, there is little point inspending time and costs pursuing an alternativeaction in such jurisdictions.16When considering another jurisdiction inpoints (14) and (15) above, assess the inherentrisks in parallel, or concurrent, proceedings.In addition to the challenges of forumnon-conveniens arguments, proceedings inone jurisdiction may be stayed in favour ofthe other jurisdiction. Findings in eitherjurisdiction may potentially, but not necessarily,also create estoppels in the otherjurisdiction.17Are the likely competing jurisdictions inEU countries? If so, consider obtaining alimitation decree or constituting a fund in12

THE SWEDISH CLUB TRITON 1-2013The Swedish Club Academy | MRMthe preferred EU country since betweenEU countries, and under EC law, theother EU member states are in principleobliged to recognise each other’s judgements(see the Seawheel Rhine, a DutchSupreme Court case dated 29 September2006).18As an alternative, should you amicablyagree law and jurisdiction and the termsof limitation with the other side? Amicablemeans to resolve a dispute is oftenpreferred and may save substantial sumsin costs. However, when negotiating lawand jurisdiction do keep in mind that, inmost common law countries, limitation isregarded as being part of the “procedural“law as opposed to the “substantive” law.Procedural law is considered to be subjectto the lex fori or the law of the Court. So,if you agreed for the case to be heard insay jurisdiction “A” but subject to the lawof country “B” then you would have potentiallyagreed to the limitation regimeof country A. That would be a problemfor you if you were expecting to be thereceiving party and country A applied theLLMC 1957 limits instead of countryB’s LLMC 1976 or 1996 Protocol limitswhich would be much higher.Concluding remarksDo not lose sight of the bigger picturewhen assessing limitation and suitablejurisdictions for your collision claim. Asuccessful outcome may depend on morethan limitation and jurisdiction. If theearly indications on claims and liabilitybring limitation into play then it is a drivingfactor and you need to consider youroptions early. However, very often it is thecase that the options in terms of securinga favourable jurisdiction are limited (bytrading patterns and the like) and thereare inherent risks in pursuing actions inmultiple jurisdictions. Thus, races for limitationand suitable jurisdictions can easilybecome a lawyer’s paradise and it makessense to explore at an early stage with theother side an amicable agreement on lawand jurisdiction. If appropriate, perhapsthis can be coupled with some variationon applicable limitation. In any event,know your limits as you plan ahead!The Academy invitescompanies to sign upfor the Mariner AttitudeSurvey (MAS)Martin HernqvistManaging DirectorThe Swedish Club Academy ABFollowing the first MAS seminarconducted in Hamburg, Germany on 6 November,2012, the Mariner Attitude Surveywill soon be in full swing as more companiesare becoming interested in knowingmore about the survey. Adding to that, twocompanies from Northern Europe have alreadyexpressed their interest in taking partin the MAS project, and one company hasalready signed up.An important feature of the survey is theopportunity for participating companiesto suggest additional questions that arerelevant to the company and its operations,Yuqi YaoAge: 24Title: Project AssistantYuqi comes from the cityof Wuhan in central China.She came to Sweden in2010 to study at BlekingeInstitute of Technology and graduatedwith an M.Sc. in Industrial Economics andManagement, in the summer of 2012. Yuqialso has a BA in Economics and Arts fromHubei University, Wuhan.In her spare time, she likes to translateJapanese manga to Chinese and to editwhich will then be integrated into the survey.The Swedish Club Academy ensuresthat taking part in the survey will requireminimal effort from the shipping company,as it is our belief that having an anonymoussurvey conducted by a third party willensure far more honest answers from therespondents than an internal survey can.After the survey is completed, there will bea data evaluation with recommendations ofthe appropriate measures to be taken.There have been two seminars alreadyconducted on the survey this year, the firston 28 February in Manila, and the secondin Singapore on 6 March. Both seminarswere enthusiastically received by representativesof the attending shipping companies.For more information about the Mariner AttitudeSurvey, please contact the Academy’s ProjectCoordinator Lorraine M. Hager on +46 31 638 492or email lorraine.hager@tscacademy.comThe Swedish Club Academy’s new team membervideos. She also loves travelling as shebelieves that walking on the road can givea person more knowledge than simplyreading in a room.As Project Assistant, Yuqi’s main taskswill include translating texts from Englishto Chinese, establishing new contacts andrelationships in the Chinese maritime industryand assisting with the productionand editing of videos for the Academy. Shewill play a very important role as contactperson and interpreter between the companyand its Chinese contacts.New Licensees since last Triton Harren & Partner Ship Management GmbH & Co. KG, Bremen, Germany NTTA Nautical Technical Training Academy BV, Groningen, Netherlands SAMAJU Academy, Åstorp, Sweden Shanghai Costamare, Shanghai, China13

THE SWEDISH CLUB TRITON 1-2013The Swedish Club Academy | Out and About with MRMPiraeus, 23-24 October 2012 An international WorkshopLeader training event inPiraeus, Greece at the end ofOctober. Participants fromleft to right: Zhang Hongnanof Shanghai Costamare ShipManagement, Bernd Ulbricht of HPSHamburg, Theodora Stavropoulouof C.M.M. Inc., Elias Andersson ofChalmers University of Technology,Martin Hernqvist of The SwedishClub Academy and KonstantinosBourliaskos also from C.M.M. Inc.Hamburg, 6 november 2012 The Mariner Attitude Survey was launched inHamburg, Germany with a 3-hour seminar. In this photo,Fifteen new MRM WorkshopLeaders and one previouslycertified Workshop Leaderattended the seminar inManila hosted by WallemShip Management.Participating companiesrepresented in the photo withMartin Hernqvist are WallemShip Management, Anglo-EasternShip Management, APL Co Pte Ltd,BSM Crew Service Center, C-ManMaritime Inc., Consolidated TrainingManila, 12-13 November 2012Systems Inc., GPN InternationalMaritime Training Center Inc., MarlowNavigation Training Center, OSG Ship Management, Wavelink Maritime Institute, ABB Marine Academy, IDESS Maritime Centre (Subic) Inc., Wärtsila Land and Sea Academy, Pacific Basin Shipping,Besiktas Likit Tas. A.S, European Training & Competence Centre, Louis Dreyfus Armateurs, OSM Crew Management, OSM ROHQ, and Rickmers Reederi GmbH & Cie. KGParticipants of the first MRMWSL training for 2013, inGothenburg carefully listenedto the presentations being givenduring a session. The participatingorganisations were Harren & PartnerGmBh & Co. KG, Northern Crewing ServicesGmbH & Co. KG, Nova Contract, NorwegianMaritime Officers Association, NTTA NauticalTechnical Training Academy BV, Star Cruises,SAMAJU Academy and Vestfold UniversityCollege.Gothenburg, 12-13 February 2013Singapore, 5 March 2013 Closely following the MRM WSL training in Manila the week before, atrip to Singapore meant another MRM event for the Academy. Here, MartinHernqvist (far right), is accompanied by representatives from Wallenius Marine,Wallenius Wilhelmsen Logistics, Wavelink, STET, Singapore Maritime Officers’ Union and AETShipmanagement.Subsequent to the MRM WSL training, the afternoon of March 6 thwas dedicated to a MAS seminar with many representatives ofthe Singaporean shipping community. The following companiesattended: AET Shipmanagement Singapore Pte Ltd, Apex Ship ManagementPte Ltd, Bourbon Offshore Asia Pte Ltd, BW Fleet Management, China NavigationPte Ltd, Columbia Shipmanagement (Singapore) Pte Ltd, DDW-PaxOcean ShipyardPte Ltd, Epic Ship Management Pte Ltd, Executive Ship Management Pte Ltd,Goodwood Ship Management Pte Ltd, Hong Lam Marine, IMC Industrial Group, JROrion Services Pte Ltd, Maritime Education and Training Services Pte Ltd, MOL ShipManagement (Singapore) Pte. Ltd, MSI Ship Management Pte Ltd, Norgas CarriersPte Ltd, NYK Shipmanagement Pte Ltd, Sentek Marine & Trading Pte Ltd, SingaporeMaritime Officers' Union, STET Maritime and Wavelink, Toll Logistics (Asia) Pte Ltd,Wallenius Marine Singapore, Wallenius Wilhelmsen Logistics, Wavelink MaritimeInstitute, Western Shipping Pte Ltd, VLK Traders (S) Pte Ltd, World TankersManagement Pte Ltd.14

THE SWEDISH CLUB TRITON 1-2013Buxtehude, 7 november 2012Managing Director Martin Hernqvist addresses the gatheredrepresentatives of Hamburg’s maritime industry. The Swedish Club Academy team was hosted by NSB Academy at their headquartersin Buxtehude, to give a Workshop Leader Seminar. NSB is now Germany’s fifth trainingprovider of the Maritime Resource Management course. Following the seminar, NSBnow have six qualified MRM Workshop Leaders.Mumbai, 20-21 November 2012 Gijón, 11-12 December 2012 The MRM WSL network in India has expanded with an additional 14 newMRM WSL licensees who participated in the 2-day seminar at the Holiday InnHotel, Mumbai International Airport. A refresher course on the second daywas attended by one of the licensed MRM Workshop Leaders based in India.The participating companies were: Bibby Ship Management, Fleet Management TrainingInstitute, Kuwait Oil Tanker Company and SEASPAN Crew Management India Pvt Ltd. To conclude 2012, Spain’s first MRM training provider held a WorkshopLeader training event. Ten new MRM Workshop Leaders from CentroJovellanos completed the 3-day MRM WSL training under the supervision ofMartin Hernqvist at Gijón, Spain.Manila, 27-28 February 2013 Another successful MRM WSL trainingwas conducted in the Philippines just after3 months from the last run in November2012. Martin Hernqvist (centre) is joinedby the participants coming from BernhardSchulte Shipmanagement, OSM, ST Education &Training Pte Ltd, Veritas Maritime Training CenterInc, IDESS Maritime Centre (Subic) Inc., Pacific BasinShipping (HK) Limited and Southfield MaritimesTraining Foundation Inc.Singapore, 6 March 201315

THE SWEDISH CLUB TRITON 1-2013Piracy | Armed guardsGerman-flaggedvessels guardedby private securitycompaniesThe International MaritimeBureau Piracy Reporting Centre(IMBPRC) reported worldwide incidentsof more than 300 attacks or hijackings ofseagoing vessels as of December 2012(www.icc-ccs.org). These figures show thecontinuous threat to the shipping industryby piracy and the need for shipping nationsto protect their shipping community. Thishas been acknowledged by the Germangovernment, and the German parliament(Bundestag) resolved an Act on 13 December2012 to permit armed guards onboard German-flagged vessels that havebeen licenced in a specific approval procedure.Whereas originally the new Actwould have become effective from 1 August2013, this date will now be suspendedto January 2014. The delay has resultedfrom difficulties in agreeing on the specificrequirements that the security companiesmust fulfil. These requirements will bepublished in a separate regulation prior tothe effective date of the Act.Two aspects of the lawThe new law contains two aspects, onecovering the conditions and procedureswhich have to be followed in order topermit armed guards on board Germanflaggedvessels and the other one dealingwith an amendment to the German lawon weapons. The first aspect, the licensingprocedure, required an amendmentof the German Trade, Commerce and IndustryRegulation Act (Gewerbeordnung(GewO)). The Federal Authority for Eco-Dr Jan-Erik PötschkeLawyerAhlers & Vogel, HamburgJan-Erik Pötschke joined Ahlers & Vogel in1999 and has been a partner since 2002. Heis a member of the German Association forInternational Maritime Law (Deutscher Vereinfür Internationales Seerecht), the GermanAssociation for Transport Law (DeutscheGesellschaft für Transportrecht e.V.), the German/SingaporeLegal Association (DeutschSingapurische Juristenvereinigung e.V.) andthe Transport Law Commission of the InternationalAssociation of Young Lawyers (AIJA).nomics and Export Control (Bundesamtfür Wirtschaft und Ausfuhrkontrolle(BAFA)) in corporation with the FederalPolice (Bundespolizei) is in charge for thelicensing procedure. The specific provisiondealing with the licensing of security companiesis § 31 GewO.RequirementsThe requirements which a security companyhas to comply with will focus onthe company’s profile and structure. Thecompany has to show that its personnelhave the knowledge and skills to act asarmed guards on board a vessel. This in-cludes nautical and technical knowledge,identifying and evaluating risk situations,de-escalation techniques, fire fightingknowledge and – to a certain extent – legalknowledge.It is not expected that the training orexamination of the personnel will be verifiedby the German authorities. The focuswill be on disclosure of documents andinformation about the internal organizationand manuals of its procedure regardingplanning, implementation and conductof operations at sea in case a vessel is attacked.Further details will be known oncethe regulations are published, which is expectedto be in April 2013.The security company must have thirdparty liability insurance cover, coveringclaims for personnel injury, damagesand consequential damages which theshipowner or third parties, in connectionwith the implementation of the securitymeasures, may sustain. Once the licence isgranted by the BAFA and the Federal Police,the Bundesamt für Seeschiffahrt undHydrographie (BSH) will be informedand, upon application by the shipowner,will approve an amendment to the bestmanagement practices on board and themanning of the vessel.ValidationThe licence will be valid for two years only.The reason for the time limit is the lackof factual possibilities for the BAFA tocheck the services of the armed guards onboard seagoing vessels. Hence, the govern-16

THE SWEDISH CLUB TRITON 1-2013PIRACY | Somali Piracy todaySomali piracy– past, present and futureHans Tino HansenManaging Director & CEORisk Intelligence, Vedbaek, DenmarkSomali piracy has been the major threat to internationalshipping since 2007, but it can be traced back to 1994,when the first hijacking for ransom took place. The hijackedvessels and the ransoms paid have been an almost daily partof shipping life and in even in the international media it hasplayed a significant role. At one point almost 1,000 seafarerswere held for ransom on the coast of Somalia.2012 saw a dramatic reduction in Somali pirate activitywith attacks dropping from 214 in 2011 to 50 during 2012.Of these 50 the vast majority (46) occurred during the firstpart of 2012, while in the second half only four incidentstook place. By the end of 2012 Somali piracy was back to2007’s levels.So what is the explanation for this drastic reduction?Some people have suggested that it was due to the merchantships arming themselves with private armed guards. As wewill see below, it is not quite as simple and there are not oneor two single decisive factors, but actually a range of parametersthat together have decided the levels of Somali piracy.These can be formulated as follows:Pirates:1. Capabilities. Vessels and equipment as well as theoverall infrastructure of pirates.2. Intentions. Tactics, strategy and business objectiveof the pirates.3. Opportunities. Chances for taking advantage ofmerchant vessels’ vulnerabilities. Return on investmentfor Somali pirate investors and alternative investmentsand business options. Politico-economicdevelopments in Somalia that are shaping the situationon land and thereby the opportunities.Merchant marine:1. Capabilities. In this case elements such as hardening,speed, vessel type, use of PMSCs2. Intentions and opportunities, such as market rates,charter, freight and fuel cost.3. Trading routes defined from (2) and (1).Navies:1. Capabilities. Number of vessels and helicopters deployed.Sensor effectiveness.2. Intentions. Types of operations, ranging from showingthe flag to offensive onshore attacks.3. Opportunities. Options for exploiting pirate vulnerabilitiesas well as political and military signalling.Rules of engagement.4. Political and financial realities and the limitationsthey impose.Environment:1. Geography, ocean currents, weather.2. Local patterns of maritime activity.PiratesThe Somali pirates’ level of activity has declined since early2011. This is mainly due to the increasing difficulty in hijackingships they have encountered and less due to onshorechanges in their operating environment. The number of piratesintercepted, captured or lost at sea has increased.The number of ships being hijacked has fallen, makingthe venture less tempting for the rank-and-file, leaders andfinanciers. There are, however, still active syndicates. Thesegroups have seen a fall in their success rates, capturing fewer18

THE SWEDISH CLUB TRITON 1-2013Photo: US NavyIncidents per sea zone, 2008-2011Mozambique CSomali BasinIndian OceanArabian Sea/Go OmanGulf of AdenRed Sea/BAMpirates have successfully hijacked a vessel, the outcome (interms of ransom) has been equal or higher to what has beenpreviously obtained.The pirates’ investors have seen their return of investmentfall, both in actual cases and in potential return of investment.This fall and relatively increasing returns on othermore secure criminal or legal investment has had a profoundeffect on investment in piracy. Since the cost of entry intopiracy is low and all the resources are easily available alongthe Somali coast, the pirate investors can quite quickly returnto piracy should the situation again change in theirfavour.In summary, pirate activity has declined, reducing theoverall likelihood of occurrence. Their capabilities are intact– particularly because they do not need much to carryout attacks – but they are currently facing a more adverseoperating environment and have not adapted their tactics toovercome this.ships per attack and facing disruption by Naval operationsquicker than previously. The main component in the fallingsuccess rate has been the shipping business and Navalcounter-piracy strategy. The low-tech capabilities of the piratesare still there and when pirates have faced a poorly protectedship in the right circumstances, they are successful inemploying their tried and tested, low-cost methods. WhereMerchant marineSince 2008, merchant vessels have increasingly deployedbetter security measures, including both toughening theseup and procedures through Best Management Practices(BMP). Finally, the use of armed guards has been commonsince late 2010.The most pressing issue for shipping companies recently9continueson page 2019

THE SWEDISH CLUB TRITON 1-2013PIRACY | Somali Piracy today9continuesfrom page 19has been cutting costs. Faced with an historically long spell of depressedfreight rates and increasing bunker rates, companies areincreasingly looking to improve operating margins. This is doneincreasingly by “slow steaming” and by reducing deviation aroundareas of known pirate activity, when an armed team is onboard.NaviesThe Gulf of Aden is well covered by Naval assets, whereas the ArabianSea and Indian Ocean are less covered. Naval operations directlyagainst pirate assets in the area are arguably one of the mostinfluential factors in the decline of pirate attack occurrences. Thecounter-piracy operations have taken pirate attack groups out ofthe equation before they could even enter the attack areas. Witha force level of approximately 25-40 Naval vessels in the area atany given time, only a handful of ships are actually available forcounter-piracy operations along the Somali coast. The rest are beingreplenished, doing national or World Food Program escorts andmonitoring the IRTC. It appears that Naval forces have becomemore effective in monitoring and cutting off active pirate attackgroups after their first attack. This entails shorter “life spans” ofPAGs and a reduction in total attacks carried out.Budget cuts in European countries have already led to some Naviesscaling back. It is likely that more will follow and since theescorting and monitoring of the IRTC has priority, the counterpiracyoperations against the Somali east coast will suffer.EnvironmentGeography is a fixed parameter, but various areas provide differentnatural boundaries or opportunities to the pirates and the level oftheir impact on pirate operations will depend on pirate capabilitiesIncidents off India December 2011-12(MaRisk by Risk Intelligence)and tactics. Theweather and currents arelargely stable and change according tomonsoon and transitions periods. In general, weather and currentscan be seen as “everything equal”, but sometimes the monsoon periodsare less harsh in certain areas and therefore give better opportunitiesfor small boat operations.Local traffic patterns play a role in as much these may includeother armed criminals such as smugglers or fishermen that arearmed due to fishing area disputes, where both types may not bepositive to having pirate skiffs in the middle of their operations. Atthe other end, small boat traffic may be favourable to pirate operationsas it increases the possibility of blending in and hiding. Eventhe use of hijacked dhows as motherships provides an opportunityto hide at dhow anchorages, which may lead to opportunities forattacking merchant ships at anchor such as the hijacking of theFairchem Bogey in 2011.ConclusionAs outlined above Somali piracy can be described via a numberof parameters. These impact on the general level of threat and aredynamic over time. What contributes to a high risk today mightgradually change. Three things in particular is interesting in thiscase: the societal situation in Somalia, the use of vessel protectionand the naval presence.Mogadishu, the capital of Somalia, currently experiences a betteredsecurity situation. In the case that an economic and politicalimprovement should also take place in Puntland and GalmudugState, piracy might be impacted. There is unfortunately no currentsigns of this happening in any significant way.The use of BMP and armed guards have played a significant rolein reducing the pirates likelihood of success. Although it has greatlyreduced the risk for the individual ships that have correct BMPmeasures and armed guards embarked, the use of vessel protectionhas not in itself lowered the likelihood of running into a pirate attackgroup. The pirates are being deterred over time by encounteringresistance and hardened ships and it has reduced the number ofattacks in a gradual way. But it must be understood that there arestill plenty of targets that are available to the Somali pirates.So in that way, the naval presence has been the real importantparameter for reducing piracy. By attacking pirate staging areas andintercepting pirate attack groups off the coast of Somalia, the navalpresence has played a large role in reducing piracy close to its roots.Followingly, if the political decision makers look back at relativelypeaceful 2012 and 2013 when making budget decisions, there is arisk that a reduction in naval forces will leave room for pirate expansionsonce again.Therefore, at least until the situation on land has improved, it isthe task of the shipping community to maintain proper levels ofsecurity measures as well as making sure that politicians and navalcommanders understand the importance of continued naval counter-piracyoperations in the Horn of Africa Area.20

THE SWEDISH CLUB TRITON 1-2013Photo: iStockphotoThe long armof the law…Legal | Update…stretches for piratesEarlier this year Japan became the latest country to prosecutepirates. There has, however, been notable disinterest amongststates in bringing pirates to justice. Almost two-thirds of theoverall prosecutions (185) have taken place in two countries only,Kenya and the Seychelles. On the occasions when other stateshave taken the lead, there is often a linkbetween the vessel and the country, as inthe case of Japan when the attacked vesselwas a Mitsui OSK Lines tanker. There ishowever no legal obstacle for states to takeaction. International law treats pirates onthe high seas as hostis humani generis – anenemy of all mankind – and as such theyare prosecutable and punishable in anycountry. It is to be hoped that ongoing efforts made by the UNOffice on Drugs and Crime to improve prisons in Somalia, Kenya,the Seychelles and Mauritius will facilitate the law enforcement ofthese ghastly acts.Pirate attacks are decliningOn the same topic there was good news from the InternationalMaritime Bureau the other week. Piracy on the world’s seas hasfallen to a five-year low, with 297 ships attacked in 2012 comparedto 439 in 2011. Worldwide figures were brought down by a hugereduction in Somali piracy in 2012 compared to 2011. No doubtthe presence of armed guards onboard vessels, coupled with othermeasures, has contributed towards this positive trend, although itshould not be forgotten there are still 585 mariners being held hostageat gunpoint worldwide.Anders LeissnerDirector,Corporate Legalthe Arrest of Vessels has been substantially amended with Dutchlaw being used as the role model and it will no longer be required asubmit evidence of a claim to carry out an arrest. Presumably, Germanyshould now be added to the list of arrest-friendly places, forgood or bad depending on whose side you are on.Sweden publishes shipping action planThe Swedish government has published ashipping industry plan in response to growingdemands to save the country’s strugglingmaritime sector. Reportedly, the plan is shortof substance but long on visions and it remainsto be seen what concrete outcomes there willbe. One contentious point is the tonnage taxthat the government has refused to introduce to date in contrast tomany European states, although the door has not been completelyshut. A solid (political) document in other words.More sanctions...Both the EU and the US have imposed a new round of sanctionsagainst Iran (see Notice Board page 27). For us as an insurer thereseem to be a particularly cumbersome provision in Section 1246of the US Iran Freedom and Counter-Proliferation Act of 2012,imposing sanctions on any person (including non-US persons) thatknowingly provide insurance for any activity that violates any USsanctions on Iran. The implications of this provision are, of course,very difficult to foresee, but clearly this is not an area where oneshould try to cut corners and we therefore constantly need to refineour procedures for control and compliance.Makeover of German Maritime LawGermany is in the process of updating its 150 year-old MaritimeCode. Reportedly, the leading concept in the new Code, whichat the time of writing is expected to become law any day, remainsthe Hague-Visby Rules, although there are influences from boththe Hamburg and Rotterdam Rules. One novel feature is that theconcept of mandatory liability provisions has been abandoned sothe parties will have greater possibilities of making their own agreements.Needless to say, the new German Code is a sign that Germanydoes not believe in a universal acceptance and application ofthe Rotterdam Rules and it is therefore a hard blow against the supportersof those Rules generally. In addition, the German Law onMaritime Labour Convention revisitedWe have previously reported that the question about whethercosts for repatriating crew in cases of the shipowner’s insolvencyshould be included in P&I cover, was discussed by the boards ofthe P&I clubs. The position has now been clarified – the costs from2013/14-policy year are included in P&I up to the clubs’ retentionUSD 9 million, but on a loan basis. The boards obviously found anelegant solution that addresses both state requirements for financialbacking and the concern for mutualising this controversial risk.21

THE SWEDISH CLUB TRITON 1-2013FD&D | London arbitrationPhoto: MorguefileIrrecoverable costs in London arbitration: thWhen a dispute breaks out over theperformance of a charter the natural tendencyis to focus on who’s at fault. Thismight take place in circumstances wherethe member is in the middle of a chain -the innocent bystander so to speak. Thankfullythe majority of disputes settle beforethey get into arbitration and everyonewalks away paying their own costs. On theother hand, back-to-back maritime arbitrationsin London can last for years and theimplications of costs awards can becomejust as serious as the underlying amountsat stake.The belief that parties in the middleof a chain are ‘neutral’ is a dangerous assumptioninsofar as litigation costs areconcerned. Yes neutrality might apply tothe substantive issues but it is not the samewith costs. A neutral middle party can potentiallybe faced with a huge costs liabilityand with no recourse action to make him‘whole’. This article will focus on how toavoid one’s exposure to such irrecoverablecosts.The Arbitration ActThe power of arbitrators to award costs iscontained in section 61 of the UK ArbitrationAct 1996. They have power to awardcosts of the arbitration, which representsthe successful party’s legal costs and thetribunal’s (and the institution’s) fees. Itprobably does not include the cost of obtainingsecurity, for example arresting aship in a foreign jurisdiction.Andrew BatesSenior FD&D Claims ManagerTeam AsiaFurthermore, as many readers will alreadyknow, the costs payable to one’s representatives(lawyers and the technical experts)is not ordered to be paid up 100% bythe losing party. The reason is explained insection 63: the paying party is given benefitof the doubt as to whether those actualcosts are reasonable and proportionate.The conduct of the successful party canlead to a tribunal curtailing or, alternatively,enhancing the costs award. For examplewrongly pleading part of a case, leadingto wasted costs both sides; or denying anycosts for two failed claims out of, say, five(known as ‘issue based’ assessment).Costs don’t carry overBased on the principles outlined abovethe tribunal may determine the recoverablecosts of the arbitration as it thinksfit. However it is not open to an arbitratorto make an order that a party in onearbitration must pay the costs of a party inanother arbitration. Whilst the ArbitrationAct provides that the parties are freeto agree otherwise (typically agreementsto consolidate two arbitrations, which arerare), in the absence of such agreement thetribunal only has power to award costs ofthe arbitration.This was confirmed in the 1981 case ofThe Antaios, which is still good law today.That involved four concurrent arbitrationsarising out of back-to-back charters. Eachparty who had been successful in one arbitration,but unsuccessful in the other,could not pass on liability for the costs hehad to pay his successful opponent.The implicationsTaking the familiar setting of two maritimearbitrations based on back-to-backcharters: an unsuccessful claimant headowner will only have to pay the nominalcost incurred by his head charterer in defendingthe claim since the head chartererhas simply passed submissions up anddown the line.The true cost of defending the headowners’ claim has been incurred by thesub charterers, and they will be awardedsubstantial costs against the innocent headcharterer. Yet the head charterer cannotpass that cost liability on the head owner,nor can he recover his costs of pursuingthe sub charterers even though, but for thehead owners’ actions, neither set of costswould have been incurred.The solutionThe element of prejudice is obvious. Sowhat can be done? The answer is for the22

THE SWEDISH CLUB TRITON 1-2013e solutionsa New York suit allegedly in breachparty in the middle to plead a separatecause of action in damages against (usingthe example above) the head owners for thesub charterers’ costs plus his own costs ofpursing his claim. The general rule is thatdamages will be recoverable if a claimantestablishes a breach of contract or duty(The Sargasso) and such losses (costs) werewithin the reasonable contemplation of theparties. Terms in a fixture recap containingexpress warranties coupled with “BTBhead charter with XYZ” might satisfy thereasonable contemplation test.It is important to remember that theordinary rules on damages apply. Lookingat another litigation scenario: did partyA’s (the defendant head owner) breach (a)cause party B’s (the middle party) costsliability to party C (the claimant sub charterer)?(b) was the type of loss too remote?and (c) has party B properly mitigated?These three rules interact and overlap.For example, the costs of an application byparty B for security for costs against partyC may be deemed to have not been causedby party A’s breach; or that it is not thetype of loss which party A can reasonablycontemplate because party C is a substantialentity who should not have to pay securityfor costs in the first place. The loss istoo remote.What, when and why?Your lawyer should provide sound adviceon tactics because they need careful consideration.Instead of defending a claimshould a party in the middle simply havepaid it and avoided the cost liability inthe first place? Or should that party havedefended it without passing it on? In TheVakis T the claimant owners brought anunsafe port claim against the head charterers,which the latter defended.The head charterers also passed theclaim on to their sub charterers. The headowners’ claim was however spurious. Thearbitrators found that the true cause of thedamage to the ship was in fact unseaworthiness,and in the High Court Langley Jrejected the head charterers’ claim for costsliabilities to the sub charterers because thecommonsense conclusion was that the effectiveor dominant cause of the loss wastheir decision to pass on a spurious claim.Another example of a contested damagesclaim is seen in the 2012 case The ChadaNaree. The arbitrators decided that aparty in the middle was not entitled torecover damages for his own liability forcosts in the arbitration above because hewas not party to any arbitration with thehead owners. He was merely party to aninternal contract with another company inthe same group, and that other companywas party to the head charter. The tribunalheld that there was no costs liabilitycapable of being claimed as damages. TheHigh Court reversed that decision on thegrounds that all litigants in the chain hadtreated these two group companies as one,i.e. as ‘the disponent owners’; liability forthe breach of the contract flowed downthe line of charters and the same breachgave rise to the same liability for costs asdamages.Other scenariosThere are other situations where costs canbe claimed as damages and where good tacticscan pay dividends.Same parties, different deal: one instanceis where the same parties are involvedbut the claimant is relying on a differentcause of action in a different forum.This arises for instance where a claimantincurs cost defending a claim broughtin breach of an exclusive jurisdictionagreement. In Union Discount v Zollerof such an agreement was struck out. Thegeneral approach to costs in New York isthat each pays his own costs. The claimanttherefore went on to claim these costs inEnglish proceedings based on breach of thejurisdiction agreement and the Court ofAppeal duly awarded damages.Member’s management time: costs asdamages can also include managerial expensesincurred by a party in dealing withthe problems caused by a breach. The mainconsideration is the dominant purpose: ifthe purpose was preparation for litigationthen the expenses can only be recovered aslitigation costs, not as damages. If say onthe other hand management commissionedan expert’s report for the purpose of maintainingthe vessel’s class, without a view tolitigation, then both management time,and the cost of the report, may be recoverableas damages. The line between costs anddamages can be hard to draw but, nonetheless,it might pay off if members recordtheir management activities for appraisalfurther down the track.ConclusionThe above shows us that there are manypermutations of litigation and the costconsequences which can result informs usersof London arbitration to think aheadcarefully about those consequences as theyexamine the underlying merits of the dispute.The rewards and savings are there butachieving them owes everything to goodcase management.23

THE SWEDISH CLUB TRITON 1-2013Club Information | Notice BoardThe Eider case– a satisfactory outcomeThe Club insured the vessel, the Eider, a bulk carrier, forP&I insurance. The Eider went aground at the port of Antofagastain Chile on 31 October 2005 and spilled about 127 tonsof oil, including heavy fuel oil and diesel oil and caused pollutionstretching for 7 miles along the coastline. A Pool claimwas made.An extensive clean-up operation followed and took overthree weeks to complete. The Club paid clean-up costs ofaround USD 5,000,000. Numerous groups of people associatedwith marine interests in the region filed claims against theship and the shipowner. The ship was arrested and the ownerand master of the ship were fined.The Club set up a limitation fund pursuant to Chilean lawof USD 26,000,000 in local currency by way of a Club Letterof Undertaking in the Court of Antofagasta against all theclaims and settled the fines on behalf of the owners to releasethe vessel from the arrest.The Eider sailed from Antofagasta after some temporaryunderwater repairs were carried out. The total gross claimsamounted to USD 238 million.After long, hard settlement negotiations and protractedcourt proceedings for seven years through the Court of Antofagasta,the court of first instance, Court of Appeals and theSupreme Court, the last claim for environmental damages wasfinally dismissed by the Supreme Court of Chile, the highestcourt in the country.This case came to an end with the landmark ruling ofthe Supreme Court. The Club’s local lawyer and correspondentsworked hard and effectively, and achieved a satisfactoryoutcome. The case cost the Club about USD 9,000,000.Environmental salvageOver the past ten years, the International SalvageUnion (ISU) has pursued that salvors should be entitled togreater remuneration to better reflect the efforts made by themto minimise damage to the environment.Discussions have been between the industry stakeholdersvia the offices at Lloyd’s Salvage Group, but have not led to aconsensus to amend the current Lloyd’s Open Form (LOF)Photo: Manuel Hernández Lafuenteregime. Another level of discussion has taken place to make achange to the 1989 salvage convention, which was up for reviewat the Comite Maritime International (CMI) conferenceat Beijing in October 2012.The outcome of the discussions at the conference did notsupport the proposed changes to the 1989 salvage conventionas put forward by the ISU, except for widening the geographicaldefinition of damage to the environment in article 1 (d).Bearing in mind the recent discussions about exposure tothe insurance industry following the two recent marine casualties,Costa Concordia and Rena, it is likely that the debateabout SCOPIC funding and wreck removal may have an adverseeffect on future discussions about enhanced compensationunder LOF or changes to the convention.Photo: iStockphotoOnerous port conditions and P&I coverThere are an increasing number of ports’ Conditionsof Use wordings being submitted to us and other clubsfor consideration. These conditions occasionally contain onerous,not to say unreasonable, provisions imposing unlimitedliability upon the arriving vessel. The conditions of the port ofAbu Dhabi is one example which contains unusually burdensomeprovisions. Members are encouraged to always contactthe Club when faced with a request to sign similar conditions.Failure to use best endeavours to avoid signing a contract imposingonerous terms on the member can result in prejudicedP&I cover.Iran sanctionsOn 2 January, PresidentObama signed into law theIran Freedom and Counter-Proliferation Act (IFCPA) of2012, which entails an expansionof the extra territorial reach of US-Iran sanctionsthat now extend to the shipping industry. As an example,entities in the Iranian shipping sector have been labelledas “entities of proliferation concern” whose assets should beblocked and it is prohibited to provide significant support andservices to these entities. IFCPA also provides a ban against insuranceof any activities that violates any US sanctions on Iran.In addition, the EU has issued Council Regulation 1263/2012essentially prohibiting (1) the purchase and transport into theEU of Iranian natural gas (2) the storage of Iranian petroleumproducts (3) the proviso of a wide range of services to Iranianvessels and vessels owned or operated by Iranian entities (4)dealings with Iranian financial institutions.For detailed information about the Iran sanctions please seewww.swedishclub.com24

THE SWEDISH CLUB TRITON 1-2013DNV and GL to mergeOn 20 December 2012, Det Norske Veritas (DNV) andGermanischer Lloyd (GL) announced that they have signed anagreement to merge. The new entity will be called DNV GLGroup. It will be one of the world´s leading classification societiesand risk experts. The global headquarters for all business segmentswill be located in Hövik, Oslo. The maritime business unitwill be in Hamburg, Germany. The merger will require approvalfrom different competition authorities around the world beforethe actual merger can take place.Maritime Labour ConventionThe International Labour Organization (ILO)Maritime Labour Convention, 2006 (MLC) will come into forceon 20 August 2013 with the purpose of providing protection andfair working conditions for seafarers. A problem which has beenhighlighted by the effects of the financial crisis is abandonedseafarers and the right to repatriation in cases involving a shipowner’sinsolvency.As a consequence of the implications the Convention has onowners, the P&I Rules have been revised as of 20 February toreflect the requirements under the MLC. With the aim of satisfyingthe unspecified requirement under the MLC to providefinancial security, Rule 3 section 1 (g) has been introduced andwe are thus hopeful that the Certificate of Entry will satisfy theMLC financial security provisions. The IG Secretariat is in closecontact with the parties involved including the States that haveratified the MLC to assist and safeguard the interests of owners.Rule 3 section 4 has also been revised to confirm that the Payto be Paid Rule is not applied in relation to crew claims, althoughthat has long been the agreed position.More information on the MLC can be found in our P&I Circular2559/2013 dated 6 March 2013.The Swedish Club AGMand eventsThe Annual General Meetingwill be held in Gothenburg on Tuesday18 June 2013 and adjacent activities on17-19 June.Germany modernisesmaritime lawThe reform bill has been approved by Parliament andis supposed to come into force around April 2013.In general, the revised law establishes a contemporarybody of law by reducing the amount of provisions byhalf and installing a systemized structure. Detailedrules on charter parties and practiceorientatedprovisions on differentforms of freight contracts,as well as the introductionof electronic bills oflading, are just examplesof the amendments beingimplemented.The central modifications of the revised law affectrules on liability of the parties involved in the transportchain. The abolishment of the exclusion of liability fornautical errors, which was considered to be an anachronismwith regard to the modern engineered shippingindustry next to deleting the fire defence are some ofthe key aspects.In addition the new law introduces a legal concept of liabilityof the “performing carrier”. This rule aims to synchroniseliability between shipper and performing carrierwithout the latter being a contractual party.Finally, the revised law facilitates and accelerates the arrestof ships. Whereas arresting a vessel used to be a complexprocedure that has rarely been made use of the new regulationsin principle require a money claim against the vesselonly.For details contact Dr. Marco Remiorz at Dabelstein & Passehl inHamburg: M.Remiorz@da-pa.comPhoto: Stefan EliassonNew chairman of IUMI’sOcean Hull CommitteeLars Rhodin has been appointedchairman of IUMI’s Ocean HullCommittee. The International Unionof Marine Insurers is the main worldwidebody for marine insurers addressingissues relevant to the industry, such as exposure trends,legislation, statistics and loss prevention. Ocean hull in particularis the essential forum to discuss and exchange ideasof common interest to hull underwriters identifying challengesand opportunities in the marketplace and, not least,safety issues in shipping.25

THE SWEDISH CLUB TRITON 1-2013Club Information | StaffChanging of the guarAn early midday in May 1980 HansFilipsson set foot in Greece for the firsttime. He arrived as a seaman onboard theSwedish Orient Line vessel Bardaland.The cargo consisted of various forestryproducts from Scandinavia, like timberand paper, and the unloading took aboutten days. Already the first weekend, whenvisiting the island of Aegina, Hans washooked. Since, he has returned severaltimes, both on business and holiday.Now, 33 years later, 1 April 2013, he willreturn by air – this time to settle down totake over the rudder as General and AreaManager of our Piraeus team and office.After his seagoing career, Hans turnedto insurance and has been working onboth the claims and underwriting side formore than 20 years.“I guess I have both shipping and insur-M/S BARDALANDArrival at Piraeus May 23, 1980End of Sea passage: 12:10Pilot on board 12:202 Tugs connected 13:00First line 13:15All fast 13:45Departure 13:30 June 3, 1980Bound for Thessalonikiance in my blood; my father was responsiblefor P&I claims at the shipowner Broströmsin Gothenburg,” he explains.Hans joined The Swedish Club as anUnderwriter in 2010. In September 2011he was appointed Deputy Area Managerfor Team Gothenburg and now it is timeto embrace Greece and Team Piraeus withhis energy and drive. At first he will workalongside of Tord Nilsson to get into theroutines. (You can read more about Tordon the next page.)“I am happy to see him staying with theorganisation in a new role as Senior Managerfor Underwriting and Special Risks atthe head office in Gothenburg; that will bea welcome support for me and the team tofurther develop our business in Greece.”Developing relationshipsHans is a keen sailor and has been sailingin the MediterraneanseveralBack againafter 33 yearstimes. His preferenceshave beenin the south westcoast of Turkeyand the Greekislands.“Greece is one of my favorite places, sowhen I was asked to succeed Tord as Generaland Area Manager, there was only oneanswer: YES in capital letters!”The family was easy to persuade and inAugust his wife Christina, son Marcusand daughter Elin will follow his example.They are all planning to study in their newhome country.“I have never been living abroad before;the closest I came was my three years atsea with the Singapore-based Thome ShipManagement, so I am really looking forwardto moving to Greece, doing what I likethe best: working in the shipping market.”The Swedish Club has always had astrong commitment to Greece and Greekshipowners.“’My mission will be to further build ourbusiness and to develop long-term relationshipsin the market, but also see to that theteam continues to deliver at the high levelwhich The Swedish Club is known for.”“Irrespective of which company youwork for, there is a big difference betweenbeing at the head office and a local branchoffice. To make a comparison, you can lookat the head office as the shipowner’s officeand the local branch office as one of theirships; and I have to admit, I think it suitsme the best to be on board.”26

THE SWEDISH CLUB TRITON 1-2013d in Piraeus”I likesaying yes!”Photo: Anders Hultman, TSCThe peculiarity of saying “yes”has taken Tord Nilsson to manyplaces and jobs over the years.This time it has brought himfrom Area Manager for Team Piraeusin Greece back to Gothenburgand the head office, but in aquite new role as Senior Manager,Underwriting & Special Risks.When Tord said “yes” to the post ofAssistant Underwriter at The SwedishClub in -96 he didn’t know it wouldtake him around the world. In one yearhe was promoted to Underwriter andin 2000 the “yes” in him took him tothe post as Managing Director of ourHong Kong office, where he stayed forfive years. Back in Gothenburg andTeam Göteborg I, as Area Managerand Senior Underwriter, he sat tightfor fourmore yearsuntil itwas timefor another“yes”,when hewas offereda position in Greece.Before moving to Greece, Tord hadonly been there once on a four-daybusiness trip in 1998.“But I have always been curiousabout new things and been looking fornew experiences, so it feels natural tome to take on a challenge like a new jobin a new culture, says Tord.”Cradle of shippingHe describes his years at the Piraeus officeas an interesting, fun, fruitful andrewarding experience.“The world’s biggest merchantnavy is managed and controlled fromGreece, and Piraeus is loaded with avariety of shipping companies. Thereis no place like this in the world – thisis where it happens in our line of business!,”Tord explains.“We have great members in Greeceand the team has created a good environmentfor delivering the expectedservice, which characterises of TheSwedish Club. The office and staff –and even some of our members – havebecome like an extended family to methat I will miss very much when I goback to Sweden. We have been workingclosely together as a team and developedthe business as well as each other,”says Tord.“Hans Filipsson, who will succeedme in Piraeus (see previous page),will arrive to a well-functioning andservice-minded team. I am sure he andhis family will feel at home in the newcountry, new office and new culture.And don’t forget the beautiful environment,good food and the best climatein the world!”Developing underwritingOn 1 July it is time to say goodbye andmove back home to Sweden and thenew position as Senior Manager forUnderwriting & Special Risks. Hisalmost 20 years’ of underwriting experiencefrom different parts of the worldwill stand him in good stead to structurethe business process and make uswork in a smarter way, to benefit boththe Club and the members. Anotherimportant task is to evaluate the needfor further training amongst the underwriters.The market moves fast andto stay in the front-line we need to developour knowledge at the same pace.“I really like underwriting and thewhole process that surrounds it. Theplan is for me to take an overall perspectiveon underwriting, develop newinsurance products and support thebusiness activities. I like to create newsolutions and look for innovations –there is always another way of lookingat things!”Carola WeidenholmCorporateCommunications27

THE SWEDISH CLUB TRITON 1-2013Club Information | StaffNew FD&D ManagerWherever I laymy hat that’smy home…Martyn in briefName: Martyn HughesAge: 50Hometown before Gothenburg:London, UKFamily: two daughters; Zoë 20 andSiân 18 who live and study in the UKSpare time: likes reading, cooking,running and bike riding when he hastime off. He is also into music and listensto everything from Beethoven toABBA and even some Greek bouzoukiwhich he got from his years in Greece.At one time he sang in the schoolchoir and even got to perform at theRoyal Albert Hall a couple of times.Background: Martyn graduated fromBirmingham University (UK) in 1984with a degree in Law. He qualified as aSolicitor in England with Holman Fenwick& Willan, then spent 13 years withthe London P&I Club, including 5 andhalf years in their Piraeus office, handlinga mix of P&I and FD&D claims. In2003-07 he joined the correspondentAus Ship in Sydney before returning tothe London Club for another six years.He has worked continuously in MaritimeLaw since 1987.Of current interest: our new FD&DManager in Team Gothenburg since 7January.England, France, Australia, Greeceand now Sweden – Martyn Hugheslikes not only to visit new countriesbut also to live in them! “I think I ampretty flexible and have always appreciateda challenge,” he says. “Iam also very interested in differentcultures as well as learning new languages– and what better way thanto stay abroad for some years.”Carola WeidenholmCorporateCommunicationsIt started already before university when hewent to Paris to work at Marks & Spencerfor a year. During the summer vacation thefollowing year, he worked for an Englishlaw firm in the same city. He did the samethe year after at Holman Fenwick & Willan’sParis office, which was his first encounterwith marine law. He later trainedwith that firm and stayed on for three yearsas a qualified solicitor.A secondment for six months to the LondonP&I Club ended with him joiningthem in 1990. After two years he wasoffered a post in their Piraeus office inGreece, where he stayed until 1997 – thelast two years as Manager. Back at the Clubin England, he got the next interesting offersix years later – to go and work for the Australiancorrespondent Aus Ship. This wastoo good to resist, so in 2003 he, his wifeand two daughters packed their bags andboarded the plane for Sydney to stay foralmost four years. In 2007 they were backin the UK and Martyn returned to theLondon P&I Club’s head office again.23 years of P&I and FD&DLast year Martyn was informed of an openpost as FD&D Manager at The SwedishClub’s head office in Gothenburg. At firsthe had no plans to switch to another jobbut in the end he couldn’t resist the challengeof a new culture in a country he hadnever visited before.“This is an opportunity for me to dostuff I know well but in a new environment,and at the same time it is nice tolive in a city like Gothenburg where thepace and work-life balance are differentfrom London”, says Martyn and continues:“The job also brings new experiences asThe Swedish Club is a hull mutual and it isinteresting to see how that interacts withP&I and FD&D first hand.”Martyn is a welcome addition to theClub staff with his long experience of avariety of claims and his international experienceof handling both P&I and FD&Dcases. The Swedish Club and he haveknown each other for a long time and have,over the years, worked on the same casesfrom time to time.“The Swedish Club has a good reputationin the marine business for its excellentservice. And the staff I have been incontact with have always been professionaland considerate, which were two other reasonsfor me to want to join the Club” heexplains.28

THE SWEDISH CLUB TRITON 1-2013Club Information | News from GothenburgTony SchröderArea ManagerTeam GothenburgThe fat tail of probabilityAnother renewal has passed. The 2013/14 renewalprompted more concern than in many years. Article after articlein various shipping papers forewarned owners and clubsabout a predicted clash of wills. The state of the shipping marketpointed south and claims too. In the aftermath we can nowsee that whilst it was an extraordinary prolonged and toughrenewal, the result is satisfactory and we should all be pleased –members and the Club alike.There sometimes seems to be a misconception that underwritersare fat cats (an impolite way of referring to someonewho is very rich and powerful). This could not be more wrong.We are mutuals. We are governed by our members for ourmembers. Our task is to handle the randomness of risk. To beable to pay claims running into millions of dollars. Some membersmight ask themselves – more so during the P&I renewalsthan the rest of the year – is there a benefit in moving your vesselsto a new club to avoid the increases levied? There might be,if you do not have the confidence that your present club is doinga good enough job managing members’ claims and premiums,in the volatile world of marine insurance.The history of insurance is a long tail. Insurance is longtailed.And volatile. It is a story about paying premium fora risk. Claims happen, and over time they happen to mostshipowners. But do I need to contribute? “Could a large claimhappen to me?” Like the ‘black swan’ theory most peopletoday know that it is quite likely that something unlikely will*The black swan theory,or theory of black swanevents, is a metaphor thatdescribes an event that is asurprise (to the observer),has a major effect, and afterthe fact is often inappropriatelyrationalised with thebenefit of hindsight. Suchevents, considered extremeoutliers, collectively playvastly larger roles thanregular occurrences. In English,when the phrase wascoined, the black swan waspresumed not to exist.happen. *The term metamorphoses tosuggest that a perceived impossibilitymight later be disproven.It lies outside the realm of regularexpectations. Costa Concordiabeing just one such event. Titanicanother. But for the observer, theshipowner, even a medium-seizedcasualty might be that surpriseoccurrence.The philosophical problem isthat rare events are not visible inpast cases. Almost all consequentialevents in history come from the unexpected – yet humanbeings later convince themselves that these events are explainable,in hindsight. But underwriters know it can happen. **Hence we have a task to build robusnessand durability against these largeclaims.However, in recent years not only largeclaims have increased, but also attritionalclaims. In particular, liabilities for cargoand personal injury, both in terms of frequencyand in terms of severity. All thesefactors have caused mutual underwritersto ask their good members for larger contributionsto be able to assist shipownersin the rainy days - and they do come!Albeit sometimes as scattered showers. There is always a risk ofa particular event occurring that is so unlikely to happen anddifficult to predict that many choose to ignore its possibility. Isthere a fat chance that frequency, severity and volatility couldhappen to me? That the fat tail of probability can hit me?***The answer is – yes!The Clubs are just instruments to tryto help members with handling risk, andright now premium increases have beena necessity to handle that risk. We needto be robust, for our members’ sake, tohandle that impulsive and obnoxious fattail of probability!Speaking of robustness, TeamGothenburg has been further reinforcedwith Martyn Hughes, FDD Manager,Martin Birgersson, Senior ClaimsExecutive, P&I, Fredrik Bergqvist,Claims Executive, P&I and Daniel**A black swan eventdepends on the observer.For example,what may be a blackswan surprise for aturkey is not a blackswan surprise to itsbutcher; hence theobjective should beto "avoid being theturkey" by identifyingareas of vulnerabilityin order to "turn theBlack Swans white".***Fat tails are basicallya statistical distributionphenomena.Most people whoare familiar with thewell-known ‘bellcurve’ will be able tovisualise the fat tailsas a bell curve withthe opening of thebell stretched out –making the openingfatter. The fat tailsphenomenon is mostoften an unexpectedresult.Kilgren, Underwriter. Martyn is an English solicitor joiningus from London. Martin, Fredrik and Daniel are all MasterMariners, albeit with different and diversified backgrounds.Four people who bring a lot of new strength, energy and vigourto our team.A warm welcome to you all!29

THE SWEDISH CLUB TRITON 1-2013Club information | News from Piraeus18FEBRUARY1921 22 23 24FEBRUARY FEBRUARY FEBRUARY FEBRUARY FEBRUARY25FEBRUARThe magical date has passedWe have once again passed 20 February, the magicaldate for P&I insurance. These renewals have been more difficultthan renewals in recent years. The reason for this is that wehave a convergence of the worst shipping market since the late70s and early 80s, affecting shipowners and a large number ofhuge claims affecting insurers. P&I results for all of the clubsin the International Group (IG) have been hit by major claimsover the past few years which have had an impact not onlyon retentions but also on the IG Pool, which we share withthe other P&I clubs, as well as the Excess of Loss reinsuranceprogramme that we also share with the other IG clubs. The increasesof premiums of the Excess of Loss programme seem tohave come as a bit of a shock to many owners.We feel that we have talked about the impact of the majorclaims with our members and what impact they would have onreinsurance, but it seems as though there were many that hadnot braced themselves for the impact. Historically, Excess ofLoss reinsurance increases or reductions are very small with avery limited impact on overall premiums, so the big increasefor this year was a bit of a shock to many owners. Given the factthat any increase in the cost of insurance is bad news for owners,the combination of General Increases, although modest,combined with major Excess of Loss increases was really badnews.The International Group clubs have had to pay for a numberof high profile and extremely costly claims incurred by itsmembers over the past few years. Due to the fact that shippinghas been suffering quite a lot since 2008/2009, most clubs havetried to keep premiums to a minimum. Major claims coupledwith relatively low premiums and a lot of new tonnage flowingin at low premiums, has led to quite a few IG clubs feelingthe impact and having to substantially raise their GeneralIncreases.The Swedish Club has not been spared from these P&Ieffects. We do however try to spare our members as much as wecan from increases as we need to look after their best interestswhile looking after our own best interests.This will be my last letter from Greece as I will be movingback to Sweden soon. I have really enjoyed and cherished myfour years in Greece. It is a wonderful country with the best climatein the world, mountains and seasides that are extraordinarilybeautiful, food that is to die for and wonderful hospitality.Unfortunately the economic woes have severely impactedthe country and its people during my years here and I hope mydeparture coincides with a turnaround for the Greek peopleand their businesses.Hans Filipsson will take over from me and will be startingin early April. Hans has been an acquaintance of mine for thepast 20 years, after he married one of my former colleagues’best friends, and in the past six month I have got to know himbetter. I think he will take over where I left off and that therewill be a seamless transition between the two of us. You willnot notice much of a difference as Hans is perfectly capable forthe role of General Manager of The Swedish Club in Greece.Best of luck Hans!The members of the Club in Greece include some of our longeststanding members and they, together with the rest of themembership, have always showed great support to us and I willmiss you all. The staff in the office are incredible and their commitmentto the Club, to me, and its members is second to none.Leaving Greece feels a bit like leaving my family but I am surethat I will continue to be involved in the Greek business goingforward and that I will still be around and even come to seeyou all from time to him. So thanks a lot for all your supportand see you soon!Tord NilssonGeneral Manager/Area ManagerTeam Piraeus30

THE SWEDISH CLUB TRITON 1-2013Club Information | News from AsiaYPhoto: iStockphotoTime to focus on future progressP&I renewal for 2013/14 is over. Thanks to our members’support we did well in Asia. We managed to achieve the renewaltarget on premium increase and we came out of the renewalwith a slight increase in both number of entered ships and grosstonnage. In addition we received over half a million gross tonsof committed new tonnage over the year. We renewed all theexisting charterers’ P&I insurance contracts, and added threenew accounts. Given all the circumstances, in particular thebad freight market, we should be happy with the outcome.When renewal is over it is time to focus on future progress.When members renew insurance contracts with the Club it isup to us to keep our promise to our members and provide goodservice in return. This of course is a continued effort.Last year we lost two senior staff member from our HongKong office. We filled in these vacancies by employing twoqualified solicitors from well-known shipping firms in HongKong; and we also boosted our resources in marketing andbusiness development. We will be adding more staff at our officeover the course of the year. We will soon have 15 people atour Hong Kong office with a very wide spectrum of expertise,lawyers, master mariners, and marine engineers. Adequateresources provide an important foundation for efficient, effectiveand quality services. We are aiming to build up one of thestrongest teams among our peers in Hong Kong and providebetter service to our members.I would like to take this opportunity of informing you thatwe will be holding a Marine Insurance Seminar in the autumnthis year in close proximity to Hong Kong. We have done thisfour times, once every three years. It proves to be a popularevent. Many of our members in Asia send representatives to attendand we look forward to seeing you this autumn.Ruizong WangManaging Director/Area ManagerTeam Asia31

THE SWEDISH CLUB TRITON 1-2013Club Information | News from NorwayPhoto: Finn Ståle Felberg ©Tjuvholmen KSEstablishing a stronger presence in NorwayMain renewals of our Energy business (MOU/FPSO)started in early February. The market has been and still is, moreor less flat, with some pressure on rates for larger fleets withgood loss records. Deductible levels remain unchanged butwith some upward adjustments for accounts with claims. Thenew Nordic Plan has been applied on all 2013 renewals led bythe Norwegian market.Norwegian shipowners have endured the global financialdifficulties somewhat better than many of their internationalpeers. A diversified overall fleet structure combined withstrong balance sheets, and in some cases major restructuringof operations and finances, have put many in a position to nowexploit market opportunities. According to Clarkson Research,Norwegian shipowners placed orders for 134 newbuildingsrepresenting some USD 17.4 billion, in 2012. This constituteshalf of all European orders and more than twenty per cent ofthe world order book.A rapidly expanding offshore oil and gas sector is a majorcontributor to this and more than fifty per cent of the Norwegianorder books are offshore service vessels (OSVs). The Norwegiancontrolled OSV fleet is the most modern in the worldand represents some 600 vessels. The Swedish Club has historicallynot targeted this market. By establishing of a strongerpresence in Norway and our entry into energy insurance twoyears ago, we are now exploiting further possibilities as far asdiversification is concerned in the Norwegian market.At the same time, our presence in the traditional Norwegiandeep sea segment has also been strengthened over the course ofthe past few months and we aim to further increase our visibilityand share of the market. By recruiting more local staff thisyear, especially on the claims side, we will soon be a full serviceSwedish Club office. We will be moving to new offices furtherout on Tjuvholmen in May and if you’re in the vicinity then,or perhaps during Nor-Shipping, which is in the first week ofJune, please come and see us.Tore ForsmoArea ManagerTeam Norway32

THE SWEDISH CLUB TRITON 1-2013Club Information | Out and AboutPhoto: Roman KoshkinSeminar in Odessa, November 2012Marlow NAVIGATION ran a Full Management Seminar fortwo days in November 2012 at Odessa, Ukraine. The seminar waswell attended and the participants included senior officers fromboth Marlow Navigation Cyprus and Germany together with officestaff.A number of interesting and important topics were presentedfor the participants and The Swedish Club Loss Prevention OfficerChristmas Dinner in Piraeus, 13 December 2012The Club’s Lucia Dinner, held once again at the Yacht Club ofGreece, opened the festive season with traditional Swedish foodand lots of smiles. The Scandinavian Church Choir, together withSwedish Club staff members, helped to create a warm, festive environmentfor all our guests, who really look forward to attendingour dinner each year.More pictures can be found onwww.swedishclub.com/News/Circulars and Out and AboutJoakim Enström and P&I Claims Executive Karoline Alfredsson,were invited to hold a half-day seminar concerning loss preventionas well as give the officers greater insight to the elements of P&Iinsurance. Following the seminar, some of the officers went on todo an MRM course. Judging from the participants’ comments, theevent was greatly appreciated and the Club is happy to have been apart of such a great initiative by our member.From left: Mr Nick Ghiouzelakis (Arion Enterprises Inc.) his daughter ValinaGhiouzelakis and Dionysios Valaveris (Grecomar Shipping Agency Ltd.)Mr George Agathokleous in the middle, his son Andrianos Agathokleous tothe left (British Bulkers Inc) and Tord Nilsson (The Swedish Club).33

THE SWEDISH CLUB TRITON 1-2013Club information | Staff NewsStaff NewsHead office GothenburgFredrik Bergqvist, Claims Executive P&I,joined Team Gothenburg on 3 December2012. He is a Master Mariner with seven years’seagoing experience and previously worked forDamen Shiprepair Götaverken in Gothenburg.Martin Birgersson, Senior Claims ExecutiveP&I, joined Team Gothenburg on 14 January2013. He is a Master Mariner with more thanten years’ seagoing experience and holds a B.Scin Business Administration specialised inShipping & Logistics. He previously worked forthe Port of Gothenburg.Oscar Holmqvist, Assistant Claims Executive,joined Team Gothenburg on 10 December 2012on a one-year traineeship. He holds a B.Sc inShipping & Logistics from Chalmers Universityof Technology in Gothenburg.Martyn Hughes, FD&D Manager, joinedTeam Gothenburg on 7 January 2013. He isa qualified Solicitor and prior to joining TheSwedish Club, was employed at the LondonClub. He has worked continuously in MaritimeLaw since 1987.piraeusDaniel Kilgren, Underwriter, joined TeamGothenburg on 17 January 2013. He has adegree from the Master Mariner Programmeat Chalmers University of Technology inGothenburg and seagoing experience as a deckofficer. He previously worked for Codan Marinein Gothenburg.Tord Nilsson will return to the head office inGothenburg on 1 July 2013 and take up theposition of Senior Manager, Underwriting &Special Risks.Jacob Vierö, Director, Marketing & BusinessDevelopment, joined the Club on 22 February2013. He has a solid background in sales andmarketing on the international scene. For thepast five years he has been employed by KukaNordic AB as Sales and Marketing Director forthe Nordic and Baltic region. There will be amore detailed presentation of him in our nextissue of Triton.Hans Filipsson has been appointed AreaManager at Team Piraeus with effect from1 April 2013.Erik Johansson has been appointed Head ofUnderwriting at Team Gothenburg with effectfrom 1 April 2013.hong KongLansee Man, Claims Manager, FD&D andP&I, joined Team Asia on 1 March 2013. Sheis a Solicitor, qualified in England, Wales andHong Kong. She previously worked for Ince &Co in Hong Kong.34

THE SWEDISH CLUB TRITON 1-2013Club information | Out and About / In Memoriam / Club QuizNaming ceremony of the”Nordlotus”, January 2013At the naming ceremony at Sumitomo Heavy Industries’ shipyardin Tokyo Bay on 19 January this year, Cilla Rhodin, our ManagingDirector Lars Rhodin’s wife, had the honour of being Godmother of theAframax tanker Nordlotus, entered with the Club. The ship is ownedby REEDEREI NORD Ltd, Limassol, Cyprus, which is a long standingmember of the Club.ChristianOldendorff,REEDEREI NORDand Godmother,Cilla Rhodin.Anders HolmbergIn MemoriamIt is with great sadness that we have to inform you of the passing of our dear friendand colleague Anders Holmberg.As a fully qualified Master Mariner, Anders served on tank ships and RoRos beforestarting with the Club in 1987. He focused primarily on P&I claims throughouthis career at the Club. In particular, he developed great skills and talents in thefield of environmental claims where his interest in nature and wildlife played animportant role.Anders was known for his direct approach to matters where “yes” was “yes” and“no” was “no”. This strong feeling of justice was often combined with his own particularsense of humour.Anders was highly valued in his endeavours, not only by us but also by the wholeP&I community. He will be sadly missed by all of us who had the good fortune ofworking with him.CLUBQuiz Whatis the term ”radar” coined from?1 Acronym for Radio Detectionand RangingX It is just a ReflectivePalindrom2 Acronym for RandomDetecting and Arching Howmany Liberty ships were builtbetween 1941 and 1945?1 2.710X 9992 1.776 Whatis the name of the first shipentered for P&I risks with TheSwedish Club?1 StavrosX Håkan2 GöteborgMail your answer to quiz@swedishclub.comThe first right answer will be awarded aClub give-away.Winner of Club Quiz 3-2012Winner of Club Quiz inTriton No 3-2012 is MrBaris Savci of KaptanogluHolding, Istanbul, who willbe awarded a Club giveaway.The right answers to thequestions are:2 Republic of GuineaX 6X 198235

THE SWEDISH CLUB TRITON 1-2013Club calendArFor further upcoming events, please refer towww.swedishclub.com/Club Calendar201322-26 April Marine Insurance Course Gothenburg7 May Lunch Seminar Copenhagen15 May Club Evening hamburg16 May Club Evening bremen17-19 June AGM events Gothenburg17 June Board Meeting Gothenburg18 June Annual General Meeting Gothenburg36www.swedishclub.com