the charterer newsletter - Charterers P&I Club

THE CHARTERERTHE CHARTERERS P&I CLUB NE WSLETTER January 2008CORRESPONDENTS’ EXPERTISE VITALTO GOOD SERVICEBy Ken Norman – EditorWe at the Charterers Club are conscious ofthe fact that we only meet the majority of ourcorrespondents if there is a serious casualty, ifwe visit their office or if they visit us inLondon. For some correspondents none ofthese things may come to pass butnevertheless a relationship continues to existbetween The Club and their man on the spotwithout the two parties everhaving met. It is a curioussituation but one of themany wonders of thecorrespondent networkwhich we value.When The Charterers Clubopened its doors forbusiness over twenty yearsago it published a list ofcorrespondents and whilstthe list has changed we arepleased to say many of thosenames are still listed today.Of course, the opportunityto act for the Club hasincreased considerably sincethen as charterers P&I cover in those days didnot produce the number of claims and disputeswhich it does today. This is due partly to thesize of our business but also to the change inthe contractual position charterers face andwhich is far more onerous now than it has everbeen. More and more liabilities have beenplaced at the door of charterers over the lastKEN NORMANfive years prompting a manifold increase inincidents requiring the use of correspondentsworldwide.This increase in liabilities and claims has gonehand in hand with the expansion of theCharterers Club portfolio which has doubledin the last five years and now covers in excessof 8,000 vessels annually.Much of this increase is dueto The Club’s first classreputation for claimshandling which is due in nosmall measure to the reliableservice given by itscorrespondents and also byother experts who arecalled upon at short noticeto assist our claims team.If this reputation is to bemaintained then we mustcontinue to find new waysof enhancing our servicewhich includes greateruse of the expertise whichexists within The Club’scorrespondent network. This newslettercontains a mixture of advice, anecdotes andinformation which we hope will be interestingto the network and, of course, to our clients. Wealso hope it will encourage correspondents toair their views and share their knowledge on aregular basis to help us serve our clients moreeffectively.The Achilleas – No overturn of crucialdecision on overrun – See page 4See also: Page 2 – The Caribbean – a different perspective. Page 3 – Speed is the keyto good settlements in North Africa. Page 6 – Human touch works wonders.Page 7 – 2007 Growth and 2008 Developments. Page 8 – Heinz Gohlish appointment.1

THE CARIBBEAN – A DIFFERENT PERSPECTIVEBy Rupert Steer – Caribbean correspondentWhen instructing asurveyor to make anurgent visit to a vessel,will I ever growaccustomed to beingtold: “Sorry, I havesomething to do in towntoday”? Is there asolution to Carnival thatmeans that someone willattend during the event,rather than waiting forthe music to stop andthe rum to run drybefore thumbing thediary to see when theremight be an availablewindow, perhaps next week?After twelve years spent as a correspondentplying the blue waters of the Bahamas down tothe muddy rivers of Guyana I have come to theconclusion that few nations in the regionrecognize a common bond with theirneighbours. There is more trade betweenFelixstowe and Antigua than between St. Luciaand St. Vincent. Trinidad and Barbados areseemingly always in one dispute or another,whether it’s fishing rights, mineral rights, orsupplies of natural gas. The NetherlandsAntilles are breaking up their federation, butmissed the date in 2006, maybe 2007.Of the fifteen CSME (Caribbean Single Marketand Economy) states committed to fullintegration at various times over the last tenyears, only two have adopted the keystoneCaribbean Court of Justice as their final courtof appeal, three maintain exchange controls,and none have fully cleared the way formobility of labour.A UK passport holder is free to travel betweenGrenada and Guadeloupe, but the Frenchislands remain a part of Europe, rather than theCaribbean, so the Grenadian needs a visa. A$1,000 work permit is required to do businessin Grand Cayman (unless the ChiefImmigration officer can be persuadedotherwise), but only a dark suit is required inCARICONSULT GROUPTrinidad. For a meeting in St. John, USVI, leavethe suit at home, and if it is in Bermuda, justwear the top half.If Barbados is “Little England”, then the regionis “Little Europe”, boasting nations speakingEnglish, French, Spanish and Dutch each as afirst language, but even the English speakingterritories are divided by a common tongue.Ask for akee in Jamaica, and you will be given“vegetable-brain”, eaten with salt fish. Ask forakee in Barbados and you will receive a clusterof small round fruit with a crisp skin, popped toexpose the thin green flesh and large seed.But behind the politics and idiosyncracies liesthe human face of the Caribbean. Aside fromthe daily frustrations, being a correspondent inthe Caribbean has its compensations, not leastof which is the outlook it affords on life. Yearsspent crossing London Bridge twice a day hadled me to the conclusion that there was noalternative, until round one of life’s hiddencorners I found the way to this beautiful islandwhich has become home. This new perspectivehas me wondering whether a people that putslife before work, takes time out to talk to thenext person in the queue, produces adisproportionate number of centenarians,smiles more than frowns, gets by where fewcontinued on page 32

continued from page 2things work for very long, laughs at life’sinconveniences, and only reads about “roadrage”, is holding on to something lost long agoin more developed places, something trulyworthwhile to pass on to the children. There isthe common ground of the Caribbean.So, to paraphrase Mr. Spock of Star Trek fame,the message from the many peoples of theCaribbean is: “Live slow and prosper”. Icontinue to struggle with the concept, butperhaps after another twelve years I will haveit mastered.SPEED IS THE KEY TO GOOD SETTLEMENTSIN NORTH AFRICABy Shtewi Legal and Pandi Services – Tripoli, LibyaLibya has undergone the biggest politicalchange since the revolution in 1969. The LibyanGovernment, as a result of a concerted effortto re-establish links with the Western powers,is now enjoying an unprecedented interest intheir country and its resources. Several largecorporations including Shell Transport andTrading and Texaco Oil have opened offices inTripoli and have negotiated contracts with thelocal oil companies to redevelop their oilfields.Also, further offshore drill test sites are beingestablished .This upsurge in interest plus theunprecedented oil price has resulted in abooming economy with the Governmentannouncing several major projects relating toinfrastructure and communications. In addition,there are plans to build a completely newFreeport outside Tripoli and to establish aHong Kong style International commercialbase including several new hotels toaccommodate the upsurge in visitors.This change has resulted in a substantialincrease in International trade as well as anincreased demand for technical equipment andbuilding materials for oil exploration bothashore and offshore and for the purpose ofupdating existing oilfields.Unfortunately, this increase in Internationalawareness has not extended to the judiciarywhich often gives decisions contrary to theexisting law. Despite the fact that Libya hasratified the Hague Rules, rarely will shipowners and charterers be given the benefit ofthe exceptions contained within those rules. Inaddition, in cases involving cargo, judges tend tofind in favour of the importer, usually agovernment body. In these circumstances it isessential to maintain a pragmatic view whenhandling claims and an early settlement, evenbefore the vessel has departed, very oftenproduces the least expensive result.Face to face negotiation is still the way businessis done in North Africa and maintenance oftrust is essential. The correspondent’s biggestweapon is to be able to tempt claimants withan immediate settlement which, although itmay be less than they would probably receivein the long run, is more attractive thanprotracted arguing and court action.Defendants, when dealing with the localcorrespondent, must give clear instructionsand be prepared to act quickly when asettlement is agreed.Any deviation or delay will not only jeopardisechances of a satisfactory settlement but canseriously compromise the correspondent’sstanding and his position in future cases. Itshould be remembered that most things oftenmove slowly in the MAGHREB, except wheremoney is at stake.3

THE ACHILLEAS – NO OVERTURN OF CRUCIALDECISION ON OVERRUNBy Ian Ross – Ross and Co. SolicitorsFew shipping cases can have generated as muchinterest in recent months among maritimelawyers and the shipping interests theyrepresent, as the Achilleas. It has been a longwait and a number of live disputes undercharterparties have been kept on ice whilethree distinguished judges of the Court ofAppeal have been debating whether to decidein favour of shipowners or charterers. Nowthe wait is over. The Courtgave their judgment a fewweeks ago and a number ofexperienced practitionersare surprised at theoutcome.Firstly some background.Most London arbitrationsare settled amicably longbefore they reach a fullhearing and the publicationof an Arbitration Award.Transfield Shipping Inc vMercator Shipping Inc –more popularly known asthe Achilleas is now a very notable exception tothat general rule. Not only did the disputemake its way to a full award from three highlyexperienced London Arbitrators – DavidFarrington, Bruce Buchan and ChristopherMoss, but the award then became the subjectof an appeal to the High Court and then yet afurther appeal to the Court of Appeal, (whogave their judgment on September 6th 2007).So what was all the legal fuss about?The case concerned “overrun”. Overrun hasbeen defined as “the period of time from whena vessel should have been redelivered inaccordance with the charterparty until hertime of actual redelivery”. In other wordsoverrun is when the time charterer fails toredeliver the vessel at the agreed time in theIAN ROSScharterparty. The particular issue which arosein the Achilleas was what was the level ofdamages the charterers should pay for lateredelivery.The measure of damages. The judges at firstinstance and also at the Court of Appeal werepresented with two distinct and fundamentallyopposed approaches and views, one thetraditional view and theother a much newer way oflooking at such claims. Thetraditional approach todelayed redelivery is that themeasure of damages shouldbe the difference betweenthe market rates on the onehand and the charterpartyrate on the other hand forthe period from the timewhen the vessel should havebeen redelivered until thetime of her actual redelivery.The new way looks insteadat the loss of profit on the entire subsequentcharterparty and says there is no reason whythose sums should not be claimed.The difference between the two approaches isnot merely an academic one. In the Achilleasthe damages payable by charterers under thetraditional approach were US$158,301.17. Thedamages applying the new approachand calculating owners loss of profit onthe subsequent charterparty wereUS$1,364,584.37.Those arguing for the traditional view pointedto a body of law and practice which is found inleading English cases and leading textbookcontinued on page 54

continued from page 4writers. There ample support is found, so it wasargued in the Court of Appeal, for thetraditional view. The traditionalists argued thatno court should depart from such an approachunless satisfied that they are clearly wrong. Itwas also argued that the rule was simple,certain and fair and above all one which wasadopted in practice by the shipping market.Contrary views. The owners of the Achilleaswhose vessel had been redelivered late saidthat the traditionalists had greatly overstatedthe position. There were in fact no Englishcases which had in fact decided as a matter ofabsolute principle the damages which shouldapply in a case like this. Whichever way thecharterers tried to argue it, the fact remained,(so owners said) that they had undoubtedlysuffered a loss of US$ 1,364,584.37 on accountof charterers breach of contract. On that basisthey were entitled to be put in the sameposition as if that breach had never occurred.Owners accepted that they were not entitledto recover in respect of any losses which eventhough they were caused by the breach weretoo remote. However, no one could ignore thefact that the arbitrators, having heard all theevidence of the parties to the contract thoughtthat those losses were not too remote.What did the judge decide and what did theEnglish Court of Appeal decide? Were damagesto be limited to approximately US$160,000 orUS$1.3 million?Having reviewed all the arguments andauthorities the Judge at first instance had nodoubt that the traditionalists were wrong. Hesaid:“To award damages in this case on the basis ofthe difference between the market rate andthe charter rate for the overrun wouldcompensate the owners for only a fraction ofthe true loss caused by the breach.” He alsosaid:“I have not come to the conclusion I havereached with any sense of regret. As LordAtkinson observed ……..it is a generalprinciple of law that in giving damages forbreach of contract the party complainingshould so far as it can be done by money beplaced in the same position as he would havebeen if the contract had been performed. Thatis a ruling principle. It is a just principle.”Did the Court of Appeal accept or reject theapproach adopted by the majority ofarbitrators and the judge at first instance? Theapproach was accepted – no overturn they said.They emphasized the importance of matterssuch as the likely business knowledge of thecharterer. They thought that a charterer of atime chartered vessel would know and if notcertainly ought to know that a new fixture wasvery likely to be entered into by the owner soas to follow as closely as possible the redeliveryof the vessel. That conclusion was reinforced bythe fact that this particular charterer was wellaware of the chartering market and should havebeen wary about the danger of late deliverygiven their background knowledge. They heldthat there was no fixed rule that damages forlate delivery of a time chartered vessel waslimited to the overrun period measure. On thatbasis the Court of Appeal decided that ownerswere entitled to the full sum of their claim plusinterest plus costs.SUMMARYThe decision in the Achilleas has been watchedand waited with great anticipation by ownersand charterers alike. It is likely to have a bigimpact on the negotiations for damagecompensation arising out of late delivery.Changes are likely to be needed to the tacticsto be adopted by charterers once late deliveryis known to be unavoidable. Of course the casecould reach the highest court in the land – theHouse of Lords, but until then the Achilleassounds a clear note of warning for charterersand their advisers.5

HUMAN TOUCH WORKS WONDERSBy Peter Jones – Managing Director of Shipserve Piraeus.When the Managers of the Charterers Clubinvited us to consider being theircorrespondent in Greece, it was necessary forus to consider carefully whether we weresuited to assist them from a charterer’sperspective, for since the coming into being ofSHIPSERVE on 20th February 1979, we hadsolely confined our range of services to thoseproviding Protection and Indemnity cover forshipowners. This was not surprising sincePiraeus is one of the most important, if not themost important, shipping centre in the worldand is predominately the domain of theshipowner and those serving his day to dayrequirements. Therefore to take up theinterests of charterers may have prejudicedour position with our established shipownerclientele.In deciding to make ourselves available ascorrespondents for the The Charterers Clubwe considered there would be no conflictproviding we made clear in every case, whoour clients were and that all parties fullyunderstood whose interests we wereprotecting.We are pleased to say that acting forcharterers interests has proven to beharmonious and that our fears of causingprejudice unfounded. In fact it is fair to say thatthose shipowners with whom we have comeinto contact have welcomed our involvement,seeing it as a positive factor in achievingprompt resolutions.Here in Greece it is crucial to readilyunderstand the culture of the players. Goodservice and the resolution of problems requireappreciation of that culture and it has takenmany years to develop such appreciation. Theart of the game is patience, understanding andthe ability to develop relationships; in otherwords, the human touch. The vast majority ofproblems are capable of resolution withoutlitigation or arbitration provided they are givendedicated attention.There is a mine of information in thecommunity here. It is that information whichcauses us to obtain a great deal of knowledge,and to put it to good use. There is alwayssomeone within the immediate vicinity to tapinto for information. There is more reciprocityhere than is realised.We look upon ourselves as basically andessentially a field extension of the P&IUnderwriter; their eyes and ears so to speak.Throughout the world, the job of thecorrespondent is to give the best possibleservice and advice to the client (charterer orshipowner) and his insurer as quickly aspossible. Speed is of the essence and nocorrespondent could survive in Greece if hedid not respond to all calls with alacrity.Fortunately, the transformation in technologyhas made it possible for parties tocommunicate at the touch of a button,speeding up claims handling and generallymaking work easier and more efficient. Whileno one doubts the advantages that theseadvances have brought to the industry when itcomes to personal service we prefer thehuman touch.We are proud to belong to a worldwidenetwork of correspondents, who we sincerelybelieve feel as we do.6

2007 GROWTH AND 2008 DEVELOPMENTSWe are pleased to advise that theClub continues to expand and nowinsures around 190 activelychartering clients. In line with thisincrease in activity the Club hasbeen recruiting additional staff, mostnotably Emma Rios and Yang Shi,who both joined the claims team; aswell as Sam Castle and CarolynMurray, who have been recruited tohelp with claims administration.We have also recently appointedHeinz Gohlish (see page 8) asUnderwriting Manager, to take onoverall responsibility for theproduction of all underwritingdocumentation and to assist ingeneral underwriting duties. GillesLegue will also be joining theUnderwriting team as anUnderwriting assistant in early2008, having previously worked fora Parisian Insurance broker.Further expansion is planned during2008 and the Club is activelyrecruiting at present. We arepresently setting up a servicingcentre in Hong Kong that willconcentrate on providing FD&Dservice to clients in that region.During 2008 we also have plans forthe creation of service operationsin both Dubai and Shanghai in orderto provide regional clients withthe benefit of local service in thosetime zones.SAM CASTLEYANG SHICAROLYN MURRAYGILLES LEGUECONTACT DETAILSCorrespondents are reminded that they should immediately notify The Club of any changes totheir details otherwise this may cause instructions to be delayed.The Club continues to list correspondent’s details in the Terms and Conditions book, but wenow regard the details displayed on The Club’s website to be the official version as changes canbe made at short regular intervals thus ensuring accuracy. Correspondents are requested toregularly check their details held on The Club’s website and inform us of any errors withoutdelay.7

HEINZ GOHLISH APPOINTMENTHeinz Gohlish originally joined The CharterersClub in 2003 as an underwriting consultantworking on special projects in support ofunderwriting and marketing objectives. Sincethat time his expertise has been invaluableduring, what has been, a prolonged period ofexpansion in the Club's membership and scopeof business.We are delighted to announce that Heinz hassuccessfully applied for the position ofUnderwriting Manager and will have overallresponsibility for theunderwriting back – upprocesses as well asdeveloping, managing andtraining an administrationteam to enhance customerservice. His appointmentrecognises the Club'sexpanded and more diversemembership base, as well asthe Club's intention tocontinuously review anddevelop its managementsystems. Heinz will also beone of the points of contactfor general underwritingenquiries and assist in underwriting newbusiness and negotiation of renewals, reportingto the Class Underwriter Gavin Ritchie. Anarea where his particular experience will beHEINZ GOHLISHbeneficial is in the management of the Club'sEuropean, American and Middle Eastmembership.Heinz is returning to familiar ground havingheld a senior position in a major London basedP&I Club as a specialist in charterers' liabilityfor over 12 years, underwriting the Club'scomplete chartering portfolio as well as mutualmembers in Europe, Africa and the Middle East.Subsequently, Heinz was the ExecutiveDirector of the liability department for aLloyd's broker for fouryears. He was most recentlyemployed for ten years invarious marine consultancyprojects, primarily for shipand port operators but alsofor port authorities andbanks. Heinz also bringspractical sea goingexperience to the Clubhaving served at seain the Canadian Navy forover ten years on a varietyof ships as a navigator andoperations officer.Heinz's post graduatedegree is in economics and he is a member ofthe International Association of MaritimeEconomists (IAME) as well as the NauticalInstitute (MNI).THE CHARTERER NEWSLETTERMichael Else and Company Limited, 65 Leadenhall Street, London EC3A 2ADTel +44 20 7702 3928 Fax +44 20 7702 3993www.else.co.ukThis publication is for general information purposes, does not constitute legal or other professional advice and should not be relied on or treated asa substitute for specific advice relevant to particular circumstances. Information and opinions in the publication do not necessarily reflect the viewsor policy of the underwriters of The Charterers P & I Club nor Michael Else & Co Ltd. Whilst every effort is made to ensure that the material isaccurate at the date of publication, neither the underwriters of The Charterers P & I Club nor Michael Else & Co Ltd accept any liability for loss ordamage (whether or not in negligence) arising from your reliance on the material (including, for the avoidance of doubt, any liability for advice orinformation obtained from third parties referred to in the material or otherwise). All rights reserved. This publication may not be copied or distributedin whole or part without prior permission.8