no. 1 - 2009 april · no. 1 - 2009 april. leading article weather the storm ... about using the...

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MEMBER PORTRAITArcadia

Prepare for increasingly aggressive claims from the U.S.!

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A newtake-me-homeconcept

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No. 1 - 2009 April

Leading article Weather the storm – back to basics 3 Loss Prevention A new take-me-home concept developed by Marinvest 4-5 Member portrait Arcadia and the drive for excellence 6-7 Market Henric Gard has an eye for the shipping market 8-9 Where is the market heading? – What can we expect? 8-9 MRM MRM training network shows rapid growth 10-11 Out and About with MRM 10-11 New MRM training providers11 P&I Charterer's all inclusive cover 12-13 Oil spill in U.S. waters - Shipowners must prepare for increasingly aggressive claims 14-15 Crew From 120 to 240 days – Positive developments in Philippine crew claims 16-17 Enhanced PEME scheme to be formally launched 16 Claims Claims at a glance 17 Legal Limitation funds and procedure – a Swedish perspective 18-19 Rotterdam Rules – a general overview 20-22 Underwriting Happy New Year! Reflection on a dull last year – and a bright future for the Club 23 Cefor Cefor opens for Nordic underwriting cooperation 24 Club Information Facelift for front edge website 25 News from Piraeus 26 New Members 26 Basic facts 26 News from Asia 27 Member Alert: Phosphine Fumigant Explosions 27 MARS Reports: Marine Accident Reporting Scheme 27 Out and About 28-31 Staff News 31 Club Calendar 32

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ContentThe Swedish Club Letter 1–2009

www.swedishclub.com2

The Swedish Club is a mutual marine insurance

company, owned and controlled by its mem-

bers. The Club writes Protection & Indemnity,

Freight, Demurrage & Defence, Charterers'

Liability, Hull & Machinery, War risks, Loss of Hire

insurance and any additional insurance required

by shipowners.

Weather the storm – back to basics

Lars RhodinManaging Director

The Swedish Club Letter is published three

times a year and distributed free of charge to ves-

sels insured with us and to our members.

The Swedish Club Letter is an editorially inde-

pendent newsletter and opinions expressed by

external contributors are not necessarily those of

The Swedish Club. Articles herein are not in-

tended to provide legal advice and the Club does

not accept responsibility for errors or omissions

or their consequences. For further information

regarding any issue raised herein, please contact

our head office in Göteborg.

Editorial Advisory Board Peter Andersson, Susanne Blomstrand,

Henric Gard, Birgitta Hed, Anders Leissner, Lars Malm, Tord Nilsson,

Lars Rhodin, Carola Weidenholm.

Production co-ordinator Susanne Blomstrand.

PR-consultant TRS Public Relations Ltd., London.

Layout Eliasson Information, Göteborg.

Print PR Offset, Mölndal.

© The Swedish Club. Articles or extracts may be quoted provided that The Swedish Club is credited as the source.

0904PR5200B

Leading ArticleThe Swedish Club Letter 1–2009

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Cover photo: Greasy oil slick on sea surface.

PHO

TO: ISTO

CKPHO

TO

Dear members and associates,

2008 was a unique year, a year not experienced before. We are all well aware of the cyclic nature of marine underwriting, in common with that of shipping. We also know that the greatest risk in our business lies in finance rather than insurance. The extent to which the asset side of the balance sheet could be under stress has neither been fully appreciated nor experienced previously. I envisage that risk management in our industry will be reshaped in the future. In addition, there are simply no “safe” investment returns to make up for underwriting losses.

At this juncture, we need to batten down the hatches and weather the storm. Whatever business model is used amongst P&I clubs and underwriters, the current storm brings us back to basics: under-writing discipline and prudent investment exposure. Underwriters should look ahead, assessing exposures and refrain from simply look-ing in the rear-view mirror. Exposures change and develop over time, whereas history belongs to the past (records). Sustainable underwrit-ing means that pricing follows exposure, whatever changes there may be. We are now also noting de-risking in our business environment in terms of investment strategies. Clubs and underwriters are anx-ious to state how little exposure there is (left) to the equity markets. In the longer term I think that the investment risk profiles will more accurately reflect the duration of claims liabilities.

The strong underwriting performance of the Club in 2008 was an important ingredient in the supplementary call process with the Board. We have achieved the best technical result in many years. Nevertheless, the impact of the global financial crisis, coupled with

the changes in the Pooling Agreement, had to be addressed. We can-not ignore an unbalanced pool record, even though the bottom line result had generated a surplus when it was incurred. Supplemen-tary calls are unwelcome news to our members, however; the Board adopted a proactive approach to neutralise the impact of the above by opting for a capital injection. We had to break a 16 year record. The circumstances were unprecedented.

Service is a cornerstone of our business. Members face increas-ingly difficult times. Volumes are down and freight rate levels are meagre. No one knows when times will turn, and the outlook for 2009 appears gloomy. There is an apparent lack of confidence in world trade to support the demand for shipping services. Members need a partner to support them during the difficult times. With our stable and proactive approach we are positioned to be that partner. Responding efficiently to casualties and claims and providing ad-vice on suitable insurance arrangements, whatever your needs may be, remain our highest priorities. We are designed to make a differ-ence.

Yours sincerely,

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The Swedish Club Letter 1–2009 Loss Prevention

4

It is always a pleasure being invited to lunch, so when Marinvest invited us to a buffet on board the M/T Marilee on a regular call at Stenungsund, Sweden, we responded in the affirmative. Besides a nice lunch, we had the opportunity to see a well-maintained tanker equipped with a new concept for a take-me-home arrangement.

Having worked almost ten years with casualty response at The Swedish Club, it was encouraging visiting a vessel where the owners have invested time and money in developing

a system which potentially can erase claims following a main engine breakdown such as towage, salvage, wreck removal and oil pol-lution.

Roger Karlsson, technical director at Mar-invest explains:

When we were planning the new building project, we tried to foresee and fulfil future national and international regulations for ves-sels trading in the Baltic region. All oil tanks, including the cargo tanks, needed protection behind a double hull. We also wanted a reliable and powerful take-me-home arrangement, but were not satisfied with the solutions available

A new take-me-home concept developed by Marinvest

The Marilee is a 74 999 TDW Panamax oil tanker, Ice class 1 A.

Örjan KarlssonClaims Manager, Collision/Salvage

Team Göteborg I

on the market for a two stroke engine, which was our requirement.

At the project stage, the available sys-tems for a two-stroke engine were based on an electric drive through a gearbox with an available power output in the region of 1500 to 1800 kW, which in our opinion was not sufficient. The installations were also too heavy and too costly. We were brainstorming about using the vessel’s cargo pump power pack supply system, with 3 MW of hydrau-lic power available. Framo, who supply the pumps and power pack, were not happy with the idea of connecting additional gear to the

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The Swedish Club Letter 1–2009

55

A new take-me-home concept developed by Marinvest

system. Finally, they accepted a solution where Hägglunds slow drive hydraulic motors were used, which enabled a connection to the pro-peller shaft without a gearbox.

Looked for an alternativeBeside the power supply and the drive there were no available solutions on the market which could disengage the main engine and transfer the propeller thrust to the vessel’s hull without additional thrust bearings. Mar-invest looked for an alternative to transferring the propeller thrust through the main engine, which is the normal already built-in solution.

They finally developed the disconnector, which is their own design. The hardware was constructed by the shipyard and approved by DNV (Det Norske Veritas).

A system that can save time and moneyThe M/T Marilee, which is equipped with the system, has achieved 10 knots during trials at full speed with a maximum power output of 2400 kW. Computer simulations show full manoeuvrability at a wind speed of 34 knots and a wave height of 3.5 metres. The system is today installed on Marilee and her sister ves-sels, Maribel, Mari Ugland and Mariann. The

great benefit of the system is that the vessels have a second propulsion system in the event of a main engine breakdown at sea. Furthermore, the vessels have the ability to manoeuvre from a terminal even if the main engine is immo-bilised. Marinvest are presently educating oil terminals about the system. Their aim is to obtain approval from the oil terminals to al-low maintenance on the main engine during cargo operations if vessels are equipped with our system. If this can be achieved, the system will also save time and money for the owner during normal operation.

Loss Prevention

PHO

TO: M

ARIN

VEST

66

The Swedish Club Letter 1–2009 Member portrait

Arcadia and the drive for excellenceArcadia Shipmanagement Co. Ltd may be a relatively young corporate name, but it has carved out a prominent position in the market for high quality Aframax and Suezmax tankers over the past decade.The company was established in 1998 and now operates a young fleet of Suezmax tankers and Aframax ships trading worldwide.

Nikolaos Manias is Managing Director of Athens-based Arcadia. He has a clear view of the company’s positioning within the market: “We had decided to focus on the safe transportation of oil within two years of our foundation. We had some Panamax bulk carriers early on but these have since been assigned to another manage-ment company. We have concentrated on expanding our tanker fleet, with a series of newbuildings over the past decade. No less than seven joined the fleet in 2007. We now manage a tanker fleet totalling some 1.8 million tonnes deadweight.”

The new vessels, in both classes, were built to a high-specification design. Nikolaos Manias says: “With a strong common design approach across both size classes, our aim is to capitalise on the obvious benefits arising from the manage-ment of sisterships, including efficiencies in the areas of maintenance and the training of sea staff and shore personnel.”

Committed to modern, forward-thinking proceduresArcadia has a progressive outlook. Its views on safety, training and en-vironmental protection position it at the forefront of modern tanker op-eration. Nikolaos Manias comments: “Firstly, we are extremely proud of our Greek maritime traditions. We are great supporters of the Greek flag – the vast majority of our ships are Greek-registered. Secondly, we are totally committed to modern, forward-thinking management procedures. We are certified by DNV for ISO 9001:2000 and ISO 14001:1996, for quality and environmental protection, respectively. We also hold ISO 18001:1999 certification for occupational health and safety, ABS certification for Risk Management Assessment and the Green Award. Vessels calling at US ports have Qualiship 21 certifica-tion. Furthermore, we are active members of INTERTANKO and the Helmepa organisation.”

Investing in crew qualityArcadia continues to invest heavily in management and crew quality. The company has established its own fully-equipped training centre in Athens. This facility is certified by DNV. Nikolaos Manias says: “We have always paid particular attention to the training of our seafarers and shore staff. Our office in Athens is responsible for the full management of the entire fleet, from technical management and crew management to chartering, newbuildings supervision and a wide variety of other tasks. We require a great variety of specialists and we pay special atten-tion to the maintenance of a close relationship between our seafarers and staff working ashore. We are proud of our extremely high staff retention in both areas.”

Tanker company of the year 2007In late 2007 Arcadia received Lloyd’s List’s “Tanker Company of the Year” award. This distinction took account of the successful completion

of its tanker newbuilding programme, the safe operation of a young fleet and the organisation’s deep commitment to training excellence. Nikolaos Manias adds: “This award produced an interesting and very positive effect throughout the organisation. We all felt a sense of in-creased responsibility towards the maintenance of the tanker sector’s high standards. Everyone made their personal contribution to this achievement, from Cadets to Masters and our people ashore.”

Lloyd’s List, in announcing the award to Arcadia, commented: “The judging panel noted that 2007 was an exceptional year for Ar-cadia in showing the fruits of its investment. With seven deliveries of high standard Aframax and Suezmax tankers since August 2006 from Hyundai and Samsung, the company is believed to have had the larg-

est delivery programme of tankers of above 100,000 dwt worldwide. The fleet is now one of the youngest in the industry, with an average age of less than three years. It has also invested in continuous training and education. Arcadia operates its own modern training centre for crew and shore personnel, which in 2007 became only the second of its kind in Greece to be certified by DNV.”

Comfortable with the commitment to The Swedish ClubArcadia Shipmanagement’s relationship with The Swedish Club be-gan in 2007. Currently, the company has three vessels entered for Protection & Indemnity, three for Freight Demurrage & Defence and 15 for Hull & Machinery. Nikolaos Manias is comfortable with this commitment to The Swedish Club: “Our company has a background of strong, long-lasting ties with the Scandinavian shipping and insur-ance communities, especially in the areas of P&I, H&M and classifi-cation. We have enriched this connection by entrusting the cover of a number of our ships with The Swedish Club.

“We are now in the third year of this relationship with The Swedish Club and we are receiving a professional service, based on a spirit of mutual cooperation and understanding.”

The tanker sector is volatileOn the current prospects for tankers, Arcadia’s Managing Director said: “In the tanker sector, the market is volatile and considerably lower than last year. Nevertheless, it is still yielding returns. At the same time, there can be no doubt that, in this uncertain trading envi-ronment, the companies with the best prospects are those which are well-prepared and carefully structured to function well in these new circumstances.”

Focus on improving safety, quality and environmental standards

In looking ahead, Arcadia’s Managing Director sees the key chal-lenge as “maintaining our sound reputation in the market, by vigor-ously pursuing a policy of continuous improvement in safety, quality and environmental standards. We fully recognise, for example, the significance of our on-going work to achieve fuel savings and reduce atmospheric emissions. We will also continue to focus on preventive maintenance. We want our ships to remain in tip-top condition. One important factor here is the work of our team of specialists who are experts in modern coatings technology.”

Member Portrait

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The Swedish Club Letter 1–2009 Member portrait

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PHOTO: ARCADIA SHIPMANAGEMENT

Arcadia and the drive for excellence

Mr Nikolaos Manias, Managing Director of the Athen-based Arcadia Shipmanagement.

8

Carola Weidenholm

Corporate Communications

8

The Swedish Club Letter 1–2009 Market

Taking a closer look at the marine insurance sector (P&I and H&M) and going back three, five or even ten years, you will find that it has only been the odd year

when the market has provided some modest returns to stakeholders dis-regarding investment income. There is not one single factor alone that has led to this situation, but the years of relying on solid financial returns to balance deficit, have certainly made it hard for insurers in general to resist the practise of cash flow underwriting. Unfortunately this has led to an overall situation where the market is lagging behind and premiums charged are simply not commensurate with today’s exposures.

Adjust and managing the manageableRecent years’ legislative actions have put an ever-increasing regulatory burden on owners. The financial market collapse, together with amend-ed and perceived amendments in the IG (International Group) pooling agreement, adds to these burdens. These will all, at the end of the day, have to be dealt with and catered for by the clubs.

The brutal adjustment in the freight market will lead to increased scrapping activity affecting older tonnage. This in turn will lead to a

weakened premium base for the clubs. The freight market situation will also influence the premium base for insurers, as insured values will be adjusted downwards in order to reflect current valuations. Recent years’ claims inflation has doubled repair costs. Extensive newbuild pro-grammes stand a clear risk of being cancelled or put on hold, leading to a slower tonnage increase than expected. In the light of all of this, we be-lieve it is time for insurers to revisit their rating models in a proactive and transparent way in order to mitigate what otherwise can be expected.

On the other hand, there are much-welcomed positive factors, such as the appreciation of the US dollar and the decrease in pool claims for the 2008/09 policy year, which, if the change is of a more permanent nature, will of course have a mitigating effect to the benefit of owners as well as insurers.

A totally new environmentThe current recession is an ugly beast taking a big toll on virtually all companies, shipping companies and insurance companies alike. We have today only scratched the surface, but it is our belief that it has the potential to change the insurance industry in a profound way. Why? Because it will have to change! Why does it have to change? Because we believe members, shareholders and insurers, inevitably would like to have predictability, stability and sustainable long-term relationships to

Henric Gard will expand upon The Swed-ish Club’s global marketing activities and

communication in his role as Director of Marketing & Business Development.

In September The Swedish Club received a major boost to marketing and business devel-opment, when Henric Gard began his employ-ment at the head office in Göteborg. After 20 years in the insurance broker field, he has solid experience from the other side of the negoti-ating table – something that will benefit our operation and members a great deal.

– Henric has been working with business acquisition internationally and brings the per-spective of a broker, which is our major distri-bution channel. With his background he will also contribute greatly to our marketing strate-gies and the positioning of the Club in to the future, says Lars Rhodin, MD of The Swedish Club.

And Henric appears just as positive about his new position and company.

– It was hard not to become attracted by the job description and I have always been fasci-nated by both insurance business and shipping, he says. I can add that I always thought of The Swedish Club as a serious company that knows how to preserve a strong brand.

He also points out the Club’s long history in the marine insurance business.

– I find it impressive that a company in such

a small niche has been so persistent in main-taining its focus on marine insurance, through highs and lows, for 137 years.

All-in-one service and delegated responsibilities make us special

Despite the rocky financial market, the Club came out with a positive technical underwrit-ing result for 2008. That is a good start to the new year, and for Henric, who will take part in the development of both the P&I and H&M portfolios.

At present the main focus of our activities is to become more visible in key markets and highlight the advantages of being a member of The Swedish Club. Growth is important but Mr Gard emphasises the key of a sustainable strategy.

– We already have a well balanced portfo-lio and will always put the best interest of our members first, that’s why we only will accept

sustainable clients that fit our profile. Lars Rho-din has painted a distinct road map that we will follow to penetrate the right markets and at-tract the right members.

When I ask Henric what is the most impor-tant issue for the Club to address at the mo-ment, he answers:

– Our members buy a service they hope-fully don’t have to utilise. But when an accident nevertheless happens, the actions of the insurer are vital. We are well known for providing an excellent service and possessing competent per-sonnel; so to support, maintain and improve an already high service level is our prime task.

– We have to be better at visualising what we offer – which is a proactive approach and an all-in-one service. Our organisation is really effi-cient at delegated responsibilities, which means the members always get an immediate response to an issue and quick actions when necessary. But I think we need to spread the word better to the market.

Henric Gard has an eye for the shipping market

Where is the market heading

Whatcan we expectHenric Gard

Director Marketing & Business Development

9

AGM

9

The Swedish Club Letter 1–2009 Market

the mutual benefit of all parties. We embrace this coming perceived change. It is also with great

pleasure that we have lately noticed other responsible marine in-surance providers officially advocating this view. This will be a

balancing act, but we are ready to take that challenge, in fact we have already started it.

Experience and responsibilityThe Swedish Club has been in the market for well over a century (as a ma-

rine insurance provider alone) and is equipped with models and data second to none. Additionally we have an invaluable asset in our experienced personnel,

who are totally committed to providing added value to our members. Our mis-sion is simple, yet we have a very complex task to carry out. In order to convince

members, shipowners and charterers to pay premiums commensurate with the actual exposure involved, we have to be even more transparent. In short, we have to further demonstrate and make visible the added value of our products, how premiums are built up and our commitment to deliver if and when we are called upon to do so.

Being a true mutual, we understand and appreciate our responsibility not to take unfair advantage of this situation; because by doing so we will only help in recreating the previous unsustainable environment. There might be a bumpy ride ahead of us all, but rest assured – we, The Swedish Club, are with you all the time and all the way.

Henric Gard– the short versionName: Henric Gard

Age: 45

Family: wife Cecilia and four sons: Carl 11, Gustaf 10, Vilhelm 8 and Fredrik 5.

Background: he took a Mas-ter of Law at the Universi-ty of Uppsala in 1989 and went directly to work as an insurer’s broker at Marsh in Stockholm, where he also had two second-ments: one in London and one in New York. In 1994 Henric moved on to Willis Group where he worked for 15 years with market-ing strategies and business development within the field of Global Energy.

Current position: in Septem-ber 2008 it was time to board The Swedish Club as Director of Marketing & Business Development. He is also part of the man-agement group.

Spare time: with four sons the family takes up a lot of his time but he takes an interest in sports and plays squash and runs every so often. In May Henric is one of 19 employees of The Swedish Club to run the half marathon – Göte-borgsvarvet.

Prime essentials for amanager: The key to all lead-

ership is direct and open communication. Everyone needs to feel that their contribution matters and is important in order to reach the company goals. You also have to make sure that everyone gets a clear idea of the primary goals for the operation and to set clear, attainable sub targets. Another impor-tant thing is to have some fun on the way – a good laugh once in a while is often underrated!

Henric Gard has an eye for the shipping market

Where is the market heading

Whatcan we expect

PHOTO: JONAS AHLSéN

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Out and about with MRM

Martin HernqvistMRM Manager

Maritime Resource Management

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The Swedish Club Letter 1–2009 MRM

A major expansion of the Maritime Re-source Management (MRM) global train-ing network was achieved in 2008. This article explains the major reasons behind this development and the way forward.

By the end of last year ten new MRM training providers joined the global MRM network, bringing the total number of mari-time academies and training centres involved worldwide to 36. Most of the network members are in Asia, but MRM representation in Europe is growing. The MRM network will continue to expand in 2009, in line with the growing

demand for training places.We regard 2008 as a “breakthrough year”

for MRM, which focuses on promoting safe behaviour through positive cultural change – in order to reduce the risks associated with human error. MRM courses are usually of four days’ duration and are designed for ships’ offic-ers, engineers, maritime pilots and shore-based personnel.

Resource management training in the ship-ping industry is now in its sixteenth year. The resource management concept is a counter to dangerous shipboard situations arising due to shortcomings in human performance, such as a breakdown of communication between in-dividuals, preoccupation with minor techni-cal problems, a failure to delegate tasks and a failure to detect deviations from operating procedures.

The dramatic surge in demand for MRM training over the past

12 months is a response to a quest for new ways of minimising the risk of marine accidents and spills, the potentially huge consequential costs and a move towards introducing international requirements for such training. An increased interest amongst ship operators to make fur-ther investments in their officers and crew – not least with the purpose of maintaining retention levels – is another important factor.

As for The Swedish Club, our long-standing commitment to MRM recognises the substan-tial costs of major claims and that collisions and groundings can result in pollution – possi-bly on a catastrophic scale. Vessel operators, for their part, appreciate that MRM is an efficient loss prevention tool and an important means of establishing a genuine safety culture in the company – onboard and ashore. MRM train-ing for deck and engineering officers, together with other personnel who contribute to safety

and accident preven-

MRM training network shows rapid growth

27 October Seminar in Hong Kong. Jointly organised with the Hong Kong Shipowners’ Association.

3 November Workshop in Manila in connection with the 9th Manning and Training Conference. In cooperation with the Interna-tional Federation of Shipmasters’ Associations (IFSMA).

6 November Seminar in Taipei for the Taiwanese shipping community.

11-13 November MRM workshop leader meeting in Singapore. Hosted by Wavelink Maritime International.

19 November “Introduction to MRM” seminar for Marlow Navigation in Manila.

3 December “Introduction to MRM” seminar for Marlow Navigation in Odessa, Ukraine.

10 December Introductory day for new MRM work-shop leaders at Norwegian Maritime Academy, Horten, Norway.

2008

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The Swedish Club Letter 1–2009 MRM

MRM training network shows rapid growth

New MRM training providersNORwEGIAN MARITIME ACADEMy

NorwayIn October 2008, The Swedish Club signed an MRM training agreement with Norwegian Maritime Academy (Norges Maritime Utdan-ningssenter AS) located in Horten, Norway. This will be our first training partner in Norway.

The training centre train and instruct 4,600 people from the maritime industry, many of them from the offshore sector. Our contact person is Rune Løkling, until

recently a cruise ship captain of Royal Carib-bean Cruise Lines.

HuMBOLDT MARINE TRAINING ChileIn January this year, we signed an MRM training agreement with Humboldt Marine Training in Valparaiso, Chile. Humboldt Marine Training was created in 2004 by Humboldt Shipmanagement with the primary purpose of meeting the training needs of its crews. Both internal and external lec-turers take part in the training activities.

The holding company of the Humboldt com-panies is the Ultragas Group with head quarters in Santiago, Chile.

tion, is an extremely direct and effective way of addressing loss prevention goals.

New view on human errorSuccessful results require a new view on human error. When things go wrong, we do not want people to sweep the problems under the carpet. An important first step is therefore to achieve a no-blame culture. We must change our view on human error to the following:

• People do not err deliberately. They did what they thought was right at that very mo-ment. Otherwise, it is a violation or sabotage. Not an error.

• We all make mistakes. Experts make mis-takes too, and sometimes the best people make the worst mistakes.

• Human error is not the cause, it is the starting point of an investigation. Human er-rors are symptoms of deeper trouble.

MRM consists of 14 distinct modules:

attitudes and management skills; cultural awareness; communication and briefings; challenge and response (creating an environ-ment in which everyone feels free to question assumptions and actions); short term strategy (especially in emergency situations); authority and assertiveness; management styles; work-load; state of the ship (in relation to the state of mind of those on board); human involvement in error; judgement and decision-making; lead-ership in emergencies; crisis and crowd man-agement; and automation awareness.

These course modules have just been commissioned in a new, web-based format. CD-Rom-based modules for MRM training providers are to be phased out. Work is now under way to revise the 14 modules, with an even stronger emphasis on the importance of cultural issues within organisations. In addi-tion, there are plans to introduce a new training module on pilotage. This would focus on the

human interaction between Pilot, Master and Bridge staff. Many authorities in the field of maritime safety have highlighted this area as worthy of more attention.

Planning for 2009Work will continue this year on training new MRM Workshop Leaders and developing the skills of existing leaders. In 2008 The Swed-ish Club organised two Workshop Leader seminars, for around 40 participants. Similar seminars are planned for the first half of this year, for Workshop Leaders in the European/Middle East region, followed by seminars in Asia during autumn. We will also continue our company-specific MRM presentations during 2009. In addition, we will reach out to the glo-bal shipping community by means of seminars, presentations and MRM information meet-ings, for national and regional shipowners’ and seafarers’ organisations.

The Swedish Club Letter 1–2009 P&I

CoVeR12

In its capacity as both P&I underwriter and H&M under-writer, The Swedish Club provides cover for all types of charterers, as the risks related to that business fi t in well with the Club’s main purpose of providing insurance cover and insurance products to shipowners.

The all inclusive cover provided is suited for charterers acting as time, voyage, slot or space charterers. Depending on category and type of operation, the Club will offer cover suitable to individual needs. The limit of cover provided is optional and varies from char-terer to charterer depending on the type of operation and the size and age of the vessel(s) chartered.

Unlike the P&I business written by the Club, the all inclusive cover is written on a fi xed premium basis. In order to be able to pro-vide fl exibility in terms of the limits provided to members, this sec-tion of the Club’s business is reinsured in the commercial insurance market rather than through the International Group’s reinsurance programme for charterers’ business. Having said that, the Club is still providing cover for Charterer’s Liabilities in the conventional way through the International group.

Over the past fi ve years the Club has become increasingly in-volved in this line of business, as it is a vital part of some of our mem-bers’ operations. Container line services and bulk cargo operations form the largest part of the entered fl eets, but also to a growing extent tanker-related business such as larger crude oil tankers and chemical tankers. It is natural for the Club to be involved in the more “front-line” type of operations such as a container line operations, as this is already an important part of the Club’s mutual business. In contrast, the majority of the Club’s chartering members are of a low risk nature involved with non-sensitive cargoes and standard ship types.

Assessing the riskWhen entering a new member or risk the risk assessment done by the Club is similar to normal practices. A thorough review of the risk is carried out not only to safeguard the quality of the business entered, but equally importantly, to provide the most effi cient and comprehensive cover to the member at a price commensurate with the risk. When assessing the risk, the Club will pay attention to the

type of operation, geographical area, vessel type, cargo type and other factors imposing an exposure to the charterer.

Typical issues of concern are whether standard charter-parties are being used and whether a back-to-back situation exists with any sub-charterer, i.e. position in the chartering chain. Other are the issuance and terms of bills of ladings, exposure under other contracts, strict liability on owners. The Club’s views on commercial and technical management are also extended to charterers, and form part of the overall risk assessment.

Risks coveredActing as the charterer of a ship, either per voyage or on time, the charterer will be exposed to risks not only vis-à-vis the owner of the ship but also vis-à-vis a possible sub-charterer, cargo owner or other third parties. Seemingly, he will be in a role similar to that of an owner, with the addition of other exposures related to the role of charterer, such as liabilities towards the vessel owner, including damages infl icted on the ship.

Even though charterparties stipulate who the responsible party for certain risks will be, most of the time a claimant will be allowed by jurisdiction to pursue his claim against the party he may choose. The charterparty will eventually determine, by contract, who will ultimately bear the costs but this may take considerable time and be determined by a long legal process.

Consequently, the charterparty is the most important factor in determining the risk and the cover needed. In this instance the Club’s claims executives input after reviewing the charter-parties, bills of ladings and other types of agreements entered in to by the charterer is of importance. Of course, in reviewing the various contracts concerned the Club will be pleased to offer advise on wordings etc should this be required by the member.

Typical risksThe typical risks falling within the standard scope of cover pro-vided to charterers of any kind are:

CoVeRCoVeRChartere

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CoVeR13

Cargo LiabilitiesPersonal InjuryFinesProperty DamageDamage to Fixed and Floating ObjectsWreck Removal

Variety of other insurable interestsThere is a variety of other insurable interests related to each specifi c charter and the Club is providing cover on the basis of the liabilities and exposures assumed by the charterer. For instance, should the charterer also be an owner of the cargo he may have an exposure to risks related to him as a cargo owner (pollution and other risks such as damage to the ship etc). Common claims and disputes between shipowners and charterers are damages to the vessel’s hull and ma-chinery and consequently the all inclusive cover includes cover for:

Damage or loss to the shipContribution in General Average (freight & bunkers)SalvageDetention

A typical situationA typical situation where a charterer may be found to be liable for damages to the vessel is when a nominated port for loading or dis-charging is found to be unsafe. If the port is unsafe, the charterer may have a liability to the shipowner should damage to the ship occur. Other situations include inadequate or incorrect stowage or trimming of the cargo causing it to shift during a voyage, lightering operations, stevedore damage, bad bunkers etc.

Cover limitsThe Club is offering cover limits at a variety of levels depending on the requirements. A charterer requesting a quotation may for his own risk assessment evaluate what limit of cover is required. In the recent upturn/downturn of the shipping market with increased/decreased

market values of ships the required limits of cover has generally varied to the same

extent. Additionally, increase in commodity prices, loss of use of the vessels in a damage to hull situation, increased compensation for injury and death and other infl ation related components has also affected the limits of cover bought by charterers. As some of these aspects are related to market conditions they may vary from year to year and charterers are advised to review their limits of cover from time to time.

Charterer’s Interest / Charterer’s Loss of HireSituations appear when a ship suffers a particular average or less often becoming a total loss. In both instances this may have direct implications on the estimated earnings of the chartered ship. In the fi rst scenario and when a ship is sublet, the charterer may wish to insure the difference between the charter rate paid and received by way of a Charterer’s Loss of Hire. Should the chartered vessel become a total loss the expected future income will not only be lost but it may also be diffi cult to substitute the vessel at a similar charter hire. This exposure may be covered by a Charterer’s Interest cover.

Charterer’s at riskAs described above, the charterparty is the contract determining which party will eventually bear the cost for a certain claim. In many cases where the charterer of a vessel seems to be free of liability, and the re-sponsibility for a claim will be on the part of the owner, the fact is that the claimant may pursue his claim against the charterer and there may be a long and costly process of defending the claim. In this instance the Club’s claims executives will assist in defending the member’s interests and covering the costs and ultimate liabilities. Additionally, there are risks connected with the chartering of a ship which are not usually those of the owner (damage to hull, owner’s loss of use in damage to hull situations, liabilities assumed as cargo owner etc).

By entering into a chartering arrangement of a ship with a ship-owner, regardless of in what capacity, the charterer has an insurable interest and may consider reducing his exposure as much as possible. Should you be interested in discussing your chartering activities in more detail, we suggest you contact your usual contact person at the Club.

CoVeR Kjell AugustssonDeputy Managing Director

Team Asia

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Shipowners whose vessels spill oil in the United States are facing increasingly ag-gressive claims and demands by federal and state agencies. These agencies are seeking ever higher criminal and civil fi nes and penalties, as well as compen-sation for natural resource damages.

The Oil Pollution Act of 1990 (OPA) allows state and federal governments to seek compensation, on behalf of the public, for damages to natural resources caused by oil spills. Most coastal states have also enacted laws that allow the recovery of such dam-ages. Under OPA, federal and state agencies (known as “trustees”) are supposed to deter-mine the extent of natural resource damages resulting from the spill, and identify restora-tion projects which will compensate the public for these damages. If the trustees follow the detailed process spelled out in regulations to make these determinations, they are entitled to a rebuttable legal presumption under OPA

that their determinations are correct.Shipowners and others within the private

sector reacted skeptically to the allowance of natural resource damages under OPA. Among the concerns expressed was that there would be no objective way to accurately measure such injuries or damages, and the trustees would thus be free to pursue overblown, speculative claims for damages. Some also feared that cash-starved government agencies would use oil spills as a means to fund projects that they could not otherwise fund.

”Junk” scienceSadly, those fears have not been dispelled by the fi rst (nearly) 20 years of practice under OPA. Many believe the trustees have routinely used “junk” science to justify exaggerated claims, and have used NRDA settlements to fund res-toration projects that do little or nothing to restore the natural resources actually injured as the result of oil spills.

A simple example involves mortality to birds following a spill. A direct measure of such mortality would be to count the number of dead birds collected on the water or the shore following the spill. However, it is generally accepted that some of the dead birds will not be found; either because they sink, are eaten

by scavengers, or fl y out of spill zone before they die. Thus, this simple method results in undercounting the number of dead birds. The trustees, with justifi cation, believe an upward adjustment is needed to account for these un-counted dead birds. They have thus developed models which attempt to count the dead birds that were not found.

Simplifying assumptions

Unfortunately, like most models, the devil is in the details. The models rely on multiple simpli-fying assumptions, each with unknown rates of error. Compounding these assumptions can result in wildly exaggerated estimates of bird mortality that may be as much as 100 times greater than the number of dead bird carcasses actually found following the spill. The famil-iar saying, “junk in – junk out” is often heard when discussing these models.

The trustees justify their models and as-sumptions on the grounds that they represent the public, and have an obligation on the public’s behalf to seek full compensation for natural resource injuries caused by spills. They correctly point out that not all of the injuries caused by an oil spill are directly observable or easily quantifi able. In their view, they have an

Shipowners must prepare for increasingly claims

Herbert H. RayMember

Keesal Young & Logan, Anchorage, Alaska

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signifi cance. The fact that liver enzymes are el-evated in a group of birds does not mean these birds have been “injured” or are in jeopardy. Moreover, many ports and shorelines have previously been contaminated by other pol-lutants. Elevated liver enzymes can be caused by exposure to other pollutants, and to natu-rally occurring substances. Despite this fact, the trustees often assume any observed effect in a spill area is caused by exposure to oil, and refuse to consider other possible causes. If the trustees detect these subtle effects, shipowners can expect that they will assume the worst and seek enhanced compensation.

Shipowners need adviceShipowners faced with these speculative claims will need the advice of specialists who understand the underlying technical issues, and can challenge the more questionable as-sumptions and methods used by the trustees. To date, there have been no legal challenges to the trustees’ use of these newer methods of assessing injury. That challenge is bound to come, however, if the trustees continue to push the envelope by using ever more questionable methods of enhancing their claims.

hectares of shoreline than would oth-erwise be the case.

The trustees are also using ques-tionable science to argue that small

amounts of residual oil left in the environment have long-term adverse affects. To support these assertions, they are attempting to meas-ure sub-lethal effects of oil on organisms, and then seeking compensation for these sub-lethal effects. For example, trustees now routinely measure levels of certain enzymes in the livers of fi sh or birds in a spill area, months or years after the cleanup has been completed. Labo-ratory tests have shown that these enzymes are elevated when there is exposure to oil and other toxic substances in the environment. If the liver enzymes are higher from birds or fi sh in the spill area then from the birds or fi sh non-spill areas, the trustees will claim that these organisms are still being exposed to the toxic effects of the oil, and are less likely to survive. The trustees may also measure the growth rate of plants, or the appearance of structures in the cells of plants, to see whether those plants are under stress, and thus less likely to fl ourish.

Can expect the worstThese indirect or subtle effects are controver-sial because there is no consensus as to their

“Compounding these assumptions can result

in wildly exaggerated estimates of bird mortality

that may be as much as 100 times

greater than the number of dead bird

carcasses actually found following the spill.”

obligation to attempt to quantify the unobserved injuries caused by an oil spill, and seek compensation for such injuries.

However, once the trustees stop using actu-al observations, and begin using assumptions and models, there is nothing to tie their claims to reality. Further complicating the problem, the trustees believe it is better to overstate in-jury using complicated and unreliable models, than risk underestimating injury. The validity of this approach has not yet been challenged in court.

Even more speculativeRecent experience suggests the trustees are moving towards the use of even more specu-lative and questionable assumptions during the NRDA process. For example, they have claimed that shorelines that are only lightly-oiled by a few small tar balls should be consid-ered oiled along their entire length and width when calculating the number of acres of shore-line that have been oiled. They have argued that shorelines on which no oil was observed should be considered oiled if adjacent or up-land areas were oiled. Using these questionable assumptions allows the trustees to demand res-toration projects involving considerably larger

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Birgitta HedSenior Claims Manager

Team Göteborg I

Ruben Del RosarioManaging Partner

Del Rosario & Del Rosario, Manila

120 240 DAYS In Jesus Vergara vs. Hammonia Mari-time Services, Inc., 6 October 2008, the Court modified the rulings in the Crystal Shipping and Remigio cases by reconciling the Labor Code provisions with the POEA standard con-tract and extending up to 240 days the period for assessing the seafarer’s degree of disability

or fitness to work based on medical findings and circumstances.

As such seafarers are no longer automatical-ly considered totally and permanently disabled after 120 days. The prevailing rule now is that, if the 120 days initial period is exceeded and no declaration is made with respect to disability or fitness because the seafarer requires further treatment, then medical attention should be provided up to a maximum of 240 days. The seafarer may be declared fit or disabled at any time within 240 days as justified by his medi-cal condition.

A welcome developmentThis new principle is a welcome development, as 240 days (8 months) is considered reason-ably adequate to treat most illnesses/injuries arising from employment or alternatively, to

The Swedish Club Letter 1–2009 Crew

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Positive developments in Philippine crew claimsevaluate the proper disability grading of the seafarer.

However, it is still recommended that the treatment of medical cases still be closely monitored to ensure that the seafarer gets the proper medical care so he can return to work at the earliest opportunity. For instance, it is best to obtain an interim assessment (detail-ing future prognosis and an estimate of when maximum medical improvement would be achieved) before the 120th day in order to as-sist in determining a suitable course of action before the 240th day.

Similarly denied claimThe Vergara ruling was followed up by another decision, where a claim based on the 120 day Crystal Shipping ruling was similarly denied. In Marciano Masangkay vs. Trans-Global Maritime Agency, Inc., 17 October 2008, the Court ruled that it is the seafarer’s contract that should determine his right to compensation. In said case, seafarer was governed by the 2000 POEA contract which requires work-relation as a condition for compensability. As the sea-farer failed to prove work-relation in the case of his illness, a disability claim was denied. The Court further held that Crystal Shipping is not applicable, as the factual circumstances are different and the issue in Crystal entails the seafarer’s degree of disability, whereas the dis-pute in this case involved the seafarer’s fitness

to work and whether his illness is work-related and/or aggravated.

The above decisions appear to show that the courts have been enlightened on the issue.

Our firm has been citing these cases in de-fending disability claims, and we are hopeful that the courts will consistently apply these principles to ensure proper handling of medi-cal claims of Filipino seafarers.

Club Letter of Guarantee (CLOG)On an equally positive note, the NLRC re-cently issued En Banc Resolution No. 25-08 declaring that Letters of Guaranty issued by the International Group of P&I Clubs, which included The Swedish Club, should be ac-ceptable as valid collateral for the surety/ap-peal bonds filed before the NLRC. This issue stemmed from rulings of some Divisions of the NLRC, dismissing the appeals filed on behalf of vessel interest on the ground that the appeals were inadequate, as the CLOG submitted to-gether with the appeal is not considered to be “security deposit or collateral securing the bond” as required by the NLRC Rules of Pro-cedure. Manning industry leaders assisted by our law firm brought this issue, among others, to the attention of the NLRC en banc and after presenting our position, the NLRC Chairman and Commissioners resolved to confirm that CLOGs are acceptable.

Enhanced PEME scheme to be formally launched Together with one of our medical experts, Mr Nigel Griffiths, and with the support of our correspondents, Del Rosario & Del Rosa-

rio in Manila, we have been working with an appropriate PEME (Pre-Engagement Medical Examination) scheme for some time and are happy to announce that a revised scheme for an enhanced PEME will be launched shortly. More information will be provided in the next issue of The Swedish Club Letter.

The number of claims caused by illnesses

which could, and should have been detected in thoroughly conducted pre-engagement medi-cal examinations (PEME) have increased sub-stantially both in number and value. Between the years 2004 and 2008 the average cost and frequency of illness claims with a value exceeding USD 5,000.00 have increased by more than 100% for the Club and we know that our experience is shared by other clubs.

Continued increase in costPart of the reason for the continued increase in cost is believed to be attributed to the avail-ability of more medically advanced treatment which is positive. On the negative side and re-ferring both to cost and frequency is the fact that the PEMEs conducted in many parts of

the world, for instance under the POEA re-gime in the Philippines, are considered to be slightly out of date and not in compliance with the demand of the shipping industry. It is not duly considering the type of diseases prevail-ing for instance in the Philippines today nor does it ensure that sufficient examinations are carried out to detect these diseases.

Apart from the seafarer’s own well being and safety it is easy to appreciate the risk im-posed on colleagues, the operation of the vessel and the environment if a seafarer is declared fit for sea service based on a medical examination which does not fulfil the criteria of determin-ing the fitness required to serve onboard ves-sels entered with the Club.

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120 240 DAYSThe Swedish Club Letter 1–2009 Crew

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The Philippine

Supreme Court has

recently rejected

claims which

centred on the 120

day issue

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TO Claims at a Glance Last year the Club produced a com-prehensive overview of claims from 2007, which we called “Claims at a Glance 2007”. We will, of course, repeat the exercise this year, and this publication is almost ready to go to press. It is not surprising that, this year too, we will emphasize the importance of

delivering high quality service in a proactive manner. Whenever there is a need to utilize the Club’s vast experience and knowledge, clients should be left with the feeling that we address each and every casualty with a commitment unequalled by any other Club. A year like 2008 in particular reminds the Club where we are coming from. We are a mutual organisation, owned and controlled by our members. As a consequence, mem-bers are entitled to benefit from their invest-ment in the form of top quality service.

As to the actual claims pattern for 2008, we feel reasonably comfortable in stating that from August onwards the trend on Hull & Machinery claims has been a reduced fre-quency as well as severity. On the Protection & Indemnity side of our business, we were extremely pleased to report an underwrit-ing surplus, but we should also say that this result was partly aided by the fact that we avoided some claims on the P&I side.

what to do to prevent recurrence

Last year’s edition of this publication con-tained reports of specific cases. This will be repeated this year, but we will also venture to attach some analysis of the cause of the incident, and what to do in order to prevent recurrence. To mention a few claims catego-ries that are still of concern: Navigational Errors account for a fair share of the claims cost. This obviously has an impact on P&I as well as on H&M. More specifically on the P&I side, we note that the frequency of Personal Injury claims is on the rise. Even though the Club does not have any major problems in handling the overall claims cost falling within this category, it has neverthe-less been decided to introduce a PEME (Pre-Engagement Medical Examination) scheme in order to address this issue proactively.

Claims

Lars A. MalmDirector

Risk & Operation

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The possibility to set up a limitation fund was a novelty when the legislation implementing the 1976 Limitation Con-vention was introduced in Swedish law in 1985. After a tentative beginning with only a couple of limitation funds set up during the first fifteen years, we saw an increase in the constitution of limitation funds in the early 2000s. There seems to be several explanations for this.

Firstly, the vagaries of shipping have de-finitively come into play, within a few years time there were several maritime casualties

in Swedish waters or involving Swedish par-ties. Secondly, by the turn of the century the limitation amounts laid down by the 1976 Convention had become eroded by inflation and maritime claims involving smaller ships increasingly exceeded the limits. Thirdly, once states began to ratify the 1996 Protocol to the 1976 Convention with considerably higher limitation amounts, it became important for shipowners to secure the right to limit in a 1976 Convention State.

It is perhaps telling that no limitation funds have been constituted in Sweden since the 1996 Protocol was implemented in Swed-ish law in 2004, whereas two funds were set up following incidents occurring shortly before the new limitation rules entered into force.

The pursuit of uniformityThe 1976 Limitation Convention seeks to es-tablish uniform rules on limitation of liability. However, true uniformity is almost impossible to achieve and as soon as there is a crack in the uniformity of the laws or practices between states, parties involved in a maritime incident will seek the best bargain among the jurisdic-tions available. For instance, as permitted by the 1976 Convention some states have exclud-ed the liability for wreck removal from their limitation rules. Others have not.

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The term forum shopping, which is used for the parties’ endeavours to seek the most appropriate forum, seems to have become less pejorative over the years, and rightly so, since shipping disputes can often be subject to multiple ju-risdictions and applicable laws, each of which can claim to have a close or natural connec-tion to the dispute. Be this as it may, the con-stitution of many limitation funds have been driven by considerations of forum shopping. And as one would expect from this develop-ment, the jurisdictional and procedural as-pects of limitation have come to the fore.

The constitution of a limitation fundIn order to set up a limitation fund in Sweden, court proceedings must have been brought or arrest or other proceedings must have been instituted on account of a claim subject to limitation under Swedish law. Leaving aside the possibility of instituting a declaratory ac-tion, something which has yet to be explored under Swedish law, a party other than the one seeking to limit his liability must accordingly take the initiative.

A question which has been the subject of litigation in Sweden is whether a fund can be constituted following proceedings between parties within the category of persons entitled to limit, for instance, on the basis of a ship-owner’s claim against the charterer. Whether this type of claim is subject to limitation is a contentious issue and was on the agenda at the CMI Conference in Athens in 2008. At least two limitation funds have been constituted in Sweden on the basis of such claims. Although this means that Swedish courts have found this type of claim prima facie subject to limitation, they have stated that the question whether the claims indeed are limitable must be de-termined finally in limitation proceedings be-fore the court where the fund was constituted. However, for the party seeking to establish a fund on the basis of an owner’s claim against the charterer, it is often good enough to win the jurisdiction battle, since the Swedish law

on limitation of liability will apply once the limitation fund is in place.

Appeal against the constitution of a fund

The decision to constitute a limitation fund is taken by the court ex parte, that is without hearing the claimants. The possibility that some claimants might object to the consti-tution of a fund in Sweden on jurisdictional grounds does not seem to have been considered during the preparation of the Swedish legisla-tion, probably on the assumption that a claim-ant would be satisfied with a limitation fund constituted in any court situated in a 1976 Convention State.

The Swedish courts have now confirmed that a decision to constitute a limitation fund may be challenged on appeal, according to principles of Swedish general procedural law,

Limitation fundsand procedure

Jonas RosengrenLawyer / Partner

Advokatfirman Vinge KB, Göteborg

– a Swedish perspective

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19

but no appellants have yet been successful in such challenges. However, the possibility of an appeal court lifting a decision to constitute a limitation fund is not wholly unproblematic. What would be the effect if the limitation fund was set up shortly before the expiry of a limita-tion period of maritime liens, and claimants were prevented from arresting the shipowner’s vessel when the fund was in place? Will the lifting of the fund after the expiry of the limi-tation period mean that the claimant can no longer obtain any security for his claims? The Swedish legislation does not seem to permit a distribution of the security for the limita-tion amount between the claimants in such a situation.

Choice of lawand jurisdiction problems

If a limitation fund is established in Sweden, the Swedish rules on limitation of liability will apply. In the Maersk case (C-39/02) the Euro-pean Court of Justice confirmed that a deci-sion to constitute a limitation fund and pro-

ceedings regarding substantive liability issues does not involve the same cause of action or the same subject matter. Accordingly, no matter of lis pendens arises under the EC Brussels I Regu-lation on jurisdiction. The Swedish courts have followed this ruling and have refused to stay proceedings relating to a limitation fund in a situation where a foreign court was first seized with proceedings on the substantive issues.

The separation of substantive issues from the rules on limitation of liability means that claims made against the same limitation fund may be subject to different substantive laws and brought in different jurisdictions. If suits on the substantive issues have been instituted before courts in several states before a fund has been set up, it would seem, at least from a Swedish perspective, that a defendant can choose in which of these states to constitute a limitation fund. Claimants would probably argue that this creates an uneven playing field. Danish case law even suggests that a limitation fund can be constituted after the judgment on the substantive claim has been given, which means that the claimant can only recover a part of the sum awarded.

Needless to say, limitation rules that cut across the substantive liability actions give rise to problematic issues relating to the recogni-tion and enforcement of foreign judgments.

Closing the limitation fund

The possibility of having claims litigated before courts or arbitral tribu-nals in other jurisdic-tions means that the final distribution of the fund must be postponed un-til the last proceedings

have been concluded. The resulting delay not only works to the detri-ment of claimants seeking payment from the fund, but also to the detriment of the party who has set up the limitation fund since, at least in Sweden, a high statutory default in-terest continues to accrue on the claims up to the limitation amount until the payment of the claims. All funds established to date in Sweden, which are not still in existence, have been dissolved following settlements between the parties.

A contributing if not determining factor to these settlements has been the problems connected with closing a limitation fund in a quick and efficient way under the present jurisdiction and limitation regime. In a recent study on the Brussels I Regulation (EU Study JLS/C4/2005/03) the reporters subscribed to a proposal for inserting a provision in the Regulation that, after limitation proceedings have been issued and all claimants have been invited to submit their claims to the limitation fund, these claims should, from that time on, only be actionable in the court where the limi-tation fund was established. However, such a provision would be unlikely to affect pro-ceedings in states not bound by the Brussels I Regulation or arbitration proceedings.

In any event, a possible amendment lies many years ahead, and in the meantime we will probably need to deal with new jurisdic-tional problems arising out of the existing ju-risdiction and limitation regimes.

– a Swedish perspectivePH

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Joakim AnderssonInternational Law Clerk

Holland & Knight LLP, New York

LegalThe Swedish Club Letter 1–2009

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RotteRdam Rules– a general overview

The Convention applies to contracts in the liner trade that evidence the international car-riage of goods which contain an international sea carriage and one of the locations stated in Article

5(1). Basically, it applies to all contracts in liner trade but excludes charter parties and any other contract for the use of space onboard a ship. Non-liner trade is not within the scope of the Convention except when there is no charter party or other contract for the use of space on ship entered between the parties and a transport document or an elec-tronic transport record has been issued2. In addition, there is a modified applicability for the contracts that qualify as “volume contracts”, as defined in Article 1(2), since it is not mandatory for volume contracts to be governed by the Convention3.

Carrier’s period of responsibility – a door-to-door responsibility principle

According to the Hague, Hague-Visby Rules Article 1(e) the carrier’s period of responsibility commences when the goods are loaded until they are discharged from the ship. This is commonly referred to as the tackle-tackle-princi-ple and has gradually been modified when interpreted by national courts. In Pyrene Co v. Scindia Navigation Co [1954] 2 QB 402 the Court held the carrier liable for goods that sustained damage during loading operations even though the cargo had not passed the ship’s rail. The shipowner had undertaken the loading operations and the period of responsibility was extended to include the stage of the carriage. In ND 1961.255 NCA RAGNHILD the carrier discharged the frost sensitive goods on the dock in cold weather, even though the cargo owner was not there to take custody of the goods. The carrier was held liable for subsequent damages to the cargo even though liability after discharge had been disclaimed.

While the Hamburg Rules Article 4 extended the car-rier’s period of responsibility to cover from the port of load-

ing to the port of discharge, the Rotterdam Rules takes it one step further and imposes a carrier’s liability that begins when the carrier or a performing party receives the goods and ends when the goods are delivered, subject to the ex-emptions stated in Article 12.(2). Who shall be regarded as a “performing party” is defined in Article 1.6(a,b),7. A door-to-door liability is one of the significant new features in the new Convention and the change strives to meet the demands of contracts that stretch over the entire carriage, from place of receipt to place of delivery without necessarily being a strictly maritime carriage.

Multimodal ambitions of the Rotterdam RulesUnlike the Hague, Hague-Visby and Hamburg rules, the new Convention includes other modes of transport in its definition of a contract of carriage4. The contract of car-riage shall provide for a carriage by sea and may provide for a carriage by other modes of transport in addition to the sea carriage. There have been previous attempts of multimodal conventions but the success has been modest5. By including other modes of transport and introducing a multimodal as-pect, the Rotterdam Rules significantly distinguishes itself from the current maritime conventions. However, there are material limitations preventing the Convention from being a true multimodal regime.

In an ambition to unify a shattered legal situation1 within the international carriage of goods the UNCITRAL adopted a draft instrument in 2002 with its origin from the CMI. The final result, The Convention of Contracts for the International Carriage of Goods [wholly or partly] by Sea (hereinafter referred to as the “Rotterdam Rules” or the “Convention”) was approved by the General Assembly of the United Nations on 11 December 2008 and will be up for signing at a ceremony scheduled in Rotterdam, The Neth-erlands 21-23 of September 2009. This article will provide for an aerial perspective of the Rotterdam Rules and highlight some of the potential changes to existing law if/when the Convention comes into force. Read-ers will recall that an interim report about this work was provided in The Swedish Club Letter No 2-2008.

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RotteRdam Rules– a general overview

Footnotes

1 The Hague, Hague-Visby and Hamburg Rules are maritime conventions that are all in force. However, their influence vastly differ depending on the number of states that have ratified each convention. HVR is commonly regarded as the central governing regime with its approximately 90 member states. The U.S COGSA is modeled on the Hague Rules.

2 Rotterdam Rules art. 6

3 However, parties to a volume contract may not derogate from the rights and obligations provided in articles 14 (a,b), 29 and 32. See art 80(4)

4 Article 1.1

5 E.g. The 1980 Multimodal Transport Convention (still not in force due to lack of ratifications) and The UNCTAD/ICC rules for Multimodal Transport Documents.

6 The Next Sea Carriage Convention?, Diamond, A, LMCLQ part2, May 2008 p. 140

7See Hague, Hague-Visby Rules art 4.2(a)

8Convention for the Unification of Certain Rules of Law with respect to Collision between Vessels

The Convention states that the contract of carriage shall provide for a sea leg of the carriage. This would mean that a carriage performed only by rail and road would fall out-side the scope of the Convention. In the article The Next Sea Carriage Convention?, Mr Anthony Diamond QC questions what contracts will fall within the scope of the Convention6. If the contract of carriage does not explicitly state a mode of transport but only a place of delivery, is the Convention applicable even though art 1.1 states that the contract shall provide for carriage by sea? In addition, if the contract of carriage contains a sea segment of the carriage but, due to unexpected circumstances, the actual carriage is not performed at sea, is the Convention then applicable? It seems that it is the stated content in the contract of carriage that will determine whether the carriage will fall within the scope of the Convention or not.

Furthermore, according to Article 26, the Rotterdam Rules shall be subsidiary to other international instruments if loss, damage or delay solely occurs due to a circumstance before or after the loading or discharge from ship. The rule is subject to that the provision of such international instru-ment would have applied to all or any of the carrier’s activi-ties if the shipper had made a separate and direct contract with the carrier in respect of the particular stage of carriage where the incident of loss, damage or delay occurred. The

subsidiary nature of the Convention in this regard could contribute to ambiguities concerning what set of rules actu-ally applies to the carriage.

Abolition of the exemption for error in navigation and management of ship

The Rotterdam Rules preserves the catalogue of exemptions found in the Hague, Hague-Visby Rules with one signifi-cant alteration, the removal of the exemption for error in navigation and management of ship. What affect this will have on claims and the carrier’s exculpatory defenses of such claims is yet to be seen. No doubt will the abolition affect the carrier’s defense where the loss or damage to cargo is the result of a collision, grounding or striking a FFO. A fictitious scenario subsequent to a collision could be as fol-lows. Ship A collides with Ship B and there is a total loss of cargo onboard Ship A. Cargo (on Ship A) has a contract of carriage with Ship A who is exempted from liability as they argue error in navigation and management of vessel7. Cargo must then sue Ship B in tort for recovery of their losses. If the two involved vessels sails under flag states that are signatories to the 1910 Collision Convention8, each ship is only liable for their degree of fault causing the collision. Say Ship B was at 60% fault, then cargo could recover 60% of its losses by suing in tort whereas the remaining 40% would 9 continued on page 22

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be lost due to the contractual carrier’s possi-bility to rely on the exemption of liability due to error in navigation and management. The removal of this exemption in the Rotterdam Rules would mean that cargo is able to recover 100% of its losses by contractual or tort claim. If the flag state is not a member of the 1910 Collision Convention then it is at the discre-tion of national legislation to determine what liability arises from the collision. It should be noted that the defense for error in navigation or management is rarely upheld by the courts as they tend to find some aspect of the ship to be unsatisfactory and therefore making the vessel unseaworthy. However, the removal of the defense could potentially be a significant change to existing law.

Continuous obligation of seaworthiness during the sea voyage

The Rotterdam Rules provides for a more ex-tensive liability for the carrier than the current Hague, Hague-Visby provisions as the obli-gation of making the vessel seaworthy is now imposed on the carrier also during the voyage. This is a significant alteration from the cur-rent obligation of seaworthiness that is limited to before and at the commencement of the sea voyage9. However, the actual consequences of the expanded obligation is yet to be seen. According to The Hague-Visby Rules Article 3.(2) the carrier has an obligation to properly and carefully load, handle, stow, carry, keep, care for and discharge the goods carried. This would indicate a continuous responsibility of care throughout the entire carriage and not, as in regards to seaworthiness, limited to be-fore and at the beginning of the voyage. Any shortcomings by the carrier in fulfilling this obligation could provide the cargo owner with grounds for a claim.

On a voyage from New York to London with a stop in Philadelphia to take on addi-tional cargo, the radar breaks during the leg between New York and Philadelphia. In Phila-delphia no measures are taken to repair the radar. On its way to London an incident oc-curs which causes cargo damage. According to the current rules the cargo loaded in New York is not able to claim unseaworthiness of the vessel since it was in fact seaworthy at the commencement of the voyage. The vessel was unseaworthy when departing Philadelphia and the cargo loaded there can successfully argue that. A continuous obligation would end this unreasonable outcome.

The carrier’s obligation entails to make and keep ship seaworthy by exercising due diligence. What constitutes due diligence is a very difficult, if not impossible, term to gener-ally define and it will be at the discretion of the courts to determine what is to be required by the carrier given the circumstances in each in-dividual case. The level of reasonable measures

that a carrier would be obliged to take would most likely be lower at sea than in port.

Shipper’s obligations and liability Currently, the shipper’s obligations and liabil-ity are briefly dealt with in the maritime con-ventions, thereby leaving it at the discretion of national laws to determine any shipper liability. In the Rotterdam Rules shipper’s obligations are given more attention. Chapter 7 of the Rot-terdam Rules contains provisions on shipper’s responsibilities which fundamentally consist of obligations of safe delivery of cargo, to provide for thorough information to carrier regarding the goods that are to be transported and for liability for any inaccuracy of information or instructions resulting in loss or damage. If rati-fied and in force, the Rotterdam Rules could possibly provide for an international unified framework concerning the shipper’s obliga-tions and liability.

Jurisdiction and arbitrationUnder the Hague-Visby Rules it has been at the discretion of each member state and their courts to decide whether a dispute is within its jurisdiction or if it should grant recognition of an arbitration clause. Unlike the Hague-Visby Rules, the Rotterdam Rules contain provisions addressing these topics. Articles 66 and 76 pro-vide the plaintiff the right to initiate judicial proceedings/choose place for arbitration in the following locations:(i) the domicile of the carrier.(ii) the place of receipt agreed in the contract

of carriage.(iii) the place of delivery agreed in the con-

tracts of carriage.(iv) the port where the goods are initially load-

ed on a ship or the port where the goods are finally discharged from a ship.

In regards to arbitration, this means that the claimant has the option to choose the place where he wants to arbitrate no matter what lo-cation is stated in an agreement. If the contract of carriage provides for an exclusive choice of court agreement, the choice of where to initi-ate judicial proceedings based on contractual grounds is no longer at the discretion of the claimant.

It is important to emphasize that Chapter 14 and 15, containing the provisions on juris-diction and arbitration, is optional for each member state, i.e. even if a nation chooses to ratify the Convention it may opt to not include these chapters and thereby leaving mentioned issues at the discretion of national courts.

Other important changes in the Rotterdam Rules

The Rotterdam Rules continues to use the lim-itation system found in the Hague-Visby Rules with a package and weight limitation. Com-pared to the Hague-Visby Rules the limitation amounts have been raised from 666,67 SDR10 to 875 SDR per package and from 2 SDR per

kilo to 3 SDR per kilo of gross weight11. In the Rotterdam Rules there is also an explicit limita-tion for liability due to delay in Article 60. The benefit of limitation is available to all maritime performing parties, defined in Article 1.7, sub-ject to the conditions stated in Article 19. As the limitation amounts is higher it is also harder to break and loose the right to limit according to the Rotterdam Rules than in the Hague-Visby Rules.

In the spirit of modernization, the Rot-terdam Rules recognizes electronic transport records and granting them the same status and evidentiary effect as a traditional bill of lad-ing12. Some of the problems associated with electronic transport records are mostly techni-cal. With a traditional negotiable bill of lading, a paper document, one has the advantage of a physical object that entitles the right of the goods and even though alterations may be done to the content of the document, the holder of the “paper” will be able to invoke his rights. In electronic equivalents there is neither a similar original nor a physical object for the parties to possess. There are systems for electronic trans-port records in place today, e.g. BOLERO, but surely there is room for improvement as more efficient and faster communications, less pa-per work and overall reduced administrative costs are some of the benefits with replacing traditional paper bills lading with an electronic equivalent.

Conclusion and futureThe Rotterdam Rules bears a strong resem-blance to the current provisions of the Hague, Hague-Visby Rules but with a few significant and important changes. What potential impact these changes will have on the liability allo-cated between the subject contractual parties is yet to be seen and will be established as the courts interpret the new provisions. The new Convention also targets new features in the transportation industry such as the recognition of electronic transport documents.

If ratified by large number of shipping states the Rotterdam Rules will serve an important purpose of unifying the current shattered le-gal picture within international maritime law. This harmonization is vital in order to achieve predictability and a more friction-free commer-cial arena. Even though the Convention may be limited in regards to its multimodal ambitions it certainly would be an important platform in the future development of transport law.

Footnotes

9The Hague and The Hague-Visby Rules Article 3.1(a)

10Special Drawing Right

11HVR Article 4.5(a), Rotterdam Rules Article 59.1

12Rotterdam Rules Article 8, 41

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Happy New Year!

The Swedish Club Letter 1–2009 Underwriting

The P&I renewal is always a challeng-ing exercise, and this year was no exception. Asking our members for unbudgeted sup-plementary calls in addition to a general increase was, of course, needed to be explained in detail. The sharp downturn in the shipping industry obviously made the unwelcome news even more unwelcome. In the process of ex-plaining the Club’s decision we were, of course, greatly helped by the Club’s strong underwrit-ing performance. In addition, the underlying reasons and arguments leading to the Club’s decisions were met with a high degree of ac-ceptance across the board among members and business partners. We stand very humble before the response from members, which was delivered in the format of a very powerful vote of confidence.

Looking at the P&I renewalThe very interesting year 2008/09 will go down in history as the year when the booming world economy and shipping industry virtually came to a standstill over night. Leaving this year be-hind and looking ahead, we are very optimistic as regards the Club’s financial position as well as our ability to deliver excellent service to our members.

Delivering service second to none and producing healthy bottom line figures for all

Reflecting on a dull last year− and a bright future for the Club

classes of insurance will enable the Club to po-sition itself as a very potent and viable option for any quality-minded ship owner. It is now time to deliver on expectations and to demon-strate that the investments made by members will pay off.

Looking at the actual figures in relation to the P&I renewal, we are pleased to report that, in respect of volume, our position is pretty much as before 20/2. As regards the general in-crease, we came very close to 15%, which must be regarded as very good.

Hull & Machinery – on track with action plan, ahead of the gameAs you are no doubt aware, H&M business does not follow the same rating structure as P&I. As a consequence, the industry has over the years experienced difficulties in making ends meet. The Club has been no exception in this respect.

Last year the Club adopted some very seri-ous and decisive measures designed to address the rating structure. It is, of course, very pleas-ing to note that already this year the H&M underwriting result was virtually in balance.

In the process of address-ing the rating structure, it is inevitable that volume will be affected. The Club reduced its exposure on H&M in terms of number of ships by 25% during 2008. The majority of the

reduced exposure was follow-line business, where the Club’s ability to handle claims is obviously not reflected in the rating.

The Club will adapt to the changesAs regards rating, the Club managed in dif-ficult and competitive market conditions during 2008 to increase rates relative to ex-posure in line with the target set for 2008. The dramatic change in the shipping climate is bound to have an impact on the cost of claims.

The Club is aware of these changes and will adapt to them in order to represent a re-alistic alternative to those owners in need of quality service, and is willing to accept rates that are commensurate with assumed expo-sure, and service delivered.

23

PHO

TO: ISTO

CKPHO

TO

Lars A. MalmDirector

Risk & Operation

24

Tord Nilsson

Area manager / Senior underwriterTeam Göteborg I

The Swedish Club Letter 1–2009 Cefor

The Swedish Club is a member of, or is involved in, various organisations within the marine insurance industry, and one of its more important memberships is that of Cefor. The Club is represented on a number of different committees within the organisation, and the undersigned is a member of the Board of Di-rectors.

Cefor has its headquarters in Oslo, Nor-way, and its initials stand for The Central Un-ion of Marine Underwriters. The Union was founded on 15 August 1911 by Norwegian and foreign insurance companies. The object was

to strengthen and develop the basic concepts of the Nordic marine insurance market and to unite and coordinate its members around key issues for the marine insurance industry.

Although the organisation was founded by Norwegian and foreign insurance companies with offices in Norway, it has historically been geared towards Norwegian insurance compa-nies. During the last five years the organisa-tion has been in transition, becoming a truly Nordic organisation, with a number of new members among insurance companies based outside Norway. The aim is to become the main coordinating body for Nordic marine insurance.

The CEFOR mission To serve the interests of our Nordic members by promoting quality marine insurance.

The members of CEFOR engage in • Hull and machinery insurance (blue water and coastal)

• Protection and indemnity insurance (P&I)

• Cargo insurance

• Legal defence

• War risks insurance

Some additional information about CEFOR

CEFOR objectives • To represent the preferred quality marine insurance market

• To promote quality shipping

• To provide world-class know-how through a highly qualified workforce

• To promote the Nordic in-house claims model as the preferred option for claims handling

Helle Hammer heads the organisation and is currently involved in a number of interesting developments and projects.

Opening up for Nordic cooperationThe members of Cefor, who write Hull & Ma-chinery business, have agreed to develop the Norwegian Plan into the main Nordic Hull & Machinery conditions. Swedish and Danish insurers have agreed to disband their national insurance conditions to the benefit of the Nor-wegian Plan, which will eventually become a Nordic set of H&M conditions. The Norwe-gian plan is an agreed document between the Norwegian Shipowners’ Association and Cefor.

As Cefor has opened up for Nordic coop-eration, so too has the shipowners’ side, and the Norwegian Shipowners’ Association has agreed to let the Swedish and Danish Shipown-ers’ Associations be a part of the revision proc-ess of the NPL. There will be a new version of the NPL in 2010, and the parties involved will soon start looking at areas for improvement. Lars Malm, Director of The Swedish Club, has been elected to the revision committee.

Active in marine insurance educationAnother area where the organisation is cur-rently very active is in the arena of marine insurance education. There is a lack of train-ing opportunities for people interested in, or working in, the marine insurance sector in the Nordic countries. Cefor and its members,

including The Swedish Club, have therefore decided to create their own marine insurance training which will primarily be available to its members and their clients. The course will start in the autumn of 2009 and will be a one year part-time course. Helle Hammer says: “This is a great development for the marine insurance sector, as we will be able to pass on the experience and know-how that Cefor members have accumulated over more than a century. It will accentuate the region’s position as one the world’s leading marine insurance centres, with service, knowledge and quality as our guiding lights”.

Another important areaClaims collection information is another area where Cefor serves an important purpose for its members. Members provide the organisa-tion with claims data on H&M which is then collected and processed in a database called NOMIS. This data is then used by the indi-vidual companies in their loss prevention work to identify claims trends and to find focus ar-eas. Claims information is passed on to ship-owners, enabling them to take precautionary action and limit their own claims costs.

Nordic underwriting cooperation

Helle Hammer, Managing Director Cefor.

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Carola Weidenholm

Corporate Communications

You might already have seen that our website has a new look since 29 Janu-ary. The first thing you probably notice is the new interface with a more intui-tive navigation at the top of the start-ing page, including main categories and tags to the most vital areas such as Emergencies, Maritime Resource Management and Loss Prevention. But there is more!

The platform is new and contains the latest technology, which gives us the poten-tial to develop new functions quicker than before, and provides higher security.

– We have carried out quite a bit of re-search to bring out the best mix of solutions for the functions we want to supply now and in the future, says Martin Eriksson, web de-veloper at The Swedish Club.

Straight to the sourceSome of our most utilised on-line services are the search of Correspondents and Ves-sels. There we now read the data directly to the main source, always supplying the latest

information. We have also enhanced these search engines by applying a more effective and easier tool, which allows you to write in just a few letters or parts of a phrase in order to get suggestions as to what you are look-ing for.

To further improve the service, we let the most popular applications follow you in the right margin where ever you are in the navi-gation.

– Most websites today contains large quantities of information and it is easy to be-come entangled deeper and deeper, only to realise that you have forgotten where to find the information you were first looking for. By placing functions – we know are often used – at the same place regardless of where you are in the navigation, you always have easy access, Martin explains.

Eco-awareness for more up-to-date information

As with most companies, we want to reduce the paper consumption as well as the envi-ronmental footprint and not the least shorten the lead time when you order or apply for our activities. That’s why we have added a collec-tion of forms to the list of news we present. With a few clicks you can easily sign on to our events, such as the Marine Insurance Course, and send the form directly from our website.

The distribution of our training pro-gramme, Maritime Resource Management, has also received some vital improvements. To always give our training providers and participants worldwide access to the course material, they just log on to the module. No more CD-ROMs have to fly the globe for the information to reach the final destination.

Yet another innovation is a new way to read magasines, booklets and our annual re-port directly on our website. Instead of the traditional pdf-file, the material is presented in a version that is easy to browse, making it easier to read on the screen. The content will also be searchable.

Even today you can subscribe to our news by RSS feed; this service will be completed with an electronic newsletter. Just fill in your mail address and you will have a mail with links to the latest news at our website.

– Nowadays the website is our primary communication channel and we are working continuosly on the development both when it comes to the technology and usability, so I hope we can present news that will benefit our members for many years to come, Martin concludes.

…for front edge website

25

The Swedish Club Letter 1–2009 Club Information

Facelift

www.swedishclub.com

Clas RydénGeneral Manager

The Swedish Club Greece

Newsfrom

Piraeus


26

News from Piraeus / New Members / Basic Facts

We have now put another P&I renewal behind us. It was an interesting renewal, as we are currently in the mid-dle of one of the worst economic crises in recent history, a crisis which has affected us all. On this note I would like to thank all our members for their support and understand-ing. We will do our utmost to ensure that we “live up to the standards we strive for”.

The shipping industry has not only been affected by the economic crisis. Earlier this year the kidnapping of ship-owner Mr. Pericles Panagopoulos changed our views over-night. After eight days in isolation and a ransom paid by his family, Mr. Panagopoulus was released. Quite a number of shipowners like Mr Panagopoulos keep a relatively low profile and do not use bodyguards. Obviously this will have an impact on their lifestyle in the future.

Crises make people react in strange ways. Although in Greece we have become accustomed to demonstrations and strikes, what happened in December last year in cen-tral Athens reached levels we have not seen in decades. It started as a demonstration. However, after the shooting of a 15-year old boy by a police officer, everything went out of control.

The riots spread throughout Athens, including Piraeus where cars were turned over in front of the theatre, and police headquarters was attacked with Molotov cocktails. At night when leaving the office we could watch all the gar-bage bins along Akti Miaouli on fire. Certain streets were deserted and you could see burnt-out cars and scooters.

So where are we all heading? It is quite common that we use metaphors to make things clearer. So if we apply the metaphor that “a goal is not a destination – it is a journey”, I guess that we are closer to what is realistic.

We have seen the freight market collapse before, but not so abruptly and never together with global financial

crises. To a large extent we have to realise that we are back to basics, and that the market will correct itself. The jour-ney will be long and hard for most of us, but if we do the right things the journey will provide opportunities. The old traditional owners who are predominantly our mem-bers will still be there tomorrow, and we will provide the cover and the service as long as we invest in each other. We have to be commercial at renewal in order to deliver for the other 364 days of the policy year.

There will be opportunities. Greece will always be a very important market in shipping. One shipowner who really put Greece on the map was the late Aristotle Onassis. You may remember that Mr. Onassis created the national airline Olympic Airways. The airline became a point of reference in aviation and one of the most valued ambas-sadors for Greece throughout the world.

The privately owned Greek airline Aegean has ex-panded very fast over the last couple of years and last year carried more passengers than Olympic. The tender for the purchase of Olympic was declared void by the Greek government in early February. Now hopes are set on a pri-vate Greek investment consortium to enter talks with the struggling airline. In my next article I will tell you the outcome for the Marfin Investment Group, and until then our journey continues.

The Journey

BASIC FACTSper 1 April 2009

Number of Average GT Vessels Age (million)Proctection & Indemnity(including Charterer’s Liability) 1,260 12.0 38.4

Freight Demurrage & Defence 593 10.0 19.8

Hull & Machinery 1,361 11.7 54.4

Loss of Hire 407 9.7 18.3

NEw MEMBERS 1 November 2008 – 15 March 2009

Courtney Fynn, NorwayProtection & Indemnity, Freight Demurrage & DefenceIntersee Schiffahrtsgesellschaft mbh & Co KG, GermanyProtection & IndemnityPerstorp AB, SwedenCharterer’s Liability, Charterer‘s Freight Demurrage& DefenceRederi AB uman, SwedenProtection & IndemnitySamco Shipholding Pte Ltd, SingaporeHull & MachineryTS Lines Ltd, TaiwanCharterer’s LiabilityVictoria Oceanway Ltd, GreeceProtection & Indemnity

Ruizong WangManaging Director

The Swedish Club Hong Kong Ltd.

Marine Accident Reporting Scheme

The Marine Accident Reporting Scheme is a confi dential report-ing system run by The Nautical Institute. This free exchange of infor-mation is contributing to spreading important lessons to be learned around the shipping community, with the aim to prevent future losses. The Swedish Club is a long-time supporter of this valuable system. To read the latest MARS Reports, please visit www.swedishclub.com

MARS Reports

Member Alert

Marine Accident MARS

Seaways February 2009

17

Another explanation could be that our berth, being the firstone inside the breakwater, was more exposed to the oceanswell. Also, given our 180,000-tonne displacement, the forcesresulting from our vessel’s movement were far greater thanthose imposed on the other vessel’s ropes, given her moreprotected position and her lighter displacement, estimated tobe only half ours.

The conditions improved by the following evening and wewere able to start on the mammoth task of resplicing our ropesand we sensibly put in a requisition for nylon mooring ropes.In retrospect, I should have been assertive enough todemand immediate unberthing and proceeded to wait offshorefor conditions to improve, placing safety ahead of the certainoff-hire situation that would have resulted. Having read aboutthe new ‘rope-less’ suction moorings (Seaways, December2006), I feel that operators of such exposed berths should havethese systems installed in the interests of safety and efficiency.

MARS 200906 Fuel oil quick closing valvesOfficial report: condensed from USCG Alert 8-08Investigations into a shipboard fire incident showed that morethan half of the fuel oil quick-closing valves (FOQCVs) failed toclose properly, which prevented the ship's service generatorsfrom being secured. The valves had not been well maintainedand the testing protocol used onboard the ship did not test thevalves properly.

The US Coast Guard strongly recommends that ownersand/or operators, ship’s crews, marine inspection personneland others ensure that:1. The closing system is capable of closing all valvesremotely and that the system is tested as designed, either toclose valves sequentially or simultaneously. 2. The ship’s crew should be familiar with the operation,technical manuals and the associated maintenancerequirements for all components. 3. Records of maintenance and testing are maintained.

MARS 200907 Auxiliary blower failureWhile approaching the pilot station of a port with a relativelydifficult approach, the sudden failure of the main engineauxiliary blowers resulted in imminent danger due to theclose proximity of rocky shoals. A Lloyd’s open form (LOF)was signed in haste and salvage tugs were called forimmediate assistance. A serious casualty was averted, the

The Nautical Institute Marine Accident Reporting SchemeMARS Report No 196 February 2009

MARS 200905 Mooring problems at exposed portOur capesize bulk carrier arrived at Kashima, Japan, with afull cargo of iron ore. Vessels calling at this port on theeastern seaboard will generally be exposed to a) severe galesin advance of and following the passage of a frontal system;and b) moderate to heavy swell coming in from the PacificOcean. The effects can be particularly severe if weathersystems move slowly or erratically.

We approached the anchorage, drawing nearly 19 metres.On the final heading, the swell came on to the beam and theship, being stiff, rolled very heavily. Fearing bottom contactdue to the increase in draught with each roll, we turnedaround and slowly steamed out to deeper waters and hove tountil conditions improved the next day. The next morning, we embarked the pilot and proceededup the buoyed channel. The heavy swell abeam made the shiproll very heavily all the way to the breakwater entrance,causing us much anxiety. Upon berthing, (moored tofour+two+two fore and aft, all with rather short leads) wecontinued to feel the effects of the swell as the vesselcontinued to roll, heave and surge alongside. On the innerberth ahead of us, another capesize vessel was about half-waydischarged, and she too was straining at her moorings. Whilewe had almost new 70mm, eight-stranded polypropylenemooring lines, the other vessel was secured with old plaitednylon ‘Dan’ ropes of similar size.

Then began a nightmarish port stay, when our ropes keptparting with monotonous regularity. We tried everything,including deploying additional lines, bights, automatic andmanual tensioning and anti-chafing measures; however wewere unable to control and equalise the loads on the highlystressed and constantly surging ropes. We were extremelylucky that there was no injury, as our ropes kept parting allthrough the first 24 hours at the berth, often with violent snap-back. Our demoralised crew watched in disbelief at the intactmoorings of the other vessel, while our protest against an‘unsafe berth’ was rejected by our charterer, whocoincidentally happened to own the other vessel. He allegedthat the poor quality of mooring ropes on our vessel was thecause of the problem. The next morning, as the other shipsailed past us after completing discharge, her crew cast apitying glance on our yarn-strewn deck and ugly, bowline-knotted mooring lines. The test certificates of our mooring ropes indicated thenormal breaking stress of about 70 tonnes, but we felt that therope had an extremely ‘soft’ lay (the strands felt unusuallyloose). This led us to suspect that there could be a material orconstruction defect in its manufacture.

27


The Hong Kong Government has just published its 2009/10 budget, which projects defi cits of HK$ 40 billions (about US$ 5b). This amount is about the same as the surplus for the year 2008/09.

In the 2009/10 budget the government will adopt a series of measures to boost the economy and provide relief to the poor and middle class in Hong Kong, including cuts in income tax of up to HK$ 6,000 per tax payer; waiving Government Rates for two quarters; and a rent reduction of 20% for three months for some 17,000 tenants in gov-ernment housing. The government will also provide HK$ 1.6b to create jobs and internship programmes.

The Hong Kong economy has been hard hit by the fi nancial crisis. For 2008 as a whole GDP (Gross Domestic Product) grew by 2.5%, lower than the trend growth rate over the past ten years. The Government forecasts a de-crease in GDP by 2-3% this year. Many analysts believe the Government’s fi gure is overly optimistic. They predict that

Hong Kong GDP could go down by 5-6%. Hong Kong unemployment has increased from its low last year at about 4% to 4.6% in January 2009. The Financial Secretary of Hong Kong predicts that it can go up to 8% this year, suggesting that the worst is still yet to come. Hong Kong’s exports and re-exports (exports from China through Hong Kong) have dropped by nearly 40% in January 2009 on a year to year basis, the third largest percentage drop in the region after Japan and Singapore. It appears that the recession will see shipping slump for quite a long period of time to come.

Newsfrom

Asia

For a long period of time to come

News from Asia / Member Alert / MARS Reports

Phosphine Fumigant Explosions The Club has recently been informed of an explo sion which occurred on board one of our members’ ships shortly after a cargo of maize had been loaded and the holds had been set for fumigation contin ued in-transit with phosphine gas produced from aluminium phosphide tablets.

Whilst fortunately no crew member was injured in the explosion, the hatch covers to the hold concerned suf fered extensive damage as a result, with the hatches being blown upwards off their normal seating position, the securing cleats ripped out, a hole approximately 1m2 blown in the weather deck and the structure of the hatches severely distorted.

Please see the enclosed Member Alert for further informa-tion on how to minimise the risks surrounding fumigation with aluminium phosphide tablets.

2828

Out and AboutThe Swedish Club Letter 1–2009

Marine seminar on February and March 2009 The Club attended a seminar in February and March on the island Tjörn (just north of Göteborg) with focus on marine insurance. People from the shipping industry listened to Lars Rhodin, Birgitta Hed, Anders Holmberg, Lars Malm and Martin Hernqvist talk about Marine In-surance and the history of The Swedish Club, Protection & Indemnity, Hull & Machinery and Loss of Hire – the-ory and practice and Maritime Resource Management.

In November last year all Claims Handlers and Staff Surveyors of the Club gathered in Göteborg for a two day conference. The first day was solely dedicated to issues of common concern between the teams and offices of the Club. As an international insurance solution provider it is paramount to us that our members and business partners will recognise the core values of the Club, regardless of the particular office or team they are dealing with. As in any organisation, staff members retire and new staff are recruited, and to this end it is impor-tant for the new staff to get a feeling for what the Club represents.

The Club has always enjoyed a very good reputation as regards claims service and our ability to address members’ needs in a proac-tive manner. This perception is something which needs to be further

Claims Handlers’ Conference 2008 – bonding and education

The Club's claims handlers and staff surveyors gathered in the board room with this year's guest speakers Mr James Gosling, Mr James Mackay and Mr Kaare Langeland of Holman Fenwick Willan, London in the front row.

developed and strengthened. Meeting up like this is, of course, one im-portant way of sharing experience and knowledge between the offices and teams of the Club, but it is also a good way of strengthening the overall Club spirit of the claims staff and the staff surveyors. Needless to say, to broaden the competence of the Club’s staff is always on our agenda, and the conference offers a good opportunity that must not be missed. Day two of the conference was, therefore, dedicated to some topical presenta-tions by this year’s speakers from Holman Fenwick Willan, London, and a workshop which, from an underwriting perspective, was comprehensive as far as insurance classes are concerned. Apart from the actual learning, it also offered fantastic opportunities for the Club’s staff to interact across offices and team boundaries.

29

The Swedish Club Letter 1–2009 Out and About

Traditional Christmas Dinner at the island of Donsö

Ingemar Andersson and Sven-Olof Kristensson from Tärntank enjoyed the company of Gunilla Jacobsson during the Christmas Dinner.

On 2 December 2008 the Club invited members from the southern archipelago of Göteborg to a traditional Christmas Dinner.

Anders Holmberg, Lars Malm, Lars and Cilla Rhodin, Peter Jacobsson and Daniel Eriksson from The Swedish Club ready to welcome the guests at the restaurant “Isbolaget” on Donsö.

PHOTOS: TSC

30

Out and AboutThe Swedish Club Letter 1–2009

Among the distinguished guestswere from left to right: Mr Vassilis Katsikis(Katsikis & Sigalas Ltd), Mr Stephanos Lekanidis (Dileship Marine Corporation) and Mrs Isidora Theotoka (Hellaschart)…

…and also Mrs Zoe Lappa-Papamattheou(Danaos Shipping Co Ltd), Mr Nicolas Apostolopoulos (Eurorisk Marine Services Co) and Mrs Stavroula Serbesi (Arcadia Shipmanagement Co Ltd).

Christmas Dinnerin Greece

As usual The Swedish Club invited members and associates to a traditional Christmas Dinner, which was held at the Yacht Club of Greece on 11 December 2008.

The guests were entertained by the Scandina-vian Church Choir, as always strengthened by the beautiful voices of The Swedish Club staff in the back row.

PHOTOS: TSC

31


Mr Lars Danielsson from the Swedish Consulate General in Hong Kong and his wife Gunilla together with Lars Rhodin and Ruizong Wang of The Swedish Club.

Mr Wei Xinghua and Mr Foinikis G. Panagiotis of Shanghai Cos-tamare Ship Mgt. In conversation with Kjell Augustsson of the Club’s Hong Kong office.

Cocktail receptionin Hong Kong

STAFF NEwS

Erik Johansson, joined Team Göteborg I as Un-derwriting Trainee on a one year traineeship as from 19 January 2009. Erik holds a Master of Science in Busi-ness Administration.

Clare McDowall, has joined the Club’s office in Piraeus on a six month assignment in order to strengthen our FD&D service in Greece. Clare is a solicitor and is employed by Hol-man Fenwick Willan since 2006. Some of that time, she has spent with the HFW office in Greece. Clare started her assign-ment with The Swedish Club on 1 April.

Peter Johansson, Senior Staff Surveyor, resigned on 6 February 2009 after ten years of dedicated services to the Club. We wish him all the best in his future career.

Anders Wranå, Hull Claims Adjuster, resigned on 2 Febru-ary 2009 after two years of dedicated services to the Club. We wish him all the best in his future career.

Out and About /Staff News

Club Evening in Göteborg on 17 March This year’s Club Evening was held at Storan in Göteborg. Manag-ing Director, Lars Rhodin, opened the event by giving his views on the state of the market and how it affects us all.

Next subject on the agenda was “Pollution in the US – experiences and challenges”, presented by Anders Holmberg, Claims Manager in Team Göteborg I.

The event was highly appreciated among the 35 guests.

Anders Holmberg describing the work with a large oil spill in the U.S.

PHOTOS: TSC

The Swedish Club invited to a cocktail re-ception at The Garden Lounge at The Hong Kong Club on 29 October 2009.

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CLuB CALENDAR

2009 11-15 May 2009 Marine Insurance Course in Göteborg

4 June 2009 Annual General Meeting in Göteborg