Beacon No. 2 2003 - Skuld

Beacon jan 2004 orig 10.12.03 13:36 Side 1Bagged bulk cargos:Down for the count?PAGE 12U.S. criminal prosecutions ofOWS violations: Is there anend in sight? PAGE 16Legal News onlinePAGE 24beaconSKULD magazineNO 2 DECEMBER 2003Are you preparedfor the ISPS Code?PAGE 8

Beacon jan 2004 orig 10.12.03 13:36 Side 2EDITOR’S cornerGoing the extra mile…This was our last annualreport’s front cover statement.So what do we do to go thatextra mile? To answer thatquestion, we start a new seriesof articles presenting Skuldoffices, this time Copenhagen.How do they keep their membersin focus? What kind of specificcompetence do they offer? Howare complicated cases handled to achieve optimalresults for members? See pages 4–7.ISPS is a hot topic these days. However, although thebasic facts are well known by now, we analyse thetechnical and legal implications of the new Act.Knowledge Management Officer Sara Gillingham talkswith Vice President and Lawyer Jørgen Rasch andPrincipal Surveyor Sverre Bergh.Interested in legal matters? You will find plenty in thisissue. Why not also sign up on our website’s mailinglist and receive regular separate Legal News updatesby e-mail? Read more on pages 24 and 25.On the technical and loss prevention side, you will findthe latest news and advice regarding prosecution ofOily Water Separator violations in the U.S., as well assome recommended precautions regarding automatictallying of cargo.ContentsThe U.S. Maritime TransportationSkuld Copenhagen – going the extra mileurity4Are you prepared for the ISPS Code? 8LOSS PREVENTION:Bagged bulk cargoes:Down for the count? 12Skuld School 2003 15LOSS PREVENTION:U.S. criminal prosecutionsof OWS violations:Is there an end in sight? 16The latest financial report from Skuld is on its way. Bythe time you read this, the first third quarter report inthe history of Skuld has been published. We are proudto say that the figures are looking better. If you havenot received a copy of the report, please contact us orgo to www.skuld.com.SEASON’S GREETINGSIngeborg BergeBEACON (SKULD MAGAZINE)is the official publication ofAssuranceforeningen Skuld(Gjensidig)No. 2 December 2003Issue 182ADDRESSP.O Box 1376 VikaN-0114 Oslo, NorwayTel: +47 22 00 22 00Fax: +47 22 42 42 22

Beacon jan 2004 orig 10.12.03 13:36 Side 3CONTENTSPAGE 4PAGE 15 PAGE 19 PAGE 22LEGAL NOTES:Claims, arrests and maritimeinjunctions in China 19Cheers or tears 22Legal News online 24Enforcement of POEAcontracts in American Courts 26Hunting & fishing 29Committee meeting in Istanbul 30Personnel news 31Contact Skuld 31VIEWPOINT:Stronger finances 32E-MAILIngeborg.berge@skuld.comVISIT OUR WEBSITEwww.skuld.comEDITOR IN CHIEFIngeborg BergeEDITORIAL STAFFLise LarsonLAYOUTTransmission ASEntire contents © 2003, all rightsreserved. Reproduction in whole orin part, without written permissionfrom Skuld, is prohibited. Opinionsexpressed by writers in Beacon arenot necessarily those held by Skuld.Skuld assumes no responsibilityfor unsolicited materialFRONT PAGEEarly morning port security flightover the Houston Ship Channel.Photo: Courtesy of the U.S.C.G.REPRO AND PRINTINGGan Grafisk asBEACON 3

Beacon jan 2004 orig 10.12.03 13:36 Side 4In the first of several articles presenting Skuld’s offices, we take a look at Copenhagen.Flexibility and competence building help form an organisation willing and able to go theextra mile. Furthermore, examples show how complicated cases are solved efficientlyfor the benefit of members.Skuld Copenhagen – gSkuld Copenhagen’s long tradition of serving the maritime community dates back to 1918. Today, a highlycompetent staff serves members from Denmark, Iceland, the Faroe Islands, Greenland and Turkey.– A clear customer focus, service andcompetence help us maintain a strongposition in the home market and play animportant role in the local shipping andmaritime law environment, says Senior VicePresident and Head of Office Anders Ulrik.Taking immediate actionAs the cases discussed in this articleshow, expertise and flexibility go handin-handin helping members bringcomplicated cases to a satisfactoryconclusion. A pro-active approach andstrong relationships with the partiesinvolved often lead to positive results forSkuld members.At your service: Stig Gregersen, Thomas Bjørn Larsen (back row)Jørgen Rasch, Anders Ulrik, Birgitte Larsen (front row)Close contact with members– Our combined underwriting and claimsfunction optimises service levels throughcloser contact and better understandingof members’ needs, says Anders Ulrik.– Our underwriters are in touch withmembers regarding their specificinsurance needs as well as their claimsproblems, making sure that optimalservice is always provided.In-house legal competence– Over the years we have seen adevelopment from small cargo claims anddisputes to much more complex casesthat call for different legal expertise.Today, we employ eight qualified lawyersand two trainees and continuouslyensure that their skills are fully updated.One good example is the course inmediation, described later in this article.– With in-house legal expertise, we arecapable of representing members inDanish court cases, and are also conductinga number of arbitration cases on documentsin London. This is not only cost effective,but also time-saving for our members,continues Anders Ulrik.Active trade representationLawyers from Skuld Copenhagen arerepresented on the BIMCO DocumentaryCommittee and on sub committeesdeveloping new contracts and clauses.This has taken Skuld Copenhagen to theforefront of developments and providesstaff with important training in legalskills for the benefit of Club members.Skuld Copenhagen’s lawyers are activein the Danish branch of CMI (ComitéMaritime International) and cooperateclosely with the Danish Shipowners’Association on maritime legal matters.Prevention is better than cureSkuld Copenhagen is focusing onmembers’ claims handling needs. As,however, prevention is better than cure,we arrange regular in-house workshopson specific topics. The next one will beon legal and insurance aspects of ISPS.4 BEACON

Beacon jan 2004 orig 10.12.03 13:36 Side 5going the extra mileEmergency responseBy Jørgen Rasch, Vice President and LawyerWithin hours of the grounding of the fully loaded Bongo Danielsen at the Cape Verde Islands, we werenotified and could provide assistance to its owners.the owners and Danish hull underwritersenabled us to assist the parties in finding amutually acceptable payment solution forthe owners.Through daily contact with the SCR wewere able to discharge all cargo from thevessel, with the exception of the irreparablydamaged cement. The damaged hull andcargo were eventually sold to a localgovernment body, thereby avoiding the costof towing the vessel into deep waters forscuttling.Close contact with salvors from thecommencement of the salvage operationand the SCR’s meticulous record keeping,enabled us to find a swift and economicalsolution to salvor’s remuneration under theSCOPIC (Special Compensation P&I Clubs)Rules.The close co-operation between owners,hull underwriters, the SCR, salvors andSkuld Copenhagen was the prime reasonfor concluding this matter within fivemonths of the grounding.Installing booms around the casualtyThe Bongo Danielsen — case closed in under five monthsThe vessel had run aground at a placewithout club representatives close by,and it was readily apparent that a highlyskilled SCR (Shipowner CasualtyRepresentative) had to be appointedimmediately. We assisted owners andtheir hull underwriters in finding asuitable salvor and in drawing up thesalvage agreement. Later events confirmedthat the choice of the SCR was crucial. Hekept the salvage expenditures in check andpossessed the ability to liaise with localauthorities – a skill that proved invaluable.When it became apparent that the vesselwas beyond repair, our close connection toBEACON 5

Beacon jan 2004 orig 10.12.03 13:37 Side 6Alternative dispute resolutionBy Stig Gregersen, Vice President and LawyerMore and more disputes are settled by way of mediation. Through acquired competence, Skuld helpsmembers save time and money.As already advised in Beacon no. 2, 2002,the popularity of alternative disputeresolution (ADR), and especially mediation,is increasing – a trend that certainly hasnot diminished since then. Actually, since2002, BIMCO has promoted the use ofmediation through its Standard DisputeResolution Clause, a tailor-made clausereadily available to the shipping community.Although, generally speaking, mediation isconfidential unless the parties decideotherwise, there are numerous examplesof disputes finalised by way of successfulmediation. One major example is the outof-courtsettlement of the recourse actioninitiated by the International Oil PollutionCompensation Fund against the MilfordHaven Port Authority (MHPA) in relation tothe Sea Empress incident. The trial wasestimated to last eight weeks, startingJune 2004, but following agreementbetween the parties to investigatemediation possibilities, the case wasfinalised on 20 October 2003 aftersuccessful mediation lasting merely twodays. The agreement stated that MHPAwould pay GBP 20 million to the Fund infull and final settlement of all claims inthe recourse action.Educating senior staffHaving monitored this aspect ofalternative dispute resolution closelyduring the last years, we decided thatsome of Skuld Copenhagen’s senior staffmembers study ADR more closely. Lastyear, Jørgen Rasch attended anextensive course in mediation. Theauthor is due to finalise a MastersDegree in Mediation and ConflictResolution in June 2004 from the Universityof Copenhagen, in what is believed to be thevery first Mediation Master Programmeoffered by a European university(http://www.jur.ku.dk/konfliktmaegling/menu.htm).Assisting membersImproving our knowledge and experienceof ADR, and especially mediation, will putus in a much better position to:• Assist members in deciding whether amatter should be referred to mediation• Assist members in connection withactual mediations• Advise members whether mediationclauses should be included in newcontractsEighty five years and going strong — Skuld has been established in Copenhagen since 19186 BEACON

Photo: Dan ÅgrenBeacon jan 2004 orig 10.12.03 13:37 Side 7Case handling on the spotBy Thomas Bjørn Larsen, Senior LawyerThe m.v. Fykan's stolen bonded stores fueled a local village partyWhen the Danish vessel m.v. Fykan hit an underwater reef and subsequently grounded on an islet off theNorwegian west coast, it was action from the start.The crew was brought to safety by a rescuehelicopter. We arranged for statements tobe taken by lawyers at Oslo airport beforemost of the crewmembers were senthome. Within days, Skuld representativesand appointed lawyers took part in themaritime inquiry held in Trondheim, whereSkuld representatives also had immediatecontact with authorities and cargo owners.Within a short time, it became clear thatthe vessel was a CTL (Constructive TotalLoss). This left the Club with the task ofnegotiating wreck removal. We succeededin striking a good deal with someoneinterested in rebuilding the vessel.There were no deals to be struck with theauthorities, however, on the price forbunker removal, but our co-operationsecured relatively low exposure in thisrespect.Amidst our negotiations, we also realisedthat local people were probably the worst‘danger to the environment’. During thelong, dark January nights, local villagersarrived to steal the vessel’s bunkers andcargo. But not only that, cigarettes andalcohol from the vessel's bonded storesserved to fuel a local village party. Personalitems belonging to the crew were alsostolen – losses that were covered by Skuld.Taking care of our membersBy Birgitte Larsen, Underwriter and Claims AssistantClearly, there were more claims than fundsavailable under the 1976 limitationconvention. Instead of establishing alimitation fund, we contacted the variouscargo owners and dealt with all cargoclaims equally and impartially through anindependent average adjuster.By utilising local assistance, co-operatingwith authorities, dealing with cargointerests with respect and takingimmediate action together with ourmember, we managed to close this casewithout one single writ being served.Underwriting competenceAs an underwriter, I handle quotations fornew and existing members. I also giveassistance to members in connection withadditional covers, trading certificates andany other aspects of members’ P&I cover.… and claims handling experienceP&I underwriting is very seasonal, with theyearly renewals from December to March asthe most work intensive period. This meansthat, for the rest of the year, I have thepossibility of combining day-to-dayunderwriting with claims handling, servingmembers and advising fellow colleagues.This is a perfect arrangement. I see theresults of my underwriting when a claimarises, and through my claims handling,I see the consequences of the underwritingthat I am responsible for.By serving the same members, both asunderwriter and claims handler, I see issuesfrom both sides and have an advantage whenadvising members on their insurancerequirements. I am better equipped to giveadvice on the extent of cover needed, and themeaning of the various clauses applying tothat cover, since I have first hand knowledgefrom both sides of the fence.Benefits for membersWith fewer points of contact, improvedcommunication and a higher level of staffcompetence, it is my opinion that service isenhanced and members are better takencare of. It’s as simple as that!BEACON 7

Beacon jan 2004 orig 10.12.03 13:37 Side 8By Sara Gillingham, Senior Lawyer andKnowledge Management Officer, Skuld, OsloAre you prepared for the ISPS Code?What should members be doingin the run-up to implementationof the ISPS Code? How is Skuldresponding? Sara Gillinghamtalks with Jørgen Rasch andSverre Bergh.Jørgen Rasch, Vice President and Lawyer,Skuld CopenhagenSverre Bergh, Principal Surveyor,Skuld, OsloThe International Ship and Port FacilitySecurity Code (ISPS Code) and SOLASChapter XI introduce a comprehensivesecurity regime intended to strengthenmaritime security and prevent andsuppress acts of terrorism againstshipping. Some of our members havealready started the process of obtainingan International Ship Security Certificatefrom their flag state. Those memberswho have not yet started this processshould consider the ISPS Code and itsrequirements long before 30 April 2004 (ittakes two months to obtain certification).From 1 July 2004, ships not complying withthe ISPS Code risk the danger of beingdetained in ports or refused entry to port.They also risk losing their insurance cover.The ISPS Code applies to all cargo shipsand passenger ships of 500 gt. or moreand mobile offshore drilling units engagedon international voyages.The ISPS Code challengeJørgen, what do we expect our members tobe doing about the ISPS Code right now?We know that some members are welladvanced in their preparation for theCode’s entry into force, but only a few havealready received their International ShipSecurity Certificates. We expect membersto be consulting with their maritimesecurity consultants or Class right now.We can only impress upon members theimportance of being fully certified by1 July 2004.What kind of preparation do you expectmembers to be making at this stage, Sverre?Although many may already have adoptedsecurity measures and therefore havesome expertise in this area, many othersneed to learn new skills. Further trainingof personnel may be necessary, togetherwith a need for more security equipmenton board. Regular security drills and othersimulations will need to be practised.There will be similar demands made onthose working portside as well.Sverre, what do you think are the greatestchallenges regarding implementation ofthe ISPS Code?Implementation of the Code in about20,000 ports worldwide will place a strainon resources. Many countries do not yethave in place the domestic legislationrequired to implement the ISPS Code.There may be different interest groupsoperating, at national and local governmentlevels for instance, which would complicateor delay decision-making within a portauthority. Coast Guard interests, terminaloperators and stevedores may also want asay. Physical changes to the port, extraequipment and personnel may be required.Many ports may not have adequatelybudgeted for this situation.Not all ports will be ISPS certified by 1 July2004. The Master will have to find the right8 BEACON

Beacon jan 2004 orig 10.12.03 13:37 Side 9Ships breaking the 1 July deadline will risk detention or being refused entry to portsperson within the port to agree and sign offon a Declaration of Security. This maycause delay. Delay will also be experiencedin sailing from a non-certified port to acertified port, as certain procedures arerequired here too.Sverre, how do members know which portsare certified and which ports are not?IMO will be issuing a list of certified portsbefore 1 July 2004, but it is not yet knownhow and when this list will be published orhow often it will be updated.Skuld’s Technical Services – adviceHow does the ISPS Code affect the workbeing done by Skuld’s Technical Services?In terms of Pre-Entry Surveys, we look atwhat kind of security procedures are inplace and how far owners have come withthe ISPS certification process. ForCondition Surveys and other inspections,we observe what kind of security measuresare in place and how they are beingpractised – are we asked to showidentification, are we escorted to theMaster, are there restricted areas, thatkind of thing. Once a ship is certified, wewould expect to see the International ShipSecurity Certificate. We will also make ourown observations as to how effective shipsecurity is in practice.Will you be looking at ship securitydocumentation on board, Sverre?We would not expect to see the completeShip Security Plan required by the ISPSCode. This is sensitive information and isnot to be disclosed to unauthorisedpersonnel. Not even an inspecting portauthority has a right to see the completeShip Security Plan; they are only entitled tosee certain elements of the plan.What if the Port Authority insists or if there isa disagreement between the Master and thePort Authority about this?The Port Authority, or the recognisedsecurity organisation within the port, musthave ‘clear grounds’ and must exercise‘professional judgement’ if they wish toreview the Ship Security Plan. In someports, there may be a difference betweentheory and practice and the Master shouldcontact his Company Security Officerand/or his flag state authority if there isany dispute.Sverre, how long will the certificationprocess take?The consensus seems to be that thecertification process will take at leasttwo months, but a certain amount ofpreparation is required before embarkingon the certification process. Currentsecurity procedures need to be reviewedand risk assessments have to beundertaken. Budget requirements,in terms of training and possible newequipment, need to be considered now.Skuld preparations for ISPS CodeJørgen, what is Skuld doing to preparefor implementation of the ISPS Code?Skuld has already sent a complimentarycopy of the International Chamber ofShipping’s publication "Guidance for ShipOperators on the IMO International Shipand Port Facility Security Code (ISPS Code)"to members to make sure that all are awareof the need to prepare for certification.We are following progress of theimplementation of the Code and circulatingimportant information internally. Sverreand I are in charge of internal training onthe ISPS Code and have attended externalcourses ourselves.Once the Code enters into force next year,we expect to receive a number of questionsfrom members regarding costs incurred ortime lost in ports due to port authoritychecks. We are training all claims handlersto deal with day to day enquiries. EachSyndicate will also have a claims handlerwith more in-depth knowledge of the Code.They will be able to answer more difficultqueries and to give a presentation tointerested members of the problems weforesee. In the Oslo and Copenhagenoffices, there will be a claims handler withoverall responsibility for co-ordinating ourresponse to members and for preparing alist of frequently asked questions. Therewill also be one person within Skuld whowill liaise with management and other P&Iclubs within the International Group.Contracts and cover – legal issuesJørgen, is there need for a new charterpartyclause?I believe that there is a need for newcharterparty clauses to deal with delay andcosts that may be incurred following theentry into force of the ISPS Code. BIMCOhas published an ISPS clause for timeBEACON 9

Beacon jan 2004 orig 10.12.03 13:37 Side 10Photo: Courtesy of the U.S.Coast GuardFailure to comply with the day-to-day security requirements of the Code maymean loss of liability cover towards cargo owners, crew or third parties10 BEACON

Beacon jan 2004 orig 10.12.03 13:37 Side 11charters. This particular clause is aimed attime charterparties, but a similar clausewill be needed to cater for the problemsencountered when vessels are voyagechartered. We also envisage thatIntertanko will prepare a suggested ISPSclause for industry use.What do you expect will be the most difficultlegal issues in the new Code?Although it is always difficult to foresee,the provisions in the Code which requirethe Master to know the identity of theparties in control of the vessel, might bedifficult to fulfil. We often see a chain ofcontracts from owners through timecharterer(s) to a voyage charterer who willgive the Master instructions as to where toload and discharge the cargo carried. Onemight also say that the holder of a bill oflading with a range of discharge ports, e.g.Rotterdam-Hamburg, is operating thevessel because they are deciding where thevessel should proceed to discharge itscargo. At a recent security conference, theEU Commissioner for Transport statedthat, in his opinion, a Master would not berequired to know the identity of such a billof lading holder, but should obviously knowthe identity of all time charterers andvoyage charterers, including their contactdetails.Jørgen, what should owners do if a fullycertified vessel is ordered to call at a portwhich is not ISPS certified?Owners would have to make a new riskassessment of the vessel calling at thatparticular port. Based on that riskassessment, owners would have to decidewhether to improve the security on boardthe vessel to meet the increased riskinvolved in calling at that port, or whetherto inform the appropriate party that theport is deemed unsafe and request ordersto proceed to an alternative safe port.Finally, let’s take a look at the insuranceposition. Jørgen, can you summarise forus how the ISPS Code will affect members’cover?Members must comply with all thestatutory requirements of the vessel’sflag state, including operation andmanagement of the entered vessel (Rule29.1). Failure to obtain an InternationalShip Security Certificate from the flag statewould jeopardise owner’s insurance cover.Failure to comply with the day-to-dayrequirements of the Code regardingsecurity operations may well mean that amember would not be covered for liabilityincurred towards cargo owners, crew orthird parties.Repercussions of the CodeAs there will be commercial repercussions,members should review shipping contractscurrently in use and consider how, ifnecessary, these should be changed totake into account the effect of possibledelay, detention, or increased costs.Although there is time to amend voyagecharterparties and bills of lading before1 July 2004, new and existing timecharterparties need to be reviewed now.The question is: do the existing clausescover the allocation of risk and expenseof delay or increased port expenses in asatisfactory manner? The outcome maywell be that owners would bear the riskunder the standard clauses of most timecharterparties. Some time charters mayalready have additional clauses. A goodexample is US Security Clauses, althoughthese only deal with US ports and not portson a worldwide basis. The extra costswould also be considered as operationalexpenses not recoverable under P&Iinsurance. Members should review timecharterparties that continue beyond 1 July2004, or that have options to extend beyondthat date, and consider whether any termscould or should be renegotiated. As Jørgenpoints out, it is expected that BIMCO andIntertanko will be publishing suggestedcharterparty clauses.Author’s note:Sverre referred to the IMO list of certifiedports. This list will obviously be importantfor everyone involved in shipping – not justfor those on board and those involved inoperations, but also those involved in fixingvessels and cargoes.MEMBERS SHOULD REVIEW TIMECHARTERPARTIES THAT CONTINUEBEYOND 1 JULY 2004, OR THATHAVE OPTIONS TO EXTEND BEYONDTHAT DATE, AND CONSIDER WHETHERANY TERMS COULD OR SHOULD BERENEGOTIATED.BEACON 11

Beacon jan 2004 orig 10.12.03 13:37 Side 12LOSS PREVENTIONBy Janet Ching, Lawyer, Syndicate 2 Osloand Skuld Defence ServicesBagged bulk cargoes:Down for the count?"To err is human, but to really foul things up you need a computer".Or when dealing with bulk cargoes, an automatic tally…It is becoming increasingly common for the loading of cargoes in developed ports to be highlymechanised, for example, loaded by conveyor belt and counted by automatic tally, or byelectronic silo scale. Whilst it is natural for everyone to assume that the tally carried outautomatically or electronically cannot be wrong, members should be aware that this is notnecessarily the case and some steps can be taken to help protect members’ interests.Automatic tally systemsThere are two different types of automatictally in use at the port of Antwerp:1. A mechanical system using an armmoving under the passage of each bagon the conveyor belt with a conveyor beltat the side of the location for countingmoving at a higher speed. This is notentirely reliable because sometimesbags can lie on top of each other, and amechanical counting arm cannot takethis into account.Photo: Scanpix2. An electronic system involvingdetection of each bag on the conveyorbelt by an electronic eye. Sometimesthree eyes are fitted enabling the resultsto be crosschecked. In addition, theremay also be a mechanical systemcounting each opening of the hatch ofthe automatic-bagging machine. Thisallows a comparison between theelectronic and mechanical counts.Despite modern technology, thesesystems are not 100% reliable. Someautomatic tally machines are notcalibrated or officially approved ortested. At some ports, regular internalchecks are carried out. However,practice varies and the accuracy of theautomatic tally varies depending uponcargo and other conditions.Previous Club reports on shore weighingof bagged and bulk commodities haveconcluded that the accuracy is unlikelyto be better than within 0.2% and, inconveyor weigh belt systems, may be nobetter than plus or minus 2%. As yet, wehave insufficient evidence to reach anyfirm conclusions about the margin oferror for automatic tally machines forbagged cargoes. However, there is littledoubt that there are inaccuracies; thereare no technical means to accuratelydetermine the exact weight or quantityof a bulk cargo on a ship.The port of Antwerp contains both mechanical andelectronic tallying systems12 BEACON

Beacon jan 2004 orig 11.12.03 08:45 Side 13Photo: Image BankAlways aim to take a physical tally and note the figures on the bill of ladingManual tallyThe best way for members to check anddetermine the quantity of cargo loaded isto have a physical tally carried out andfor the ship’s figures to be noted on thebill of lading.• Ideally, members should agreewith shippers and receivers that a jointtally be carried out by independenttallymen at the load port and dischargeport. Alternatively, owners should carryout their own tally of the quantityloaded, or the Master should at leastmake his own check of the shore figures.• If the ship’s figures differ from thosestated in the bill of lading, the Mastershould clause the bill of lading. Bills oflading should be claused as specificallyas possible to accurately reflect thecargo loaded. Also, ensure that Mates’receipts are accurate.• If hatch covers are sealed afterloading operations and certified by asurveyor, the hatches should beunsealed and witnessed jointly by allparties.Insisting on a ‘clean’ bill of lading?What should the member do if shippersrefuse to allow manual tally figures tobe inserted in the bill?There is currently no authority ondiscrepancies between automatedmethods of determining the quantity ofcargo and manual draft survey or tallyfigures. Guidance may be found in theEnglish Court decision of The Boukadoura([1989] 1 Lloyd’s Rep. 393).In this case there was a difference in thebill of lading figures and the ship’sfigures of approximately 5,000 barrelsof fuel oil. The Master agreed to sign thebill of lading if he could endorse it withthe ship’s figures, but the charterersrefused to accept anything other than a‘clean’ bill of lading. The dispute led toa delay of 24 hours. Owners succeeded intheir claim for damages. The Court stated,"the sensible course for the Master toadopt in such circumstances is to clausethe bill of lading, either generally or byrecording the ship’s figures alongsidethe shipper's".Under Hague/Hague Visby Rules,members are obliged to state the quantityor weight of the cargo, unless there arereasonable grounds for suspecting thatthe weight furnished by the shipper isinaccurate. Even if the charterpartyrequires the Master to sign bills of ladingas presented, "this does not mean thatthe Master is bound to sign, or thecharterers may issue, a bill of lading inwhatever terms the charterer choosesto demand". Instead, "there is … a basicand implied requirement that the billsas presented should relate to the goodsactually shipped and that they shall notcontain a misdescription of the goodswhich was known to be incorrect".The Boukadoura provides some helpfulguidance; however, each case will turnon its own facts. What was the margin oferror for a draft survey or manual tally?Were the Masters actions ‘reasonable’,taking into account the length of delayand the reliability of the Master’sevidence regarding discrepancies inthe shipper’s figures? Generally, in suchcases, the issues will be whether theMaster has reliable evidence that theshore measurement was inaccurate,and whether the Master’s actions werereasonable.Clausing bills when manualtally is not possibleSometimes there is no opportunity fora manual tally. In such cases, ourrecommendations to members are toclause the bills of lading as specificallyas possible:• “electronic tally, quantity cannot bechecked by carrier"; or,• "number of bags as stated by theshipper and based on electronic tally:Master and carrier have no reasonablemeans of checking figures given thespeed at which cargo is loaded".These wordings are more likely to beeffective against claims by cargointerests in certain jurisdictions (seenext page) than clausing the bills moregenerally "shippers load and count".Clausing the bill "electronic tally, quantitycannot be checked by carrier" should notmake the bill ‘unclean’. Article 32 of theUniform Customs and Practices forDocumentary Credits (UCP 500) statesthat a ‘clean’ transport document is onethat bears no clause or notation thatexpressly declares a defective conditionBEACON 13

Beacon jan 2004 orig 10.12.03 13:37 Side 14of the goods and/or the packaging.Article 31 of UCP 500 indicates a numberof common clauses that may be acceptableto banks, such as "shipper’s load, stowand count" or "said by the shipper tocontain", and clausing the bills"electronic tally, quantity cannot bechecked by carrier" or similar, does notoffend article 32 and should be acceptedby banks.Effectiveness of clausing billsWhen shipper’s figures cannot be checked bythe member, the effectiveness of clausingthe bills will vary, not only on a case by casebasis, but also according to jurisdiction:• Belgium –The bill of lading should beclaused as specifically as possible, e.g."number of bags as stated by theshipper and based on electronic tally:Master and carrier have no reasonablemeans of checking figures given thespeed at which cargo is loaded". TheBelgian Court will determine on theevidence available, whether the Masterand the crew had ‘reasonable’ means/opportunity to tally the bags.• France – As above, the bill should beclaused as specifically as possible.The French courts are very strict inassessing whether the carrier hadreasonable grounds for suspecting thatthe weight furnished by the shipper wasinaccurate and members should try tocollect and record any information that isavailable.• Spain – Generally, clauses such as"shipper's load, stow and count" areacceptable, as long as the Master hasreasonable grounds for suspecting thatthe description furnished by the shipperdoes not accurately represent the goodsactually received or when he has had noreasonable means of checking. However,there are differing opinions as to whetherthe previous enactment of the HagueRules can still apply. If they do, a carrierwho has any suspicion as to the accuracyof the shipper's description, must statein the bill of lading the reasons forsuspecting this or why it is not possibleto check the accuracy of the description.• South Africa – New legislation(the Sea Transport Documents Act)provides that a sea transport document(including a bill of lading) is prima facieevidence, against the carrier of shipmentin favour of the shipper, but conclusiveevidence in favour of a subsequentholder of the bill of lading, including anamed consignee. The new Act appliesto all goods shipped to or from SouthAfrica and to any legal proceedingsinstituted there, and will override anychoice of law in the bill of lading.It is currently not clear what impact thenew provisions will have judicially,particularly whether a carrier can stilldefend a claim effectively by the ‘all in allout’ defence or whether the effectivenessof this defence is now limited. There isno doubt that, in due course, the matterwill receive judicial interpretation, but inthe meantime it is recommended thatMasters clause bills of lading to indicate,where applicable, that the quantity saidto have been loaded is based on theshipper's figures, which could not bechecked or confirmed by the carrier.Members who automatically rely uponthe automatic tally/shipper’s figureswithout carrying out their own tally of thecargo where they have the opportunity todo so, will be vulnerable to claims forshortage by the shipper. However, ifmembers have no opportunity to checkthe quantity said to have been loaded bythe shipper, clausing the bills effectivelymay help them have recourse against theshipper.With thanks to correspondents/lawyersSCUA, Antwerp, France P&I, DLA, Madridand Shepstone & Wylie, Durban for theircontributions.MEMBERS WHO AUTOMATICALLY RELYUPON THE AUTOMATIC TALLY/SHIPPER’SFIGURES WITHOUT CARRYING OUTTHEIR OWN TALLY OF THE CARGOWHERE THEY HAVE THE OPPORTUNITYTO DO SO, WILL BE VULNERABLE TOCLAIMS FOR SHORTAGE BY THESHIPPER.14 BEACON

Beacon jan 2004 orig 10.12.03 13:38 Side 15Some of the students gathered in Vigelandsparken,OsloSkuld School 2003Representatives from Algeria, Belgium, China, Costa Rica, Denmark, Egypt, the Faroe Islands,Finland, France, Germany, Greenland, Guatemala, Iceland, Italy, Monaco, Norway, the RussianFederation, Singapore, Spain, Sweden, Switzerland, the Netherlands, Ukraine, the United ArabEmirates, the United Kingdom and Yemen — we truly enjoyed seeing you all in October.This year’s Skuld School was held 15-17October in Oslo. As in previous years, theSchool was well attended with more than70 students from 26 different countriesmaking the trip to Oslo. Bringing togethermembers and associates from differentparts of the world really shows us howinternational our business is.By allowing members and otherassociates to understand more aboutSkuld and how P&I works, we alsodevelop closer relationships. We want tokeep our members in focus and thisprovides the chief motivation behindSkuld School. In our day-to-day business,we all rely heavily on e-mails, telephonesand faxes. Meeting people face to face ismuch more enjoyable.Three days well spentSkuld School is primarily aimed atmembers’ junior staff and others whoneed a working knowledge of or arefresher in P&I insurance. Lectures aregiven by Skuld’s own experienced staffmembers and are kept at a fairly basiclevel. Judging by participant feedback,the information is well received.Following completion of the three-dayintensive course, participants receive theCertificate in P&I Insurance.This year’s presentations covered – on theclaims side – tank, dry cargo, personalinjury/stowaways and oil pollution from aP&I perspective. Underwriting lecturesincluded insurance products, entryprocedures, statistics and reinsurance.There were also lectures on defenceinsurance, emergency response and riskmanagement/loss prevention, as well asclaims workshops.Although there are a lot of facts to take in,there are also social events. Attendantsenjoyed a dinner at the Norwegian MaritimeMuseum, a sightseeing tour of Oslo and an‘Open House’ evening at the Skuld offices.Friends and valuable contacts were made.What the students thoughtHere are a few comments from thisyear’s students:– Very useful. Thanks very much!– The seminar was very useful and myexpectations were exceeded.– The seminar was very informativeand helped me very much to knowmore about Skuld and its activities.– Given the time available, the seminarwas well organised and carried throughin the best possible manner. As the aimwas to introduce your staff, your scope ofactivities and to provide a picture of whatP&I is all about, then I can only say: Yes,you hit the mark well!– Thank you very, very much for aprofessional and innovating seminar,where the ‘open’ atmosphere is evenmore important in the long term thanthe technical info.Did you miss this year’s Skuld School?There will be a new chance in October2004. The course will be advertised onour website well in advance and memberswill receive invitations.Lectures are given by Skuld’s own experiencedstaff membersBEACON 15

Beacon jan 2004 orig 10.12.03 13:38 Side 16LOSS PREVENTIONBy Joe Walsh, Partner,Keesal, Young & Logan,Long Beach, CaliforniaU.S. criminal prosecutions of OWS violations:Is there an end in sight?Since the Oil Pollution Act of 1990 (OPA ’90), perhaps no other single maritime issue in the U.S.has received so much concentrated publicity as the U.S. government’s continued focus oninvestigating and prosecuting Oily Water Separator (OWS) cases. Despite this publicity, industrywarnings and P&I club advisement (such as this article), some owners and operators have stillnot fully heard or appreciated the message.In the past year, no less than 21 vesselson the U.S. west coast have beenidentified by the U.S. Department ofJustice (USDOJ) as having engaged inillegal dumping of oily wastes. Morevessels, individuals and companies arecurrently under investigation. USDOJ andU.S. Coast Guard are on the record asbeing convinced that the practice of illegaldumping at sea is "so rampant and sopervasive" that they are actually givingmore attention and devoting moreresources to it. No, there is no end insight, at least not for now.A quick legal overviewThe U.S. authorities have initiated anaggressive port state inspection programas permitted under MARPOL. In caseswhere a discharge occurs or has occurredwithin U.S. waters, it may opt to pursue acriminal prosecution under its version ofMARPOL, which is codified in the Act toPrevent Pollution from Ships (APPS), 33U.S.C. § 1901-1911. Except to refer a civilenforcement action to the flag state, thereis very little the U.S. can do in caseswhere a non-U.S. flagged vessel hasillegally discharged on the high seas.However, statements or actions by thecrew (or owners/operators) to conceal theMARPOL violations or otherwise misleadinspectors including, for example, makingfalse entries in the Oil Record Book (ORB)serve as an entirely separate basis forcriminal prosecution. In the U.S., it is afelony to knowingly make or present afalse statement to a USCG inspector.Thus, most of the OWS cases involve adispute over statements made toinvestigators, entries (often multipleentries) in the ORB and other actionstaken to conceal illegal conduct.A suggested approachOwners/operators trading in the U.S. haveinvested dearly over the years to complynot only with OPA ’90, but with the manyindividual state anti-pollution laws aswell. Those efforts typically includesubstantial measures to ‘prevent’ apollution incident as well as a‘contingency plan’ of action should anincident nonetheless occur. Given the U.S.government’s position on OWS cases,perhaps the same approach should beconsidered with respect to MARPOL andbilge waste management.The failure to take affirmative steps toensure that your vessels are in fullcompliance with MARPOL before the U.S.authorities do, will, at best, prove costly anddisruptive. In the worst of circumstances, itcould result in substantial multi-milliondollar fines, imprisonment of crew, officersand shore side management and even theloss of key business. Similarly, just as oneplans against a contingency, a well advisedowner/operator might consider having aplan in place to defend against a prosecutionshould an investigation get underway.Simply put, an owner/operator cannot affordto ignore these issues.Prevention: avoiding an OWSinvestigation in the first instanceThe most obvious means for avoidingan OWS investigation is to ensure fulland complete compliance with MARPOL.Easier said than done. What exactly doesit mean to ensure full compliance?Clearly, it is not sufficient for managementto simply order shipboard personnel tocomply with MARPOL. A careful or‘responsible’ owner/operator will takesteps to make sure that the tools, trainingand resources are in place such that a16 BEACON

Beacon jan 2004 orig 10.12.03 13:38 Side 17The U.S. Coast Guard is devoting more resources to combating illegal dumpingPhoto: Courtesy of the U.S.Coast Guardreasonably competent crew can abide bythe Convention. These steps might includea system of internal audits designed toperiodically check the operability andcondition of bilge waste managementequipment such as the incinerator, bilgeand sludge pumps, Oil Content Meter andthe OWS itself. It probably should alsoinclude a more in-depth review andreconciliation of ORB entries against ratedpump and tank capacities. An audit canalso be used for checking to see if thecrew has the training to properly cleanand service the OWS. An audit programmight also set a schedule for calibratingthe OCM.Compliance itself, however, may not beenough to avoid an investigation. Rather, itis also critical to project a positive image,or a ‘first impression’ that the vesseloperates in full compliance. This can beachieved by having a clean and wellpresentedengine room, properly verifieddrawings in place, ensuring that the crewcan fully explain and operate OWSsystems. Part of keeping the enginespaces (bilges) clean will be to develop anaggressive bilge waste managementsystem that minimizes the amount ofleaks and drips that end up in the bilge inthe first instance. Some vessels havetaken the extra precaution of painting outthe OWS system in a distinctive color sothat it can be easily traced and verified byUSCG inspectors.BEACON 17

Beacon jan 2004 orig 10.12.03 13:38 Side 18Overboard discharge valves with lead seals in placesuggesting no tampering has taken place. Note, however,the disturbed paint and fresh metal at the bolted flangeconnectionsUSCG, suspicious of turned bolts, conducts inspectionwith cotton swabUSCG find evidence of oil in the overboarddischarge lineBelow is a more detailed list of items,which we previously identified as ‘redflags’ that USCG is trained to look for intrying to discern whether the vesselcomplies with MARPOL. Addressing theseitems ‘before’ USCG comes aboard canreduce the risk of becoming a target of aninvestigation.• Existence of flexible hoses of certainlengths with pre-fitted flanges. The useof flexible hoses aboard a ship shouldbe kept to a minimum. If they are beingused as a temporary means, measuresshould be taken to have the permanentequipment repaired. Moreover, if thehose already has a flange fixed to oneend it suggests that its use has alreadybeen planned out.• Existence of blank flanges on pipingassociated with the OWS and/oroverboard discharge valve. Obviously,the more fittings that exist to tie into theOWS system from outside, the greaterflexibility to have the equipment misused.• Evidence that nuts and bolts on flangeshave been turned recently (see photo).The fresh metal suggests that a wrenchwas recently used to loosen a fitting orbreak the integrity of the OWS pipingarrangement.• Fresh or different colors of paint onOWS or bilge piping system suggestthat the pipe was out of place orrecently put back into service.• Crew’s lack of familiarity with OWSsystem. If the crew cannot answer basicquestions or operate the OWS, pumpsand/or the incinerator, then how is it18 BEACON 18 BEACONthat they are using it regularly at sea?• Piping schematics being out of date ornot accurately reflecting existing piping.• Lack of sludge receipts for dischargeashore.• Inoperable or rarely used incinerators.• ORB irregularities. Routine or repetitiveentries suggest that the entries aresimply carried over with no new orrealistic measurements as to quantities.• Evidence of oil leaking from valve stempacking or from gauges associated withnon-oil systems. Is oil where it issupposed to be?Contingency planningIt is entirely possible that despite thebest of intentions or greatest efforts, aninvestigation will still be undertaken.USDOJ has become very aggressive in itsapproach, sometimes executing searchwarrants, seizing documents andinterrogating crew. The process can bevery confusing and is also extremelystressful on the Master and crew. Keep inmind, in some cases it was a crewmemberwho made a report to the authorities inthe first instance. While no plan can becast for this type of event, some steps canbe taken in advance in order to minimizeconfusion and chaos.• Consider obtaining and reviewingmaterial related to criminal procedurein the U.S. Key definitions and termssuch as indictment and how a grandjury works might also be of benefit.• Identify in advance or ensure that yourP&I club (or its local correspondents)have a readily available list of experiencedand well-qualified criminal counsel.More than one criminal attorney maybe needed depending on how manyindividuals are involved. It is importantthat folks who have experience and canwork together be identified in advance.• Consider training senior officers oncertain aspects of US law and thenhow to respond to USCG or USDOJrepresentatives expressing an interestin OWS equipment.• Perhaps most importantly, impressupon all officers and crew that theymust be truthful at all times shouldthey decide to talk to the authorities.• Agree in advance to streamline andminimize correspondence andcommunications should an OWS caseoccur. A simple, straightforward casecan be jeopardized because of the lackof control over internal communicationswithout the benefit of the attorney clientprivilege. In addition, the authorities canmisinterpret an otherwise innocuousstatement made by a co-worker.IT ISENTIRELY POSSIBLE THATDESPITE THE BEST OF INTENTIONS ORGREATEST EFFORTS, AN INVESTIGATIONWILL STILL BE UNDERTAKEN. USDOJHAS BECOME VERY AGGRESSIVE IN ITSAPPROACH, SOMETIMES EXECUTINGSEARCH WARRANTS, SEIZINGDOCUMENTS AND INTERROGATINGCREW.

Beacon jan 2004 orig 11.12.03 08:40 Side 19LEGAL NOTESNicola Mason, Vice President Hong Kong Syndicate andSkuld Defence ServicesClaims, arrests and maritimeinjunctions in ChinaIf an owner or charterer is presented with a cargo claim in China, or wishes to take advantageof Chinese law to arrest assets or obtain an injunction, these acts are governed by the SpecialProcedure Law for Maritime Action of the Peoples’ Republic of China (SPL). In reality, however, thePractice Direction provides the real guidelines as to how the SPL should work. These regulations anddirections go hand in hand with the Chinese Maritime Code and the Chinese Civil Procedural Law.The Special Procedure Law (SPL) wasadopted by the Chinese legislators on25 December 1999 and came into forceon 1 July 2000. The Practice Directionwas issued by the Chinese SupremePeople’s Court on 6 January 2003, andtook effect on 1 February 2003.How is a legal action commenced inChina?A Bill of Complaint, the equivalent of a writ,is issued by the claimants’ lawyers andsubmitted to the People’s Court. The SPLprovides that the document may be servedby the:"Court on either the legal attorney, theofficers of the Foreign Establishment inChina and on the foreign parties by any othermeans which can confirm receipt of suchservice. For example, arrest papers can beserved on the ship’s Master. Service ofproceedings can include fax and e-mail,including the recipient’s e-mail address onthe website.”What should you do if servedwith proceedings?1. If members have any representativeoffice or associated business partners inChina, it is important that they give themclear instructions to immediately pass tomembers any documents issued by thePeople’s Court.2. They should also immediately notifySkuld to put forward procedural defences.3. A Power of Attorney (POA) andCertificate of Legal Representation (CoLR)should be completed. Skuld’s Hong Kongoffice can provide you with the wording andassist in appointing a PRC (People’sRepublic of China) lawyer to attend courton your behalf.Upon receipt of the Bill of Complaint, theSkuld/PRC lawyer will review it and theclaim documents to see if there are anyprocedural defences, which may operatein your favour.What procedural defences mightbe taken?a) Validity of the Bill of Complaint and itsserviceA review of the original Bill of Complaintwill establish whether it stated the correctparty, and was served in the right way.b) Time bar for cargo claimsThe time limit for a claim against a carrieris one year from the day on which thegoods were delivered or should have beendelivered by the Carrier. (Article 257 of theChinese Maritime Code.)c) JurisdictionAccording to Article 38 of the ChineseProcedural Law, if a party to an actionobjects to the jurisdiction of a People’sCourt after the Court has entertained thecase, the party must raise the objectionwithin the period proscribed for thesubmission of the defence. Article 248provides if a defendant has no domicilewithin the territory of the People’s Republicof China, the People’s Court shall serve acopy of the Bill of Complaint and notify himto submit his defence within 30 days after hereceives the copy of the Bill of Complaint.An extension after the period may begranted at the discretion of the court.d) Whether a third party should be joinedto the actionIt may be possible that a third party isactually liable. In such circumstancesthere is the opportunity under ChineseLaw to add a third party to theproceedings. A claim of recourse against athird party is time barred at the expirationof 90 days, counting from the day on whichthe party claiming the right of recoursesettled the current claim or was servedwith a copy of the process by the courthandling the claim against him (Article 257Chinese Maritime Code).BEACON 19

Beacon jan 2004 orig 10.12.03 13:38 Side 20Can you arrest assets within Chinato secure claims in jurisdictions otherthan China?The SPL provides that claimants may applyto the Maritime Court to arrest assetsbelonging to respondents to secure a claimnot subject to Chinese jurisdiction. ThePractice Direction defines properties toinclude a ship, cargo on board the vesselor under control of carriers, bunkers andmaterials.However, you will have to provide countersecurityto the Court, which is at thediscretion of the Court. For arrest of avessel, the amount of counter-security iscommonly equivalent to the vessel’s 30days charter hire and for other properties,an amount equivalent to the claim amount.The type of counter-security required bythe People’s Court is likely to be a bankguarantee issued by a PRC bank, a letterof undertaking issued by PICC, China Reor CPI.It is possible in some circumstances toarrest freight payable to owners byshippers if the claimants have a claimagainst the owners.When is an arrest deemed wrongful?The SPL itself does not deal with thisissue. However, the Practice Direction,whilst not defining a wrongful arrest,provides that if an arrest of the vessel isa wrongful one, the arresting party willcompensate the losses that the ownersmay suffer during the period of thearrest, including expenses incurred bythe owners, lost revenue and the costsfor the provision of security. Someparties have argued that an arrest maybe considered a wrongful arrest if thearresting party does not succeed inmaintaining the arrest.Can the vessel continue discharging orloading once the arrest order is given?Yes, the SPL provides that the Court, in itsdiscretion, can allow the vessel to continueto operate during the arrest. However, thePractice Direction defines that such anoperation period is limited to activitieswithin China. Although it is entirely up tothe Judge’s discretion, it has been knownfor the Court to permit the vessel to sail tovarious ports in China to complete loadingor discharging while under arrest.The provision of securityThe Chinese Court usually recognises acorporate letter of undertaking issued by aPRC insurer such as PICC, CPI and ChinaRe. A bank guarantee issued by a PRCbank is also considered good security.The People’s Courts will accept a foreignbank of good standing provided that it hasbranch offices in China. In somecircumstances, PRC claimants haveaccepted Skuld’s Letter of Undertaking.Can the security amount be reduced?The SPL will allow the party providing thesecurity to apply to the Court for areduction of the amount of security, toamend the security or to cancel theguarantee provided the grounds forreduction are reasonable, e.g. if theapplicant can prove that the security is toohigh or appropriate substitute methods ofsecurity have been provided or themaritime claim itself is extinguished.Preservation of Evidence OrderIt is possible in China to apply to the Courtfor a Preservation of Evidence Order beforeproceedings are commenced. UnderChinese law, a party is allowed to apply tothe Court after a party has commencedarbitration proceedings or Courtproceedings in a foreign country if theevidence itself is located in China. Thismeans that a claimant could apply to theChinese courts for a maritime injunction,i.e. Preservation of Evidence Order to obtaina copy of the vessel’s documents, such aslog books, maintenance reports on boardthe vessel, ISM compliance documents andchecklist maintained on board the vessel,signed statements or reports pluscorrespondence exchanged with the ownersand the Master. The Order can also apply toobtaining evidence from local PRC agents,such as cargo documents issued byshippers, for example, and retained bythe agents.How does the Preservation of EvidenceOrder work?The applicant submits their request tothe Court, stating that they have fears thatthe respondent may not disclose all ofthese documents in the proceedings.Provided that the Court is satisfied withthis request, the Judges will issue theorder. For example, if the application werefor documents on board the vessel, a list ofdocuments in English and Chinese wouldbe given to the Master with a request forthe documents to be produced for the20 BEACON

Beacon jan 2004 orig 10.12.03 13:38 Side 21The Court may permit vessels to sailwithin Chinese waters to completeloading or discharging while underarrestJudges. If a photocopier is on board thevessel, documents may be photocopiedon board. Alternatively, the Court willtake away the originals, photocopy themand return the originals to the vessel.The Judges go on their own and are notusually accompanied by the claimant’slawyer or surveyor.ConclusionThis article highlights some of theprocedures that may be relevant tomembers. Should members wish furtherdetails or information, please contactSkuld’s Hong Kong office. We’d bedelighted to answer any questions.With thanks to Mr Lianjun Li who is a solicitorin the litigation department at Richards Butler,Hong Kong.Operators need to be aware of new Chinese legislationthat’s come into effect in 2000 and 2003BEACON 21

Beacon jan 2004 orig 10.12.03 13:39 Side 22LEGAL NOTESNicola Mason, Vice President Hong Kong Syndicate andSkuld Defence ServicesCheers or tearsPhoto: Scan pixDon’t let your cheers of profitabilityturn into tears of disappointment22 BEACON

Beacon jan 2004 orig 10.12.03 13:39 Side 23The recent and remarkable boom inthe dry cargo market has seen someowners make a substantial profit, whileothers look on wistfully, desperate toget out of their less profitable chartersand dive into the sea of cash!Reports of rates being as high asUSD100,000 a day 1 can even lead ‘saintly’owners to temptation. Owners andoperators, desperate to take advantage ofthe present market, may use any excuseto break the contract. Breaking thecontract may give short term financialbenefits, but can lead to legal disputeswith long-term financial consequences,especially if, for example, the withdrawalof the vessel from a long-term timecharter is deemed to be unlawful.If an owner or operator, keen to get outof an unprofitable fixture, thinks he cansimply withdraw the vessel becausecharterers have been late in paying hire,he should make sure that he has takenlegal advice before doing so. If there is ananti-technicality clause in the charterparty,the owner may face claims for wrongfultermination of the charter, and be liablefor damages. Owners may be tempted toview any short payment of hire as anideal opportunity to withdraw the vesseland terminate the charter. However,owners should take care to ensure thatthe deduction from hire is truly unlawful,and that there has been no previoushistory between owners and chartererswhere charterers have been permitted todeduct amounts from hire. In any event,owners should take good legal advice toensure that there is no way that anythreat to withdraw the vessel, or anyactual withdrawal of the vessel, could bedeemed as a wrongful withdrawal,exposing owners to damages forrepudiatory breach of charter.Last ordersWhen long-term charters fixed in thegloomy days of the ‘poor market’ draw toa close, owners eagerly anticipate redeliverylike husbands on their weddingnights. Consequently, any possible delaysin re-delivery produce outrage from irateowners. Again, before owners refuse tocarry out any last voyage orders fromcharterers on the basis that orders areillegitimate, they need to be certain thatthey do have a right to reject those voyageinstructions and call for new ones 2 .If there is any way that a margin maybe implied into the charterparty period,owners need to make sure that this hasbeen taken into consideration beforerejecting charterers’ orders and callingfor charterers to submit new orders.Remember, the validity of the charterers’orders will be judged at the time whenthe voyage is to be performed 3 . Ownersshould also check the charterparty’sadditional clauses to ensure that thereare no clauses providing that off-hireperiods can be added on to the length ofthe charter. The recent decision of TheKriti Akti (which is reviewed in detail inthe Legal News section of Skuld’swebsite) provides a timely example ofhow expensive a mistake can be. It washeld that the period of the charterpartyincluded: "all off-hire periods (as therewas a rider clause to this effect) and 15days more/less charterers' option. Ownerstwice refused to carry out charterers' lastvoyage orders, which the Court had heldto be legitimate. The Court reasoned thatthe charterers' orders had been givenduring the 15 day extra period, and underthe charterparty terms, the chartererswere permitted to add any periods of offhire to the duration of the charter period.If an owner is considering rejectingcharterers last voyage orders, an ownerwould do well to take legal advice first toensure that he is entitled to reject thoseorders before he treats the contract asended.Summing upOwners and operators, who are now freeto dip their toes in the ‘sea of cash’, woulddo well to ensure that they check charterers’financial status to ensure that paperprofits become ‘money in the bank’.For charterers and operators with vesselson long-term charter fixed in the days oflow rates, it’s necessary to make surepayments of hire are done in time and infull. Furthermore, if you are tempted tomake deductions, make sure that theyare absolutely lawful and pursuant to theterms of the charterparty, otherwise yourcheers of profitability could turn intotears of disappointment!References:1. TradeWinds 24.10.2003.2. The Gregos 1995 1 LL Rep. (HL).3. Wilford Fifth Edition 4.10-41/4.BEACON 23

Beacon jan 2004 orig 10.12.03 13:39 Side 24LEGAL NOTESBy Sara Gillingham, Senior Lawyer and KnowledgeManagement Officer, Skuld, OsloLegal News onlineThose who regularly check our website may have noticed a new type of article called Legal News.The name speaks for itself – the aim is to publish legal updates, as and when new matters arise.There is also a Legal News section under News and Circulars, where all Legal News articles areavailable for six months before going into the website archive.Members should note that if they subscribeto the mailing list on our website, they willautomatically receive notice of of all newonline publications (Circulars, Legal News,etc.). To register on the mailing list, go tothe LOG ON box on our home page atwww.skuld.com.In the last few months, Legal News hasdealt with a number of topical issues,some of which I have summarised below.The full text of these and other articlesare available on the Legal News section ofwww.skuld.com.Delivery under straight or non-negotiablebills of lading – should they still be in use?(By Sara Gillingham, 27 May 2003)This looked at some recent decisions inEngland and Singapore on straight bills oflading (The Happy Ranger, The Rafaela Sand Peer Voss v APL Co Pte Ltd.). It is nowclear that an original straight or nonnegotiablebill of lading needs to beproduced to obtain delivery unless:1. The printed words have been deleted and2. It is clear from the document thatproduction is not required.These decisions have also removed asignificant difference between straightand negotiable bills of lading.Straight bills were held to be a documentof title under the Hague Visby Rules.Owners can no longer limit their liabilityto the lower Hague Rules amount whenthe Hague Visby Rules apply compulsorily.The common assumption that a straightbill is the same as a sea waybill is notcorrect. Our advice to members is that ifproduction of bills is a problem (e.g. shortsea voyages), or cargo ownership will notbe transferred, or if no bill of lading is infact intended to be issued, then seawaybills should be used instead of nonnegotiablebills of lading.Previous practice where the same form ofbill is used for both negotiable and nonnegotiablebills should be reviewed. Clearwords are needed to distinguish when thebill should be negotiable and when itshould be non-negotiable. As the Court ofAppeal commented, carriers should notbe using non-negotiable bill of ladingforms when in fact they intend the bill tobe used like a sea waybill.The Kriti Akti – what is the period of thischarterparty?(By Stig Gregersen, 20 August 2003)The vessel was chartered on a Shelltime3 form for a period of 11 months, 15 daysmore or less in charterers' option. Thecharterparty also contained clausesallowing for a final voyage to be completed,and for charterers’ option to extend theoriginal charter period by the time off hire.Charterers gave orders for a final voyage ata time when owners took the view that thecharter had already expired (there was adispute as to the times off hire and whetherthese were included in the ‘period’ of thecharterparty). Owners offered to performthe proposed final voyage but at anincreased rate of hire.The English Commercial Court decided that"the period of this charter" was all threeperiods as claimed by charterers, i.e. thebasic period plus option period plusextension period. On the basis thatcharterers’ off-hire period was correct,charterers' orders regarding the finalvoyage were legitimate, and so owners wereheld liable for not following charterers’orders. It should be noted that this matterhas been referred to the Court of Appeal.24 BEACON

Beacon jan 2004 orig 10.12.03 13:39 Side 25Legal News – now online at www.skuld.comIncorrectly claused bills of lading-The David Agmashenebeli(By Per Zerman, 29 September 2003)A dispute arose about condition of thecargo (urea in bulk) when the Masterprotested about moisture, colour andcontamination. According to cargo’ssurveyor, the cargo’s condition wasnormal and had the correct colour. TheMaster claused the bills of lading: "Cargodiscoloured, also foreign materials (e.g.)plastic, rust, rubber, stone, black particlesfound in cargo". There was nothing aboutthe extent of the contamination ordiscolouration.The Court held that it was the carrier’sduty to record the apparent order andcondition of the cargo according to thereasonable assessment of the Master.The Master is required to exercise hisown judgement on the appearance ofthe cargo being loaded (and there is noseparate obligation to call in expert helpe.g. a surveyor or other ‘expert’ withspecific knowledge of the cargo inquestion). The words used to clause thebills of lading are also a matter for theMaster’s judgement.The Court held that, on the evidence, thecargo had not in fact been contaminatedand that only a smaller portion of thecargo had been discoloured. The correctclausing should therefore have mentionedthe extent (e.g. by percentage) of cargobeing discoloured. The clausing theMaster had used in this case was likely tocause a third party to believe (wrongly)that a major part (or all) of the cargo wasdiscoloured.Attention carriers – fill in those blanks!(By Chris Walker, 29 October 2003)In a recent decision by the US Court ofAppeal, 2nd Circuit, the inclusion of thedate of the charterparty between ownersand time charterers was sufficient toincorporate the terms of that charterpartyinto the bill of lading, including the lawand arbitration clause. All that wasrequired was for the charterparty, to bespecifically identified by date e.g. “as percharterparty dd. 29 October 2003". Takenat face value, the Court’s decision wouldallow a stay of cargo claims brought in theU.S. in favour of London arbitration.Most of our members have Londonarbitration clauses in their charterpartiesand, for trade to the U.S., our advice tomembers is to have both the charterpartyand its date incorporated into the bill oflading. For claims brought in the 2ndCircuit (New York, Connecticut and RhodeIsland) members would then be able tofile a motion to dismiss in favour ofLondon arbitration. This would improvemembers' claims statistics as a result ofsignificant cost savings for the Association.Please refer to the Legal News section athttp://www.skuld.com/news/legalnews/ forthe full text of these and other recentlypublished articles.MOST OF OUR MEMBERS HAVELONDON ARBITRATION CLAUSES INTHEIR CHARTERPARTIES AND, FORTRADE TO THE U.S., OUR ADVICETO MEMBERS IS TO HAVE BOTHTHE CHARTERPARTY AND ITS DATEINCORPORATED INTO THE BILL OFLADING.BEACON 25

Beacon jan 2004 orig 11.12.03 08:34 Side 26LEGAL NOTESBy Pamela Milgrim, Lawyer, Anchor Marine Claims Services Inc, New YorkEnforcement of POEAcontracts in American CourtsOver the last few years, most notably in an extremely high profile case in October 2003, U.S.courts have repeatedly upheld the standard Philippine Overseas Employment Administration(POEA) contract and have ordered Filipino crewmembers who file suit in the U.S. to arbitratetheir claims against shipowners in the Philippines.Philippine employment contractsThe Philippine government closelyregulates the employment conditions andcontracts by which Filipino seamen serveaboard ocean-going vessels. Employmentof Filipino crewmembers is governed bythe terms of a standard contract ofemployment approved by the POEA, adivision of the Department of Laborand Employment of the Republic of thePhilippines. Among other things, thePOEA supervises, regulates and monitorsoverseas employment programs.The POEA also collaborates withrepresentatives of the local manningagencies and maritime employers innegotiating standard employmentagreements and terms of compensationand other benefits for Filipino workers.Filipino seamen are hired throughmanning agencies licensed by the POEAto conduct recruitment activities. Eachseaman’s employment contract is signedby the seaman and the shipownerrepresentative, and is verified andapproved by a POEA officer. Filipinoseaman contracts generally consist ofone page that sets forth the basic termsand conditions of the seaman’s employmentincluding the duration of the contract,the position accepted, and the monthlysalary and hours of work. The contractspecifically incorporates the StandardTerms and Conditions Governing theEmployment of Filipino Seafarers OnBoard Oceangoing Vessels. The standardcontract requires Philippine arbitration incases of claims and disputes which arisefrom the seaman’s employment, eitherthrough submission of the claims to theNational Labor Relations Commission,voluntary arbitrators or a panel ofarbitrators. In addition, a Philippinechoice of law clause is contained in thePOEA contract.Suits filed in the U.S.Despite the plain language in the POEAcontract, Filipino crewmembersrepeatedly file suit in the U.S. seeking torecover damages that far exceed thecontractual entitlements under the POEAcontract. There is no limitation to what acrewmember can receive in a U.S. Courtand this means that a crewmember canrecover hundreds of thousands or perhapsmillions of dollars more than he wouldbe entitled to receive in the Philippinesystem.When a Filipino crewmember files suit inState Court, the shipowner must removethe case to Federal Court and seek tocompel arbitration under the Conventionon the Recognition and Enforcement ofForeign Arbitral Awards, 9 U.S.C. §§ 201-208, (the Convention) to which the U.S.and the Philippines are both signatories.In a series of recent cases, FederalDistrict Courts have granted motions tostay U.S. litigations and ordered thatdisputes between crewmembers andshipowners must be resolved throughPhilippine arbitration. Courts haveenforced arbitration clauses both incases where non-U.S. based shipownerscall the U.S. on a sporadic basis as wellas those cases where shipownersheadquartered in the U.S. havenumerous vessels calling Americanports each week.U.S. Courts have a liberal policy favoringthe enforcement of internationalarbitration agreements. That policy isIN ASERIES OF RECENT CASES,FEDERAL DISTRICT COURTS HAVEGRANTED MOTIONS TO STAY U.S.LITIGATIONS AND ORDERED THATDISPUTES BETWEEN CREWMEMBERSAND SHIPOWNERS MUST BERESOLVED THROUGH PHILIPPINEARBITRATION.26 BEACON

Beacon jan 2004 orig 10.12.03 13:39 Side 27The lure of big bucks – Filipino crewmembers repeatedly ignore their POEA contracts and file in U.S. Courtsbased on concerns of internationalcomity, respect for foreign and transnationaltribunals, as well as sensitivity to the needfor predictability in the resolution ofinternational commercial disputes.For these reasons, U.S. Courts enforceinternational arbitration agreements evenif the result in a foreign country would becontrary to the result in the U.S. Courtsconduct a very limited inquiry in decidingwhether to compel arbitration pursuant tothe Convention. A District Court must granta request for an order requiring arbitrationof a dispute where: (1) there is anagreement in writing to arbitrate thedispute; (2) the agreement provides forarbitration in the territory of a signatory tothe Convention; (3) the agreement toarbitrate arises out of a commercial legalrelationship; and (4) there is a party to theagreement who is not an American citizen.Crewmembers who file suit in the U.S.seeking to overcome the strongpresumption in favor of arbitration oftenargue that the POEA contracts areunenforceable because they are contractsof adhesion. Some crewmembers claimthey are vulnerable seamen, desperate foremployment, and they had to sign thePOEA contract as presented, without anyability or opportunity to read the contractterms, much less negotiate them. Othercrewmembers contend they should not bebound by the arbitration requirementbecause they were not provided with anynotice of the provisions.When considering these challenges,courts have repeatedly held thatPhilippine arbitrators, rather than U.S.Courts, should consider whethercrewmembers were coerced into signingtheir contracts. In light of the fact that thestandard contract is signed and approvedby the POEA, U.S. Courts have rejectedcrewmember claims that shipowners tookadvantage of them in negotiating the termsof the contract. After all, the employmentcontracts, with the incorporated standardterms, were in the form and language thatthe Philippine government required inorder to protect its own citizens. Inaddition, Philippine law prohibits foreignemployers from hiring Filipino workers foroverseas employment, except through thePOEA. Courts have steadfastly maintainedthat where the Filipino government hasacted, through the POEA, to protect itscitizens and advance their employmentopportunities with foreign employers, it isnot the role of American Courts to secondguesssuch actions.Success in Louisiana and Florida CourtsSkuld has had repeated success in bothLouisiana and Florida Courts in compellingarbitration in the Philippines. For example,in Gavino v Eurochem Italia, a Filipinocrewmember who sustained an eyeinjury aboard a chemical tanker nearCorpus Christi, Texas, filed suit againstthe vessel owners in Louisiana StateCourt asserting claims for negligenceand unseaworthiness. The crewmemberwas employed pursuant to a standardPOEA contract. The shipowner removedthe case from Louisiana State Court toFederal District Court in Louisiana,alleging federal question jurisdiction andthe Court's jurisdiction to enforce thearbitration agreement under theConvention. The Federal District Courtdenied the crewmember’s motion toremand, granted the shipowner’s motion tocompel arbitration, and dismissed the suit.The U.S. Court of Appeals for the FifthCircuit affirmed the District Court’s order.In Amon v. Norwegian Cruise Lines,another Skuld matter, a Filipino crewmemberworking under the terms of astandard POEA contract filed suit in FloridaState Court asserting claims for negligence,unseaworthiness, maintenance and cureand unearned wages arising out of hisemployment. The cruise line, relying on theConvention, removed the case to FederalDistrict Court in Miami, Florida and movedto compel arbitration in the Philippines.The Federal District Court in Miamirejected the crewmember’s argument thatthe POEA contract was a contract ofadhesion and ordered the case to proceedto arbitration in the Philippines.Other P&I clubs have also been successfulin enforcing POEA contracts, both inLouisiana and Florida Courts. For example,in Francisco v. Stolt and Lejano v. K.S.Bandak, Louisiana Federal Courts haveordered that crewmembers arbitrate theirclaims in the Philippines. Similarly, in Adolfov. Carnival Corporation, Santos v. CarnivalCorporation, Villavicencio v. Royal CaribbeanCruise Lines, and most notably Bautista v.BEACON 27

Beacon jan 2004 orig 11.12.03 09:57 Side 28Photo: Image BankReturn to sender – timely removal of cases to Federal Court will result in the case being heard in the PhilippinesNorwegian Cruise Lines, Florida FederalCourts have repeatedly enforced the POEAcontract by granting motions to compelarbitration.The Bautista case, decided in October2003, involved various lawsuits arisingout of a boiler explosion aboard a cruiseship in Miami, Florida in May 2003. Theexplosion killed six Filipino seamen andseriously injured four others, making thecase one of the most serious accidentsaboard a cruise ship in U.S. waters. Thesurviving seamen and the personalrepresentatives of the decedentcrewmembers filed suit in Miami StateCourt, each seeking millions of dollars indamages and alleging negligence andunseaworthiness, as well as failure toprovide maintenance, cure and unearnedwages under U.S. general maritime law.The cruise line removed the Filipino crewcases to Federal Court, alleging that thecrewmembers signed POEA contractsand those agreements were subject tothe Convention. The federal districtgranted the motion to compel arbitrationin the Philippines. An appeal from thisruling is expected, as it has far-reachingconsequences for plaintiffs’ attorneys inFlorida whose earnings will be severelyimpacted if they can no longer bringFilipino claims against Florida-basedcruise lines.Tips for future handlingTo successfully stay U.S. proceedings andenforce arbitration agreements under theConvention, crewmember suits filed inState Court must be removed to FederalCourt. The law provides for the removalof claims at any time before trial andcourts have generally held that removalcan be filed any time before anadjudication on the merits or a finaldetermination of the plaintiff’s claims.Therefore, when the shipowner in theLejano case removed the case to LouisianaFederal Court one month before trial andclose to seven years after suit wascommenced, the removal was found to betimely. Some Florida Courts, however, haveruled that the removal from State toFederal Court must be done within thirtydays of suit being filed. In Espinola v.Princess Cruise Lines, Ltd., Velchez v.Carnival Corporation, Tare v. CarnivalCorporation, Radam v. Carnival Corporation,all cases where the removal petition wasfiled after the thirty day period had expired,the Federal District Courts in Floridaremanded the cases back to State Courtand therefore precluded shipowners fromcompelling Philippine arbitration under theConvention. In light of the holdings in atleast some Florida cases, the best andsafest course of action is to file the removalpetition within thirty days of receivingnotice of the lawsuit.SOME FLORIDA COURTS, HOWEVER,HAVE RULED THAT THE REMOVALFROM STATE TO FEDERAL COURTMUST BE DONE WITHIN THIRTY DAYSOF SUIT BEING FILED.In order to succeed in staying U.S.litigation and compelling in thePhilippines, shipowners must be able toprove that the crewmember was given acopy of the standard terms of the POEAcontract and the arbitration clause.Shipowners, therefore, need to considerways in which they can satisfy thisburden of proof. In cases wherecrewmembers dispute that they eversaw the arbitration provision or had itexplained to them, it is very helpful ifshipowners are able to produce copies ofthe standard contract terms initialed orsigned by the crewmember. It is alsobeneficial for shipowners to obtainaffidavits from manning agencyrepresentatives which certify that theyexplained the employment documents tothe seamen in their native language andthat the seamen had an opportunity toreview the documents.Given the potentially enormous disparityin the amount of money a crewmembercan recover in the U.S. versus thePhilippines, we should anticipatecreativity from crewmembers and theircounsel in their efforts to challenge thearbitration clause in the POEA contract.Well-prepared and knowledgeableshipowners can defeat these efforts andenforce the arbitration provisions so longas they timely remove cases from Stateto Federal Court and can prove that thecrewmember received and understoodthe terms of the POEA contract.28 BEACON

Beacon jan 2004 orig 10.12.03 13:40 Side 29Hunting & fishingCostas Pallaris, from SeatankersManagement Co. Ltd., trying his luckAutumn is hunting season in Norway. This year we decided to treat some of our Oslo members toan adventure in the western part of Norway.Representatives from fifty memberswere invited for deer hunting inWågbøvaldet, Tingvoll and fishing inthe nearby Breifjorden. The periodwas 9-14 September, with the optionof staying two, three or five nights.As we all know, people in our business arebusy, so only an exclusive group of twelveparticipants had the pleasure of spendingsome sunny autumn days in the ‘wild’Norwegian west. Surrounded by mountainsand fjords, they were in for a real outdoorsexperience. Lodgings were in a timberbuilding dating back to 1750, with foodbased on local tradition. The days werespent hunting in the woods and fishing outon the fjord, resulting in one deer and agood catch of cod, halibut, redfish andother species. A very enjoyable time washad by all.On the look out (top)Coffee break in the forest (left)The hunting team with deer, including the lucky hunterHenning Poulsson (with gun) from V.Ships Norway (bottom)BEACON 29

Beacon jan 2004 orig 10.12.03 13:40 Side 30Patrick Wang, Skuld Hong Kong (left) and Tor ErikAndreassen from Skuld OsloHans Petter Westfal-Larsen from Westfal-LarsenManagement AS (left) and Arthur Pilkington fromSkuld Oslo with wife RegitzeErik Gløersen, President of the Committee,representing Jahre, Dahl Bergesen AS,with Anne BrunCommittee meeting in IstanbulSkuld’s Committee consists of 27 members’ representatives, all elected by the General Meeting.The Committee’s role is to supervise Skuld’s business, elect Skuld’s Auditors and make decisionsregarding insurance conditions and premiums. Committee meetings are held twice a year.At the Committee meeting in Istanbul,Turkey on 13-14 June 2003, the mainitems on the agenda were:• Report to the Annual General Meeting(4 September) on the Board ofDirector’s proposal for the AnnualReport and the Statement of Accounts• Auditors’ Report• Decision on the closing of the2000/2001 policy year• Release calls for open years•Revision of the Association’s statutesAs the pictures reveal, there was alsotime for social events, including dinnersand a fascinating cruise on theBosphorus.By the time you read this issue of Beacon,the next Committee meeting has beenheld in Bergen, Norway on 5 December2003, with the following main items onthe agenda:• Budget 2004/05• Renewal strategy for 2004/05 anddetermination of general premiums• Decision on Release Calls 2000-2003for P&I and Defence• Decision on Rules amendments2003/04Istanbul, the city where East meets West, served as afitting setting for the Committee’s June meeting30 BEACON

Beacon jan 2004 orig 10.12.03 13:40 Side 31PERSONNELNEWSOSLOLeonardo Polito,41, was recentlypromoted to VicePresident Claimsin Syndicate 1.Leonardo hasworked withinClaims in Skuldsince 1990 and,since 2000, as Claims Manager inSyndicate 1. Leonardo has a legalbackground, and has studied law atthe University of Rome. Before joiningSkuld he practised civil law with a lawfirm in Italy.PIRAEUSKen Stewart, 36,joined the Piraeusoffice 11 August asClaims Manager.Ken is a graduateof LeicesterUniversity andqualified as aSolicitor in 1996.He worked in the shipping litigationdepartment of a law firm in London until1997 when he joined Skuld's Hong Kongoffice handling P&I and FD&D claims forSkuld's Far East members. From 1999 to2001 Ken worked in the Greek office ofanother P&I club before returning to joinSkuld as Senior Lawyer at the head officein Oslo.Contact SkuldOsloAssuranceforeningen Skuld (Gjensidig)Ruseløkkveien 26P.O. Box 1376 VikaN-0114 OSLOTelephone: +47 22 00 22 00Telefax: +47 22 42 42 22Emergency telephone:+47 952 92 200E-mail: osl@skuld.comBergenSkuld Bergen ASNedre Ole Bulls plass 3P.O. Box 75N-5803 BERGENTelephone: +47 55 30 18 60After office hours: +47 90 50 49 07Telefax: +47 55 30 18 70Emergency telephone:+47 952 92 200E-mail: bgo@skuld.comCopenhagenAssuranceforeningen Skuld (Gjensidig) –Den Danske AfdelingFrederiksborggade 15DK-1360 COPENHAGEN KTelephone: +45 33 43 34 00Telefax: +45 33 11 33 41Emergency telephone:+47 952 92 200E-mail: cph@skuld.comHong KongSkuld (Far East) Ltd.Room 2909, China Resources Bld 26Harbour RoadWanchaiHONG KONGTelephone: +852 2836 3909Telefax: +852 2836 3219Telex: (802) 69571 SKULD HXEmergency telephone:+47 952 92 200E-mail: hkg@skuld.comPiraeusSkuld Hellas1-3 Filellinon StreetGR-18536 PIRAEUSTelephone: +30 210 459 4190Telefax: +30 210 459 4194Telex: (601) 21 24 98 SKLDEmergency telephone:+47 952 92 200E-mail: syn.ath@skuld.comInternetwww.skuld.comBEACON 31

Beacon jan 2004 orig 11.12.03 08:18 Side 32VIEWPOINTDouglas Jacobsohn,President and Chief Executive Officer,SkuldStronger financesDear readerAt this time of year, most club CEOs arebusy planning for the renewal seasonand determining the level of generalincreases – a wait and see game acrossthe International Group club boards. AtSkuld, we proposed a moderate requestof 15%. Not the lowest, but equallyimportant, not among the highest either.This figure reflects the Club’s policy ofrebuilding the contingency capital andmirroring the risk exposure among ourmembers. Further information on Skuld’simproved financial position is presentedin our third quarter report.Skuld is at the forefront when it comes totransparency. Our policy is to communicatewith the market openly and frequently,reflecting the true state of our Club.This will help you feel confident that yourClub will be able to serve you as a memberin the long run. We already have regainedconfidence from our members and wantto communicate this to the rest of themarket.By publishing our third quarter results,we are setting a new standard. In theprevious two years, we have publishedhalf-year reports, which, incidentally, isalso not done by all International Groupclubs. We hope that our new reportingstandard will be adopted by other clubboards in the future. After all, it is in theinterest of all members to know abouttheir club’s current position whenrenewing their P&I cover.The reader will remember that, eventhough our financial projections werequite positive, Skuld’s Annual GeneralMeeting voted for a subordinated loan toboost the level of the Association’scontingency reserves. Since then, thelegislators have changed the rules,reducing the benefit of such a loan.In addition, the Club’s actual financialstrength has improved significantly.The Board has therefore decided not toraise this capital.A significant part of shipowners’ overallcosts for P&I cover is the marketreinsurance arranged on behalf of theInternational Group. The reinsurance subcommittee is currently working on therenewal of reinsurance cover. Skuld’sBoard is of the opinion that no furtherincrease in the overall price for this covershould be necessary since, over the lastseveral years, reinsurers have earned ahandsome profit underwriting the world’slargest liability reinsurance contract.The decision to retain a large part of thefirst USD 500 million layer within theInternational Group clubs, throughtheir captive Hydra, should be usefulin fulfilling the ambition of keepingreinsurance costs down in the future.Douglas Jacobsohn32 BEACON Return address: Assuranceforeningen Skuld, P.O. Box 1376 Vika, N-0114 OSLO