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You will notice that that we have adopted a new logo and style. The Charterers P&I Club, which celebrates its 30th anniversary this year, is the largest brand in the MECO Group and this rebranding exercise is a key milestone in our evolution.

So what’s changed? – well, in structural terms, nothing. There is no change of ownership and the team remains the same. The aim is to define and effectively communicate our core values and to promote our brands as part of a group where the group identity and core values are common to all brands. So we now have just one website, one format for business cards and a unified style for communication and documentation.

The more observant readers will have spotted that MECO is short for Michael Else and Co which is a Management Company based in London with a proud 45 year history. The brand identity for the MECO group is based on a new logo that carries forward our strong maritime heritage. The new logo will be common to the Group and all of its brands, with each brand having a unique colour. The rebranding is designed to reflect the combination of all of our core values, which can be grouped under the three headings of Professional, Dedicated and Trusted.

The four points of the new logo represent the cardinal points on a compass, they symbolise our outward looking nature and the way in which we use our expertise to give guidance. The points are arranged so that they form an

inner circle, which represents our global structure and conveys the concept of a circle of trust.

The MECO Group operates globally as 3 hubs 1 team, through its hubs in London, Shanghai and Dubai. The fiscal and regulatory HQ is in London, through Michael Else and Company Limited, which is authorised and regulated by the UK Financial Conduct Authority.

This latest look to our organisation sets us up for the next stage in our development. It seems fitting at this stage to look back briefly on our past. The Charterers P&I Club was the brainchild of Michael Else, the founder of Michael Else and Company, which traces its origins back to 1974 and the creation of Transmarine, which provides marine trade disruption insurance to ship-owners.

Michael Else and Company, which is owned by the MECO Group, is a reputable and experienced Managing General Agent ‘MGA’ that provides specialist marine insurance products and consultancy based services. The marine insurance brands owned and managed by Michael Else and Company are Transmarine, The Charterers P&I Club and CPIC Commodities & Logistics. Claims and Legal Consultancy services to existing clients and prospects are provided under a new brand ‘True North’.

So a fresh new look, but business as usual; The Charterers P&I Club will continue to trade as the Charterers P&I Club, part of the MECO Group and you will be dealing with the same familiar team of faces.

Our new website www.themecogroup.co.uk

Michael else and coMpany liMited rebrands as the Meco Group

newsletter of the charterers p&i clubJanuary 2017 contents The saga of The aThos I Page 2

The anomalIes of bunker samplIng Page 5

lIabIlITIes for oIl sTaIned hulls Page 8

hanJIn Insolvency Page 10

sTaff news Page 11

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In a meticulous 174-page Opinion handed down on July 25, 2016, following an 8-week trial held in the spring of 2015, Judge Joel H. Slomsky of the U.S. District Court for the Eastern District of Pennsylvania awarded Frescati Shipping Company, Ltd. and Tsakos Shipping & Trading S.A., the owner and operator of the tanker M/V Athos I, their claim in full, plus accrued interest, for a total judgment in the amount of $71.5 million against Citgo Asphalt Refining Company and related companies (“CITGO”) in a case arising from a catastrophic 2004 oil spill at Paulsboro, New Jersey, just across the Delaware River from Philadelphia. 1

We refer to our article on this case appearing in the Club’s newsletter of May, 2014 for the full details of the prior history of this litigation, but in brief:

the casualty On November 26, 2004, while the Athos I was attempting to dock at CITGO’s Paulsboro refinery on the Delaware River, her hull was punctured by a 9-ton anchor abandoned on the river bed. The anchor punched a hole in a cargo tank allowing over 264,000 gallons of heavy crude oil to spill into the river, closing the port while emergency responders scrambled to contain the spill under difficult tidal and weather conditions. The oil spill cleanup cost in excess of $143 million. The vessel also suffered millions of dollars in damages and was out of commission for many months. The owners sued CITGO for breach of a maritime “safe berth” warranty, and for negligence in failing to ensure that the approach to its terminal’s berth was clear of obstructions to navigation.

the fund claim and first trial Frescati also had submitted a claim to the National Pollution Fund Center for reimbursement of its response costs in excess of its $45 million limitation cap under the Oil Pollution Act of 1990. In 2006, the Fund determined that the owner was entitled to limit its liability and ultimately reimbursed it in the amount of $88 million. The owner then proceeded with a lawsuit against CITGO seeking damages of $55 million, including its unreimbursed oil spill response costs, cost of hull repairs, detention and related expenses on the grounds of breach of the safe berth warranty under the ASBATANKVOY sub-charter and wharfinger’s negligence. The first trial was held in 2010, and ran for approximately eleven weeks at which 64 fact and expert witnesses testified. The trial judge held that Frescati, as the head owner, was not a third-party beneficiary of the safe berth warranty that CITGO gave in the sub-charter and, moreover, that the berth was safe based on an accident free track record with other ships. The Judge also denied the wharfinger’s negligence claim on the ground that CITGO did not control the federal anchorage through which ships had to transit to arrive at its berth and, therefore, CITGO was not responsible for conditions in the anchorage.

the saGa of the athos i litiGation continues: recent decision on safe berth warranty and wharfinGer’s neGliGence by euGene J. o’connor, partner at MontGoMery Mccracken walker & rhoads, llp, new york

1 The Opinion may be found at In re Petition of Frescati Shipping Co., Ltd., 2016 WL 4035994 (E.D. Pa. 2016); 2016 A.M.C. (E.D. Pa. 2016), or contact the author at eoconnor@mmwr.com.

eugene J. o’connor

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the appeal The owner appealed his Decision to the Third Circuit Court of Appeals who, in 2014, reversed these holdings by the trial court. The Court of Appeals instead held that indeed the shipowner, although not a party to CITGO’s sub-charter, was a third-party beneficiary of its safe berth warranty. It also held that the warranty was an absolute warranty that the berth was safe for the Athos I provided her draft was no more than 37 feet 2.

In addition, the Appellate Court held that CITGO had a wharfinger’s duty to insure that the approach to its dock was safe for incoming vessels, even though it was through a federal anchorage3.

With these holdings now “law of the case”4, the Third Circuit remanded the case to the district court to make findings of fact relating to the vessel’s draft on arrival at Paulsboro, the standard of care that should apply to CITGO as wharfinger, and whether a defense for navigational negligence or unseaworthiness should apply. If CITGO was found liable on either of these claims, the court would also determine Frescati’s damages.

the second trial on remand The second trial was complicated by the fact that the judge who presided over the first trial retired, so the case was reassigned to another trial judge who first had to certify familiarity with the mountainous record from the first trial5

at which 64 fact and expert witnesses testified. Judge Slomsky certified the requisite familiarity with the prior record in late 2014 and the second trial, at which 24 witnesses were recalled to testify again, carried through approximately eight weeks in the spring of 2015. This lengthy opinion was issued just over a year later.

The second trial court found in favor of Frescati on all counts. First, it found that the vessel’s arrival draft was less than 37 feet which, based on the Third Circuit’s prior ruling, meant that CITGO was in breach of the safe berth warranty. The court went on to consider Frescati’s claim of wharfinger’s negligence

and held that the appropriate standard of care for CITGO, under the circumstances of this case, was to scan the approach to its berth periodically using readily available and relatively inexpensive side-scan sonar to search for any obstructions to navigation, and either remove or warn vessels utilizing its berth if any such obstructions were detected. The court also found that there was no negligent navigation or unseaworthy condition on the ship that was a contributing cause of the casualty.

the court of appeals instead held that

indeed the shipowner, although not a party

to citGo’s sub-charter, was a third-

party beneficiary of its safe berth warranty. it also held that the

warranty was an absolute warranty that the berth was safe for

the athos i.

in addition, held that citGo had a wharfinger’s duty to insure that the

approach to its dock was safe for incoming vessels, even though

it was through a federal anchorage

2 It was undisputed that CITGO’s voyage instructions were for the ATHOS to load its cargo at Puerto Miranda, Venezuela to a draft of no more than 37 feet. 3 Evidence at trial established that CITGO was not prohibited from surveying the federal anchorage for obstructions to navigation and the technology to locate ob-jects like the anchor was readily available.4 Meaning these holdings by the Court of Appeals could not be re-argued in the

District Court.5 Fed. Rule Civ. Proc. 63.

the “athos i”

The court then turned to the quantum of Frescati’s damages, and awarded it the full amount of its claim of $55 million plus another $16 million of accrued interest, for a total award of $71 million. CITGO has appealed this judgment.

The court also addressed the claim of the U.S., as subrogee of Frescati, for the $88 million the National Pollution Fund had reimbursed Frescati on its response costs. Although the court found that the government had never represented that it would search for obstructions in federally maintained waterways, it found that the government had “created the impression” that it maintained the anchorage free of obstructions (although it did not). Applying the doctrine of “equitable recoupment,” the court reduced the government’s damages by 50%, i.e., from $88 million to $44 million.

commentary

It cannot be predicted with any degree of certainty whether courts in other circuits or arbitrators who are called upon to interpret a safe berth warranty in a charter party with wording similar to the ASBANTANKVOY warranty at issue in the Athos I case will follow the Third Circuit’s holding that the safe berth warranty is an absolute warranty. However, a charterer need not depend on judicial or arbitral interpretations to have the warranty limited by a “due diligence” qualifier that CITGO argued should be implied in the ASBATANKVOY’s safe berth warranty provision. Instead, this “due diligence” qualifier can be included in the safe berth warranty provision itself, as some charters already have. For example, the SHELLTIME 4 time charter provides in relevant part of its “Period Trading Limits” clause (¶4) as follows:

“Charterers shall use due diligence to ensure that the vessel is only employed between and at safe places…where she can safely lie always afloat…. Charterers do not warrant the safety of any place to which they order the vessel and shall be under no liability in respect thereof except for loss or damage caused by their failure to exercise due diligence as aforesaid…” (emphasis added).

A safe berth warranty worded in this fashion eliminates the notion that the warranty is absolute. Instead, the charterer will be held to a reasonable standard of care to provide a safe berth, including the approach to the berth. This standard of care will vary with the factual circumstances of a given berth.

The question of whether the safe berth warranty is intended to cover third parties not in privity to the charter can also be dealt with by careful drafting. A simple disclaimer can state that, “this safe berth [and/or port] warranty is intended for the benefit of the named parties to this agreement only, and not for the benefit of any third parties.” Wording such as this expressly eliminates the question that third parties not party to the charter might be covered under the warranty by implication.

Turning to the court’s finding of CITGO’s negligence as a wharfinger, the Third Circuit had already found that CITGO had a duty to maintain a safe approach to its berth, even though that approach was through a federal anchorage. The district court then went on to determine the standard of care required of CITGO and in doing so, considered a specific set of facts. First, the approach from the navigation channel to the berth was only about 2100 feet. The court considered the possibility of the ship striking an unchartered submerged hazard, the potential injury to the environment if this happened, and the relatively inexpensive cost ($8,000 – $11,000) to conduct a side-scan sonar survey designed to detect such obstructions. It concluded that the standard of care required of CITGO was to scan the approach through the anchorage “periodically” using side-scan sonar and remove or warn vessels invited to its dock of any obstructions to navigation.

it concluded that the standard of care required of citGo was

to scan the approach through

the anchorage “periodically”

using side-scan sonar and remove or warn

vessels invited to its dock of any obstructions to

navigation

4

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It should be emphasized that this Decision did not necessarily set a new standard of care that will generally apply to all wharfingers. The case was decided on the specific set of facts applicable to CITGO’s berth. The area constituting the approach to the berth was relatively small and the cost of using side-scan sonar to detect obstructions to navigation was inexpensive when considered in the context of the revenue CITGO was generating at its terminal. It should also be noted that in 1999, at CITGO’s request, the local docking pilots expanded the docking window for CITGO’s terminal to commence at the start of the flood current and run until one hour after high water which, in effect could reduce the under keel clearance of ships with a draft like the Athos I by up to four feet, bringing the hull much closer to objects on the river bottom. CITGO expanded the docking window to minimize the waiting time for ships calling at its terminal and avoid demurrage charges. If the docking window had remained at its pre-1999 parameters, the Athos I would have passed over the anchor without incident. Regarding damages, the court gave Frescati wide discretion about how to deal with the emergency of the oil spill, and did not require it to hire the least expensive response contractors for it to have exercised reasonable business judgment. In this case, Frescati, as the designated “Responsible Party” by the U.S. Coast Guard, hired as many as 1,800 workers to clean up the spill in order to avoid “federalization” by the Coast Guard, which would have increased response costs dramatically. Eventually, as the crisis eased, some responders and equipment were sent home and for others, contracts were renegotiated at lower rates.

conclusion

One purpose of the remand was for the trial court to make factual determinations regarding the vessel’s draft, allegations of negligent navigation and unseaworthiness and damages which the first trial court did not reach, but which became relevant in light of the conclusions of law made by the Third Circuit Court of Appeals. However, Judge Slomsky also made significant legal determinations, particularly in his evaluation of how the standard of care for a wharfinger should be determined and his reduction of the government’s claim by 50% based on the doctrine of equitable recoupment because the U.S. government “created the impression” that it searched federal waterways for obstructions, even though it was not required to do so and never represented to anyone that it did so6.

Eugene J. O’Connor eoconnor@mmwr.com. www.mmwr.com/maritime

6 The Plaintiffs, Frescati Shipping Company, Ltd. and Tsakos Shipping & Trading S.A., were represented by Montgomery McCracken Walker & Rhoads LLP. Please feel free to contact us if you have questions or comments.

the anomalies of bunker sampling by stephen J. findlay, ManaGinG director of findlay Marine, liverpool

There are many in the shipping and bunkering industries who argue that the quality of bunker fuels remains as good now as it did 5 or 10 years ago, and there are of course many who subscribe to an alternative view. Perhaps, unsurprisingly, it is generally the view of bunker suppliers that the quality of fuels delivered is entirely satisfactory whilst ship owners and charterers are finding that the quality is deteriorating. Indeed, the deteriorating trend in fuel quality seems to be the view of a number of fuel analysis laboratories, some who say an increasing number of samples are found to be ‘off-spec’. As a consequence the number of bunker quality claims is increasing. However, matters related directly to the quality of fuel oils, is for another day.

It is the case that for a significant proportion of bunker quality disputes, the problem is often exacerbated by the manner in which samples are collected during the bunkering process. It is widely

accepted that sampling should be carried out using automatic samplers or continuous in-line drip sampling equipment. More

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often than not these days continuous in-line drip sampling at the ship’s manifold is the method employed on board ships although the writer still finds that, in many cases, no samples are taken at the ship’s manifold. However, problems arise when ship’s staff

insist on taking samples at the ship’s manifold, whilst barge staff insist that the samples are collected at the barge manifold.

ISO8217:2010(E) (and 2012) states at Para 4: Sampling: The sampling of petroleum fuels for analysis shall be carried out in accordance with the procedures given in ISO 13739 or an equivalent national standard. Where specific requirements are documented in the referenced test methods, these shall be adhered to.

ISO 13739 states at section 9.2.2: A single sample shall be drawn continuously throughout the delivery, from either end of the bunker hose, using an automatic sampler or a continuous drip sampling device (see Annex M). The guidelines for the sampling of fuel oil for compliance with Annex VI of MARPOL 73/78 are for the sample to be drawn by the Cargo Officer, using a sampling device at the receiving vessel’s inlet bunker manifold. It is recommended that the commercial sample and the MARPOL sample be derived from this single sample.

It would seem at first that ISO 13739 may be a little ambiguous in that on the one hand it states that the sample should be collected from either end of the bunker hose, i.e. either at the barge manifold or the ship’s manifold, yet reference is made to Annex VI of MARPOL which expressly states that the sample should be collected at the ship’s manifold. Little wonder ship’s staff and ship owners are often confused as to where the samples should be collected. The matter is further compounded by the fact that Singapore Bunkering Procedure CP 60:1996 and Code of Practise for Bunkering SS600:2008 states:

Custody transfer sampling shall apply to all bunker deliveries based on FOB terms in the Port of Singapore. The custody transfer sample shall be taken at the manifold of the receiving vessel. Should disputes arise; the custody transfer sample shall be the official sample for ascertaining the quality of the bunkers delivered.

To confuse the position further, in many ports, neither the barge staff nor the ship’s staff are permitted to physically transfer from one vessel to another. Further, authorities at Gibraltar insist that the samples have to be taken at the barge for safety reasons. Introduce factors such as weather and sea conditions, the general difficulty in gaining access from the barge and the ship or vice versa, or even language differences when discussing the various sampling methods, the matter often develops into an almost impossible situation to overcome and this creates a plethora of difficulties when the quality of the bunkers is questioned.

It is often the case whereby the barge staff will sample from the barge manifold, whilst at the same time ship’s staff will sample from the ship’s

manifold. It has to be said that ship’s staff rarely witness the barge sampling and similarly barge staff rarely witness the sampling from the ship’s manifold. Disagreements then arise with the sample seal numbers on the Bunker Delivery Note (BDN) although generally the samples collected by the barge are noted on the BDN and occasionally counter seals are added by ship’s staff. The samples collected at the ship’s manifold are recorded on the ship’s bunkering documentation but more often than not, barge staff refuse to acknowledge such samples.

So which samples are sent for analysis? In theory a BDN sample should be sent for analysis by ship’s staff prior to consuming the fuel although often a sample collected at the ship’s manifold,

it is the case that for a significant

proportion of bunker quality disputes, the

problem is often exacerbated by the manner in which samples are collected

during the bunkering process

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but not necessarily recorded on the BDN, is sent for analysis instead. When the analysis results are known and the fuel as sampled is considered satisfactory, which is usually the case with a BDN sample, the fuel is consumed. 9 times out of 10

that is the end of the matter. However, occasionally problems arise with handling and treating the fuel, or worse, damage is sustained to the Main and Auxiliary Engines. The methods employed in collecting the samples are then brought into question.

Occasionally, when samples are taken by continuous in-line drip sampling methods, errors occur with the drip rate. The principle behind continuous in-line drip sampling is to adjust the valve so that the drip of fuel into the sample container (cubitainer) remains perfectly constant throughout the entire bunkering operation. However, often the drip rate is too rapid and therefore additional cubitainers are required. Ship’s staff may just use one cubitainer and when they realise that, for example, after one hour of a four hour bunkering operation, the cubitainer is half full, they then close the valve slightly so that the remaining half of the cubitainer can be filled over the remaining three hours of the bunkering operation. Similarly, it is often the case that after three hours of bunkering, ship’s staff suddenly realise that the cubitainer is only half full and therefore the valve is opened and the drip rate increased so that the cubitainer is full at the end of the bunkering operation and there is sufficient fuel to be decanted into the 4 or 5 smaller sample bottles.

Let’s consider at a typical scenario. 175mt of IFO is to be bunkered by an unscrupulous physical supplier, over a period of say 3 hours. During the first 30 minutes pure water is supplied at a rate of 100mt per hour (total 50mt). For the remaining 2½ hours, fuel, free of any water, was supplied at a rate of 50mt per hour (total 125mt). The actual water content would be 50mt of the 175mt supply which equals 28%. However, a continuous drip sample taken over the 3 hours would have produced pure water for the first 30 minutes and then pure fuel for the remaining 2½ hours (or 150 minutes). The sample would have found that the product had a water content of just 16.6% (one

sixth) and therefore the 175mt product supplied contained just 29.16mt of water i.e. slightly more than half the water that was actually supplied.

Whilst the above scenario may be a bit extreme, it happens on a regular basis. Perhaps not only with water but the bottom layer of the bunker barge tanks which are usually very rich in sediments etc.

The samples collected, which are clearly not true ‘average’ samples, may or may not show characteristics which deem the fuel to be out of specification. Essentially, whilst the ‘average’ fuel may have been within specification, the sampling errors can reveal that the fuel has been delivered in a non-homogenous condition. If the fuel, as a non-homogenous product, had been pumped to tanks sequentially then there would be a risk that the fuel in one tank would have very different characteristics from another. Even if the fuel was pumped to just one or two tanks, if it was delivered as a non-homogenous product, the fuel in those tanks would be non-homogenous. If so, then difficulties may be encountered treating the fuel, or worse, machinery damage may occur.

ISO8217:2010(E) expressly states: “The fuel shall be a homogenous blend of hydrocarbons derived from petroleum refining”. In other words, the fuel delivered at the commencement of the bunkering operation should be exactly the same as the fuel delivered mid-way through and at the end of the operation. However, that is not always the case as frequently the fuel within a barge may be stored within different tanks or, perhaps, the fuel has been allowed to settle over a period of time before the bunkering operation commences. Accordingly the fuel drawn initially may be rich in

heavier elements; Aluminium and Silicon, or water perhaps. If the Chief Engineer has arranged to bunker to a number of tanks

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sequentially then it is possible that the fuel in the tank filled first, could have completely different characteristics compared to the fuel in the tank filled towards the end of the bunkering operation. However, continuous in-line drip sampling would not have shown

the different characteristics of the fuels. If performed correctly, the drip rate should have remained constant throughout the bunkering operation and the sample collected within the cubitainer would have simply been an average sample of the entire quantity. The Chief Engineer, once the average sample has been analysed and shown to have satisfactory results, may then decide to start consuming the fuel that was bunkered to the first tank i.e. the tank that could possibly have contained fuel with greater aluminium and silicon or water perhaps than the fuel in the final tank to be bunkered. Damage to the Main and Auxiliary machinery may be sustained as a consequence of the fuel quality, but, the ‘average’ samples collected during bunkering, whether from the ship’s manifold or at the barge, show that the fuel is entirely satisfactory.

With the reduction in Sulphur and in many cases a corresponding increase in Aluminium and Silicon, it is likely that the quality of fuels delivered to ships will continue to deteriorate. Correct sampling of fuels at delivery is critical. However, the difficulty with continuous in-line drip sampling, whether at the barge or at the ship’s manifold, is that even if performed correctly, it will not necessarily determine whether the fuel has been delivered as a fully homogenous product and thus whether the fuel really satisfies the ISO8217 standards.

conclusion

Unfortunately, more often than not, the Charterer who simply purchases the fuel in good faith from a supplier, usually via a broker, is left in the unenviable position as being the party responsible for machinery damage or possibly the operation to de-bunker. The system in its current form does little to protect a Charterer and therefore when the terms of a Charter Party are drawn up, it should be a requirement that ship’s staff and the physical bunker suppliers agree to joint sampling and an agreed location and by agreed methods. Of course, that may not necessarily help with the possible non-homogeneity of a fuel when delivered, but it will certainly be a good starting position.

Stephen Findlay is the Managing Director of Findlay Marine Ltd., a company that has been operating since 2006 providing specialist consultancy and surveying services to Ship Owners, Ship Charterers, Underwriters and Solicitors.

Stephen J. Findlay steve@findlaymarine.com www.findlaymarine.com

with the reduction in sulphur and

in many cases a corresponding

increase in aluminium and

silicon, it is likely that the

quality of fuels delivered to ships

will continue to deteriorate.

correct sampling of fuels at delivery

is critical

liabilities for oil stained hulls sustained at venezuelan ports; a charterers’ perspective by José alfredo sabatino pizzolante, ManaGinG director of Globalpandi, s.a., venezuela

Significant oil slicks in Lake Maracaibo have been reported since 2010 raising environmental concerns among the population and the authorities. Commercial operations of vessels trading in that area have also been adversely affected as a result of their hulls becoming stained with oil. At the time, the Minister of Energy and Petroleum announced to the local press that, after sixty years of continuous exploitation, underwater pipelines required maintenance and repairs to avoid leakage. Notwithstanding statements like this, very little has to date been done to correct or otherwise minimise the consequences of poorly maintained equipment. With approximately 11,000 active wells and 45,000 kilometres of pipelines, the lake is a crucial export location for the Venezuelan oil and something in the region of 1.5 million barrels are exported through main oil terminals located at Puerto

Miranda, La Salina and Bajo Grande.

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While the staining of a vessel’s hull with oil has been a regular occurrence for vessels calling at most marine terminals owned and operated by the state-owned company PDVSA, the problem has unfortunately propagated in recent years to commercial ports under the administration of Bolivariana de Puertos, S.A. (Bolipuertos, S.A.) such as Maracaibo and Puerto Cabello (although in this latter port the source of the oil slicks is not yet clear). When a hull staining issue occurs to vessels berthed at oil terminals, PDVSA would as a matter of course undertake the cost and tasks required for the hull cleaning. However, when the problem happens at any of the commercial ports outside PDVSA jurisdiction, it may become difficult to get a similar undertaking or commitment from this company or indeed Bolipuertos, S.A. It should be emphasized, however, that even where PDVSA expressly undertakes the cleaning in writing, this is

subject to availability of a cleaning team which in turn will depend on the number of vessels queuing to load or discharge. It follows that cleaning does not necessarily take place immediately resulting in losses in the form of delays which are hard to recover in the future. It is not therefore surprising that cleaning tasks are often arranged by owners and/or charterers through private companies. To make matters even more complicated, the hull cleaning is not allowed within the lake due to environmental reasons and therefore has to be performed in the anchorage area of Port Guaranao - Punto Fijo, where pilots disembark when leaving territorial waters. The net result is that significant cleaning costs are incurred either locally or in a nearby port including loss of time the extent of which will depend on the availability of cleaning services. Assuming partial or no recovery from PDVSA or other local authorities both in terms of costs and time is available, owners and charterers will look to the governing charterparty for relief.

Indeed the financial implications for charterers following a claim for oil stained hull may be serious as owners will invariably seek to pin these losses on them on the (likely) grounds their vessel was ordered by charterers to load or discharge at a specific port or place which was not properly maintained in terms of cleanliness and that this

represents an actionable breach of charter. To avoid or minimise disputes, it would be advisable to have a bespoke clause in the charterparty apportioning liabilities and expenses between the parties in a clear manner.

Attempts to pass all costs, liabilities and expenses onto the charterer in connection with hull oil staining claims was already considered by BIMCO through a recommended clause to their (mostly) shipowners members when addressing the disastrous effects of the ‘Deepwater Horizon’ offshore drilling platform in the Gulf of Mexico back in 2010. The Charterers Club immediately reacted to this publication by releasing a more balanced clause aimed at achieving an equal apportionment of liability and costs1.

From an insurance perspective, our understanding is that cleaning costs are treated as operational in nature and are therefore generally considered to fall outside standard P&I cover. The situation from our experience may be treated differently under H&M and Loss of Hire policies depending on the facts.

In conclusion, bearing in mind the current situation in Venezuelan marine terminals and ports as described above, it would be advisable for charterers (and indeed owners alike), to make proper and timely enquiries through ship agents and/or local P&I correspondents on the conditions of the specific terminal or port the vessel will be calling at.

José alfredo sabatino pizzolante

the financial implications for

charterers following a claim for oil

stained hull may be serious as owners will invariably seek to pin these losses

on them on the (likely) grounds their vessel was ordered

by charterers to load or discharge

at a specific port or place which was not properly maintained

10

Proper due diligence should also include the review of the relevant provisions in the charterparty for which advice from the Club is key to determine the exposure and necessary risk management steps through, for example, the use of equitable ad hoc rider clauses.

Globalpandi is the leading P&I Correspondent in Venezuela providing its services throughout all Venezuelan ports.

José Alfredo Sabatino Pizzolante (mail@globalpandi.com) www.globalpandi.com

1 See Circular 005 2010 – Gulf of Mexico – Problems Associated with the Deepwater Horizon Oil Spill

hanJin insolvency – arrest considerations in south africa by arthur James, a partner at clyde & co, cape town office, south africa.

Hanjin’s creditors are currently considering options on the recovery outstanding debt. Do you wait for the process in Korea in the hope of eventually receiving a dividend of a few cents in the dollar, who knows when, or are there more proactive options? What about those entities who have purchased Hanjin’s vessels already? Do they have clean title?

Where a creditor has a maritime claim against the owner of a vessel, such creditor would normally be entitled to arrest that vessel. However the judicial winding up of the owner would in the normal course preclude such an arrest. Is there a way around this for Hanjin’s creditors?

South Africa is known as an arrest friendly jurisdiction. Its Admiralty Jurisdiction Regulation Act follows English law with regard to the right to arrest a vessel. However these rights are extended beyond the “sister ship” arrest to the “associated ship”, i.e. a ship under the “control” of the entity which “control’s” the ship in respect of which the maritime claim arose. The concept of “control” goes beyond simple management control.

Under South African law, a vessel arrested before the shipowning company is wound up or placed under judicial management does not fall within the insolvent estate of the shipowning company. The arrested vessel may therefore be sold in execution and the proceeds placed in a fund, with the vessel’s creditors then being paid from the fund in terms of their rankings under South African Admiralty law. The general body of creditors would not necessarily get a look in and the ranking of claims for payment in admiralty differs somewhat from normal insolvency rankings. For example, a claim for necessaries supplied within a year of the arrest will currently rank ahead of the mortgagee bank. In short, a process outside of the Korean bankruptcy protection proceedings is potentially available to creditors.

Further, it appears that the Korean bankruptcy proceedings will not protect Hanjin vessels in South African ports, unless the current receivers

seek recognition before the South African courts. Such recognition is not a foregone conclusion and such an application could possibly be successfully challenged. The bankruptcy protection against the arrest of Hanjin vessels is currently not available to Hanjin’s receivers in South Africa. This could of course change at any time should such an order be sought and obtained.

arthur JaMes

it appears that the korean bankruptcy

proceedings will not protect hanjin vessels in south

african ports, unless the current

receivers seek recognition before the south african

courts

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Hanjin’s receivers are currently selling vessels in the Hanjin fleet. The sale of a vessel to a third party would, in the normal course, deprive a maritime creditor of its right to arrest the vessel in respect of which its claim lies. Again, the South African legislation may come to the assistance of a maritime creditor. It is possible

to issue a “protective writ” against vessels in the fleet, both in respect of direct claims and associated ship claims and even though the vessel is not in South African waters. The caution is however that the vessel must then call at a South African port within 12 months (or a possibly extended period, subject to order of the South African High Court) and the vessel must then be arrested failing which the writ will lapse. The neat advantage to the creditor is that the disposition of the vessel in respect of which the claim lies after the issue of the writ does not defeat the creditor’s right to arrest in that the arrest papers have been issued prior to the vessel’s disposition.

In short, there are options open to creditors in South Africa which may protect their claims, subject to Hanjin vessels calling at South African ports. Please note further that this is a general and high level note on South African admiralty law and practice. Any creditor contemplating an arrest in South Africa or an owner who has purchased a Hanjin vessel should take proper advice on process and their rights under South African law.

Arthur has had a long career specialising in admiralty and transportation law, with particular focus on contentious shipping law and, latterly FI cover and advice, specifically to the reinsurance market. During this time, Arthur has acted for ship owners, hull insurers and cargo interests.

Arthur James Arthur.James@clydeco.com

staff news

Mengzhen yu

anne Marie castle

anne Marie castle

We are pleased to announce that Anne Marie Castle will relocate to our Dubai office in January 2017 to help establish and supervise an efficient and effective claims and advisory function within the company’s existing Dubai hub and to service the clients in that region.

MenGzhen yu

Mengzhen joined the MECO Group in August 2016 as a claims executive. He is a maritime law graduate from Dalian Maritime University, and postgraduate (LLM Maritime law) from Southampton University. Prior to joining us Mengzhen worked as a Chinese qualified lawyer for 2 years in a law firm, specialising in Maritime law.

The MECO Group, 65 Leadenhall Street, London EC3A 2AD Tel +44 20 7702 3928 enquiry@themecogroup.co.uk www.themecogroup.co.uk

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