britannia news 28.11.14 britannia news 28.11.14 03/12/2014 … · 2017-10-18 · 14 the mlc and...

The Britannia Steam Ship Insurance Association Limited

Issue number 46 December 2014

NEWST

Britannia News 28.11.14_Britannia News 28.11.14 03/12/2014 11:43 Page 2

Contents1 Letter from the Chairman 2 Financial update and calls decisions3 Committee news4 Claims review8 Loss prevention seminars: anchoring and mooring

12 Freight, Demurrage & Defence review 14 The MLC and medical standards16 The Wreck Removal Convention20 Charterparties: safe port warranties revisited24 A new office in Hong Kong


Nevertheless, when the Committee met inSingapore earlier this month the possibilityof a more benign claims environment wasone of the reasons behind its decision toincrease the 2015/16 advance call rate by just 2.5%. Strong investment returns ofalmost 5% across the portfolio in the yearending 20 February 2014, combined with theAssociation’s strengthening capital position,were other important considerations. Theyfurther contributed to the Committee’sdecision to reduce the 2014/15 deferred callby 5% down to 40%.

The Committee also noted the positive resultsin Class 6 (FD&D), where claims have reducedconsiderably since the post-crash highs of2008/09 and 2009/10, and the reserves havenow been rebuilt. Accordingly, the Committeedecided that yet again there should be nogeneral increase in the 2015/16 advance call.This is the fourth year out of the last five that there has been no general increase. Inaddition, the deferred call for Members withmutual entries was reduced to 30%.

A more detailed analysis of the recent calldecisions and an update on the Association’sfinancial position is given in the article onpage two.

We were pleased to receive an ‘A’ rating fromStandard & Poor’s (S&P) in September. Thiswas the Association’s first interactive rating,enhanced by a ‘stable’ outlook assessment.S&P said that their assessment reflected theirexpectation that ‘Britannia will manage itscapital adequacy consistent with [a] ‘AAA’benchmark and will maintain a strongcompetitive position’.

Letter from the ChairmanAs the claims review explains, 2014 has started well with claims levels lower than they were at thesame point in the previous two years. This is largely because of a smaller number of high value claims,so a note of caution must be expressed – a lot can happen in the remaining northern winter months.


S&P commented on the heavy claims years in 2012/13 and 2013/14 – but noted thatadverse loss ratios were partly the result ofwaiving deferred calls, premium discountsand the Association’s conservative reservingpolicy. Members will recall that Britanniawaived US$12.8m of deferred calls in 2012and US$2.8m of deferred calls in 2014 – inaddition to a premium discount amountingto US$10.3m.

Members will be aware that there has beendiscussion about ‘diversification’ among P&Iclubs and in the press. Some clubs havetaken the view that by establishing ancillaryproducts, such as a Lloyd’s syndicate, they can provide Members with additional servicesand deliver a healthy return from the profits.They compare such returns to the returnsproduced on standard market investmentssuch as equities and bonds. This may seem tobe a perfectly reasonable approach; indeed, if the venture is profitable, the scheme willwork to the benefit of the entire membership.However, the risks of diversification arearguably greater than those found in‘standard’ investment portfolios. Further, thescheme becomes more problematic wherethe ancillary product provides fixed premium P&I to quite large ships.

Britannia is firmly committed to mutualityand believes strongly in the InternationalGroup (IG) providing the highest possiblelimits to a broad range of shipowners. Fullmutual cover is not appropriate for everyshipowner; for example, some smallshipowners trading domestically do not needthe levels of cover that an IG club can offer.

However, establishing facilities offering fixedpremium P&I cover to tonnage better-suitedto membership of an IG club could potentiallyundermine a system that has servedshipowners very well over many years.

The issue of whether Britannia should coverthe additional Maritime Labour Convention(MLC) risk relating to back wages forabandoned crew was also considered by theCommittee. This matter is also referred to inthe claims review article. The boards of all IGclubs will be asked to consider whether theywere willing to cover the risk and provide therelevant financial security; and, if so, whetherthe risk should be poolable with other clubs.It is likely that there will be a variety of views,although it is hoped that a clear consensuscan be achieved.

The Association continues to enjoy a strongfinancial position. Through the Managers weendeavour to provide the highest levels ofservice in all areas. While uncertainty in themarkets persists, with political turmoil innumerous countries, Britannia is working hardto maintain its position and doing everythingit can to support its loyal membership.

Nigel Palmer OBE Chairman


2 B R I TA N N I A N E W S D E C E M B E R 2 0 1 4

In both of the last two years, ending on 20 February 2013 and 2014, the Associationexperienced extremely high levels of P&Iclaims. The 2013 policy year set a new record,but 2014 then beat it, and by some margin.

One of the main drivers of the higher level ofclaims overall was an unusually high numberof large claims (those expected to cost theAssociation more than US$1m). As at today’sdate, 26 such large claims have been reportedfor 2012/13 and 33 for 2013/14. High valueclaims are more volatile and unpredictable innature and occurrence but, invariably, theyhave a disproportionate impact on theAssociation and its overall claims experiencein any given year. In contrast, it is encouragingthat over recent years claims of US$1m or less(attritional claims) have reduced both innumber and aggregate value. This is a positivedevelopment, although in part it is due tosome Members agreeing higher deductibles.

In the first six months of the current year,which will end on 20 February 2015, attritionalclaims have continued to decline and,reassuringly, only seven large claims havebeen reported to date. It is hoped that this is areturn to a more typical level of claims seen inprior years. Total claims within the Association’sretention after the six month stage were attheir lowest level for four years. Over the same

period, claims in older policy years developedvery positively; in other words, the actualoutcome of many claims has proved to belower than expected. This has allowedreleases of surplus claims reserves from thoseyears. The positive claims development andreleases of surplus provisions are normalfeatures of the Association’s operations andreflect the Association’s prudent approach toclaims reserving.

Investments performed strongly in the yearending 20 February 2014, returning US$48mor almost 5% across the portfolio. The maincontributor was equities, to which theAssociation has maintained a significantexposure. These returned more than 21%over the year. In the first six months of the2014/15 policy year, investment returns have been more volatile, but the return at 20 August remained at a healthy 5% (on anannualised basis), with equities continuing to contribute strongly to the overall result.

The improvements to claims in prior years anda positive investment return have resulted in astrengthening of the Association’s capitalposition since 20 February 2014. In addition,Boudicca’s funds have also increased, theresult of strong investment returns from itsportfolio and the fact that, as Britannia’s claimshave improved, the reinsurance recoveries that

Boudicca had been expecting to pay have alsofallen. Overall, the Association’s capital position(which includes the benefit of surplus funds inBoudicca) projected forward to 20 February2015 shows a modest headroom over theeconomic capital benchmark.

The financial strength of the Association hasrecently been confirmed by Standard & Poor’s(S&P), which in September 2014 publishedthe Association’s first interactive credit rating.This rates the Association as ‘A’, which is ‘strong’,and gives the Association a stable outlook. Inprevious years, S&P rated the Association ona ‘public information’ basis, but the interactiverating gives a more robust assessment.

Against the encouraging background ofrecent claims and the Association’s continuedfinancial strength (confirmed by S&P), on 21 October the Committee of Britannia metin Singapore to decide on the terms of the2015/16 renewal and the appropriate actionsto take in relation to the deferred calls inprior years.

The Committee approved an inflationary2.5% general rate increase for P&I advancecalls, with the deferred call remaining at 45%.The level of the deferred call reflects theCommittee’s cautious assessment of theclaims environment faced by Members,

Financial update and calls decisions Despite two consecutive years of heavy claims, the Associationremains financially very strong, as evidenced by the rating fromStandard & Poor’s of ‘A’ with a stable outlook.


B R I T A N N I A N E W S 3

but it also gives financial flexibility, whichmeans that in the event of a more benignclaims year, part of the deferred call mightnot need to be collected.

In respect of minimum deductibles, theCommittee decided that for 2015/16 therewould be no change.

For prior policy years, the Committee decided that:

• the 2011/12 policy year would be closedwith no further calls;

• the 45% deferred call for the 2013/14 policyyear be approved in full, with 25% to becollected immediately and the remaining20% in October 2015; and

• Members should now budget for a deferredcall of only 40% for the 2014/15 policy year,rather than the full 45% deferred callpreviously advised.

Turning to Class 6 (FD&D), this class has seenmuch improved fortunes since the ‘twin peaks’in claims in 2008/09 and 2009/10 resulted in

the aggregate policy year balance of this Classbeing negative. To address this problem, sincethe 2010/11 renewal, the Association’s callsstrategy has been to call sufficient premium torebuild Class 6 reserves. That rebuilding hasnow been achieved and, in addition, claimshave returned to levels more consistent withthose seen in pre-recessionary policy years.

The Committee therefore agreed to revert tothe previous calls strategy, which was to callonly the amounts necessary to balance thepolicy year. Accordingly, the Committeedecided that there should again be no generalincrease in the 2015/16 FD&D advance call.This is the fourth year out of the last five thatthere has been no general increase. Inaddition, the deferred call for Members withmutual entries would be reduced to 30%.

In further recognition of the overallimprovement in the Class 6 reserves, theCommittee also decided to call only half ofthe 50% deferred call for 2013/14, with thebalance waived, and that Members shouldbudget for a deferred call of 30% in respectof the 2014/15 policy year, which hadpreviously been set at 50%.

In conclusion, despite two consecutive yearsof heavy claims, the Association remainsfinancially very strong, as evidenced by therating from S&P of ‘A’ with a stable outlook.

That solid financial footing enables theAssociation to take a positive view of thefuture. Members entered for Class 3 willagain benefit from a low general increasegoing into the 2015/16 renewal, togetherwith a waiver of part of the budgeteddeferred call for 2014/15. Class 6 has alsoperformed very strongly and again Class 6Members will reap the benefits at renewal.

The ability of the Association to use itsfinancial strength to benefit a loyalmembership is one of the key benefits ofthe mutual P&I system and one that theAssociation fully embraces.

Since the last edition of Britannia News,Messrs. B Chiu, U Kranich, S-H Lee and B KMandal have resigned as directors of theCommittee and Miss Irene Lan and Messrs. A Firmin, S-D Lee, L Martel, B Nielsen, S Paekand J Warwick have been welcomed ontothe Committee.

Committee meetings have been held overthe last 12 months in Amsterdam, Bermudaand Singapore, as well as at the Association’soffice in London.

As usual at the October meeting, theCommittee looked at the Association’s

finances, discussed the policy year reviewand made decisions about the callrecommendations, both for the openpolicy years and for the amount of thegeneral increase for the 2015/16 policyyear. Full details of these decisions arefound elsewhere in the magazine.

Committee news



Claims reviewThe 2014/15 policy year has started well. After seven months, the total cost of retained claims issignificantly lower than at the same point in the last two policy years. This is largely due to the verylow number of ‘high value’ claims reported to the Association – that is, claims with an estimate inexcess of US$1m. At the time of writing, only seven such notifications have been received, comparedto 17 and 15 at the same point in the previous two policy years.


In previous claims reviews, we haveexplained how high value claims, althoughsmall in number, can have a considerableeffect on the total cost of claims. For example,in the 2013/14 policy year, the total numberof high value notifications (33) representsjust 0.6% of the number of notified claims(5,887); but in terms of total estimated cost ofclaims they represent over 50%. Furthermore,by their nature, high value claims are randomin occurrence and therefore difficult topredict. This means that the results to dateare encouraging, but nothing more. So, whileit is to be hoped that the number and cost ofhigh value claims have returned to the lowerlevels seen in the years prior to 2012, thatremains to be seen.

One factor that might indicate a realimprovement in claims levels is the numberof attritional claims reported in the firstseven months of 2014/15 – that is, claims ator below US$1m. Not only have claims at thislevel reduced in number (by over 18%) butthey have also reduced in estimated totalcost (by over 24%). This means that the currentaverage value of an attritional claim is aboutUS$13,400, compared to over US$14,500 atthe same point last year and almostUS$15,000 in the year before that.

There are a number of factors that need to beconsidered when trying to identify patternsor trends in claims, so these figures meritexamination in greater detail.

High value claims (above US$1m)The three largest high value claims involved a collision (leading to loss of life and oilpollution), damage to a shore crane and anoil spill during loading from an offshore buoy.Only the collision claim has an estimateexceeding the Club’s retention (currentlyUS$9m) and this has been notified to the Pool.

Analysis of high value and Pool claims inprevious years has shown that the rootcauses of many collision, grounding andproperty damage claims can be closelylinked to the competence and experience of bridge teams. Fortunately, there is now ageneral acceptance within the industry thatfar more emphasis needs to be placed ontraining and owners should undertake morefrequent navigational audits.

The Association’s loss prevention team canalso play a part. Over the last few months,they have organised technical seminars inImabari, Taipei and Tokyo and are holdingfurther seminars in Manila and Mumbai. They continue to conduct in-depth rootcause analysis of every high value claim inexcess of US$1m. The findings are thenshared with the whole membership throughthe regular publications Risk Watch andHealth Watch.

Risk Watch has recently included articles onthe importance of a proper lookout, a casestudy on a collision in restricted visibility andwill be continuing the series of posters toremind bridge watchkeeping officers of therequirements of COLREGs. The recenttechnical seminars have included a review of damage to property claims, using casestudies to show what can go wrong due tocomplacency and poor communication,while highlighting best practice and ways to mitigate risk.

In addition, further workshops haveconcentrated on how to generate andmaintain an effective safety culture on board.This is an ambitious goal, but essential ifaccidents are to be avoided. All crewmembers should be aware of the risks theyface and understand how these risks can bestbe reduced. The workshops therefore focused

on many of the daily operations that can beseen as merely routine. Specific topics haveincluded the use of correct personalprotective equipment, maintenance ofsafety/life-saving equipment and entry intoenclosed spaces.

In the October 2013 edition of Britannia Newswe reported on the work beingundertaken by the International Group (IG)reviewing the most expensive casualtiesinvolving wreck removal and, whererelevant, SCOPIC expenditure. The mostsignificant driver of cost was identified asthe unreasonable and disproportionateorders being issued by authoritiesoverseeing the removal operation. The IG has therefore been in contact withinternational shipping organisations,national and supranational authorities toraise awareness of how clubs respond tocasualties. The IG has also tried to explainthe need for proportionality in the responseorders that are issued. To give thesemeetings a focal point, a Memorandum ofUnderstanding (MOU) has been drafted bythe IG, which is designed to promote aneffective response to casualties and toencourage preparedness. The MOUencourages parties to participate in eachother’s training sessions and workshops,thus enabling both sides to establish whichnational/local authorities will be involved.

The MOU further envisages that, immediatelyfollowing a casualty, the parties will quicklyidentify the individuals handling the case andthat all relevant technical information will beexchanged at an early stage. The requirementthat a club should keep relevant authoritiesadvised of the proposed response to anincident is important because it helps toengender confidence that appropriate actionis being taken.


Loss prevention must continue to be at the forefront of all Members’ minds, with a particular emphasison training and auditing, especially with regard to bridge team management. The Association willcontinue to give Members every possible support.


In May 2014, the South African MaritimeSafety Authority became the first nationalsafety agency to enter into the MOU with the IG. Meetings with representatives fromthe UK, Australia, New Zealand, Singapore,Malaysia, Canada and the US have takenplace and it is hoped that more nationalsafety agencies will follow South Africa’sexample. The IG will participate at Sea AsiaWeek in Singapore in April 2015 as this willprovide the opportunity to engage withnumerous Asian national safety agencies.

The IG’s Large Casualty Working Group(LCWG) continues to gather data on recentmajor casualties involving salvage and wreckremoval. This process will allow the LCWG tomonitor the effectiveness of the contractualarrangements and to identify whether anyproblems are continuing to arise whensalvage is no longer relevant and a club wishesto terminate SCOPIC. The level of interventionadopted by the authorities will again be ofsignificant interest.

The LCWG was formed in 2012, as estimatesfor the COSTA CONCORDIA and RENA casesdeteriorated significantly. As readers will have seen in the press, the COSTA CONCORDIAwas successfully parbuckled and, following aperiod of winter lay-up, refloated with theassistance of external buoyancy sponsors. In July, the wreck was towed to the Italianport of Genoa for final dismantling. With thewreck removed from the grounding site,attention has now shifted to the remedialaction considered necessary to clear the siteof debris. This work will be put out to tender.Unfortunately, a high level of interferencecontinues with the refusal of the authoritiesto permit the wreck to be exported and their insistence on dismantling in Italy,notwithstanding the technical viability ofcheaper foreign alternatives.

The RENA also continues to be problematicwith a highly-publicised Resource Consentapplication being filed with the Bay of PlentyRegional Council. This seeks permission toleave what remains of the wreck in situ atOtaiti Reef. While this politically-chargedapplication is considered, work continues tomonitor the shoreline of the Bay of Plentyand remove debris from the vicinity of thewreck when flotsam is discovered.

International Conventions continue to play avital role in capping the costs of high valueand Pool claims and next year there are twoimportant developments.

First, there is the introduction of the WreckRemoval Convention, which will enter intoforce on 14 April 2015. This will provideuniform rules and procedures to ensure theprompt and effective removal of wreckswithin the exclusive economic zone (EEZ)(but outside the territorial sea) of the statesparty to the Convention. There is an option toextend the application of the Convention tothe territorial sea but, so far, only three of theten states that have ratified the Conventionhave done this. It is hoped that more stateswill ratify the Convention and extend it totheir territorial seas. Most wrecks occurwithin territorial seas, so this would give theConvention much greater force. It is furtherhoped that the new Wreck RemovalConvention may assist in bringing greatertransparency, proportionality and certaintyto this important area. Readers will find adetailed article outlining the principalprovisions of the Convention in this editionof Britannia News.

The second development relates to newlimits of liability under the 1996 Protocol tothe Convention on Limitation of Liability forMaritime Claims (LLMC) that will come intoforce in June 2015. Under the amendments,

the limit of liability for property claims for ships not exceeding 2,000 gt will increase to1.51 million SDR’s (Special Drawing Rights) (up from 1 million SDR’s and equivalent toapproximately US$2.24m at today’s rate ofexchange – an increase of approximately 50%).

For larger ships, the following additionalamounts will be used in calculating thelimitation amount:

• For each ton from 2,001 to 30,000 gt, 604 SDR’s (up from 400 SDR’s).

• For each ton from 30,001 to 70,000 gt, 453 SDR’s (up from 300 SDR’s).

• For each ton in excess of 70,000 gt, 302 SDR’s (up from 200 SDR’s).

A separate set of increased limits has beenadopted for loss of life and personal injury.

This increase reflects the 45% change ininflation between 1996 and 2010, rather thanany perception that the limitation regime wasnot working as intended. While any increasemay be unwelcome, it is hoped that by keeping the limitation amounts in line withinflation, states will not only continue to ratifythe LLMC but, more importantly, will preserveand uphold the concept of limitation when amajor casualty occurs. In view of the ever-increasing cost of casualties, it is vital that states fully integrate international conventionsinto their domestic legislation, thus ensuringthat their national courts then uphold theshipowner’s right to limit liability in accordancewith the terms of the Convention.

Attritional claims (claims at or below US$1m)These claims have gradually been reducing innumber over the last few years and the totalvalue has reduced this year after two veryheavy years. What are the reasons?


Claims review (continued)


The reduction in the number of claims has, in fact, resulted from the introduction ofcombined deductibles at the start of the2014/15 policy year and the decision by afew Members taking higher deductibles. Ifthe figures are adjusted to take account ofthese changes, we find that the numbers ofclaims are actually very similar to last year.

Over 70% of the Association’s attritionalclaims continue to be either cargo claims or crew claims relating to illness or injury.While this is a similar percentage to 2013/14,the split has now reversed with crew claimsrepresenting 40% and cargo 32%. A reviewshows that the average cost of cargo claimshas decreased, whereas the average cost ofcrew claims continues to increase. What arethe factors behind this?

Cargo claimsCargo claims at or below US$1m account forthe largest reduction in value of attritionalclaims and have fallen considerably comparedto the previous policy year. This year there hasbeen a reduction of around 50% in both thenumber and value of cargo claims betweenUS$250,000 and US$1m compared to thistime last year. This has been a key factor in the overall reduction in value of cargo claimsbelow US$1m. It must be remembered,however, that the number of claims at thislevel is relatively small; the figures aretherefore likely to be more volatile.

The average value of cargo claims belowUS$250,000 has reduced from US$5,900 toUS$4,000 (based on projected figures as at 20 August 2014). At this lower level, theimpact of higher deductibles and thecombined deductible has been significant. An additional factor has almost certainly beena general decrease in the value of goods:since the start of 2013, the IMF commodityindex has decreased by around 4%.

Crew claimsWith the increasing focus by Members andthe Association on crew matters, it is pleasingto report that the number of crew claims hasremained stable over the last four years.Unfortunately, the value of crew claims hascontinued to increase, with the average costof crew claims below US$250,000 nowaround US$19,400 (based on projectedfigures as at 20 August 2014). This compareswith about US$18,200 last year. This is asignificant leap when one bears in mind thatthe average cost in the 2010/11 policy yearwas US$13,000.

Last year, around 37% of crew claims relatedto injury, while 61% involved illness. So farthis year the split has been similar. Theaverage cost for injury continues to be higherthan for illness; this is mainly due to thehigher compensation limits and moreonerous terms found in many collectivebargaining agreements.

The ever-present problems of rising wagesand increasing compensation levels incollective bargaining agreements remainmajor factors in the ongoing increase inaverage costs. This is unlikely to change giventhe industry demand for better quality crew innumbers that exceed supply. The Associationis continuing to analyse the underlyingcauses of crew claims and work closely withMembers to disseminate the findings throughits publications Risk Watch and Health Watchand through its active programme of lossprevention seminars. Risk Watch has includedan article on hand injuries. These are the most common injuries suffered by crewmembers which are usually caused by poorworking practices and complacency. HealthWatch has recently included articles and aposter on the importance of wearingappropriate personal protective equipment,even while performing routine tasks.

There has also been a focus on lifestyleillnesses caused by poor diet or the wrongtype of food. The most recent loss preventionseminars included a talk on the root causeanalysis of non fatal illness and injury claims,using case studies to raise awareness of crewinjury claims caused by poor work practices.

The continuing problem of claimant-friendlytribunals and courts is not helpful. Both theManagers and the International Groupcontinue to make representations togovernment bodies and other keystakeholders in Manila to provide a morebalanced process for the handling ofseafarers’ claims. The International Group has submitted a position paper to variousinterested parties, including the NationalLabour Relations Commission in thePhilippines, highlighting industry concerns.Two of the main issues were the incorrectapplication of collective bargaining limits to illness claims and the attachment of fundsafter a decision in the labour court, despite the fact that there was still a right of further appeals.

In summary, early claims figures may indicatea reduction compared to the very high levelsexperienced in the previous two policy years.If so, that is indeed good news for both theClub and its Members. The underlying causesfor claims remain broadly the same and thereis no evidence to suggest that the claimsenvironment will become any less hostile.Loss prevention must continue to be at theforefront of all Members’ minds, with aparticular emphasis on training and auditing,especially with regard to bridge teammanagement. The Association will continueto give Members every possible support.




Loss prevention seminars: anchoring and mooring


In addition to navigation issues, the seminarshave also focused on ‘frequently conducted’tasks. Mooring and anchoring operations, forexample, are routine operations for most ships,but if things go wrong there is the potentialfor serious consequences. For this reason, wedecided to produce an article featuring someof the key points from a recent seminar.

AnchoringThe following examples of recent incidentswill highlight some typical issues:

• A ship’s anchor started dragging due toheavy weather; the anchor position was notadequately monitored and the fact that theship was dragging its anchor was not noticedfor several hours.

• A ship at anchor started to yaw between 30 to 60 degrees in moderate-to-heavyweather conditions. The anchorage was in anexposed location, with a rocky sea bed. Afterweighing anchor, the anchor flukes werefound to be missing.

• A number of incidents where Members’ships either anchored too close to anothership or had another ship anchor in veryclose proximity. When the ships started toswing at anchor close quarters situationsdeveloped.

A root cause analysis (RCA) of some of theseincidents has shown that navigators areoften not maintaining an adequate anchorwatch, leaving the bridge unmanned for longperiods while at anchor, either due tocomplacency, lack of advice or lack ofsupervision. It is therefore worth reviewing a few fundamentals.

There are a number of reasons why a shipmight want to anchor:

• Awaiting a berth, tide or pilot;

• Carrying out cargo work;

• Seeking shelter in case of cargo or shipdamage;

• Providing respite for crew under the MLChours of rest requirements;

• Entering lay-up.

In any of the above situations, an anchor planshould be prepared before the ship arrives atthe anchorage.The anchor plan shouldinclude an assessment of all associated risks,including the following:

• The ship’s anchor system design,performance and limitations;

• The characteristics of the designatedanchorage (including the topography of thesea bed, location of pipelines and otherhazards), expected weather, tidal conditionsand range and also whether shelter isavailable from adverse weather (whetherexpected or not);

• The ship’s draft, freeboard/windage, underkeel clearance and propeller immersion;

• The depth of water, scope of cable andpreferred swinging circle; and

• The notice period for readiness andavailability of the engine.

It should always be remembered that theanchoring equipment required and fitted isthe minimum considered necessary ‘…fortemporary mooring of a ship within a harbouror sheltered area’ (as per the InternationalClassification Societies’ (IACS) standards formooring, anchoring and towing).

IACS also notes that: ‘The equipment is therefore not designed tohold a ship off fully exposed coasts in roughweather or to stop a ship which is moving ordrifting …The anchoring equipment presentlyrequired herewith is designed to hold a ship ingood holding ground in conditions such as toavoid dragging of the anchor. In poor holdingground the holding power of the anchors willbe significantly reduced.’

Reviews of incidents have shown that mastersand navigation officers often fail to appreciatethis fundamental point – apparently believingthat their anchors can hold them in almostany conditions. As ship sizes have increased,their anchors have also increased in weightbut not always in proportion with their size. A number of larger newer ships haveconsequently experienced a potential loss inthe holding power of their anchors.

Analysis of a number of anchoring incidentshas shown that windlasses and brakes aregenerally the weakest component in anyanchor system. In almost all ships, windlassestend to be modestly powered (e.g. on astandard 100,000 DWT cargo ship, the anchorwill be able to apply a ‘pull’ of around 34 – 35tonnes). In theory, windlass performanceeffectively restricts anchoring to depths ofaround 110m or less but this would also bedependent on prevailing weather conditionsand the type of sea bed.


Britannia’s technical seminars have proved to be very popular with the membership. Usingpresentations and workshops, liberally sprinkled with real-life Britannia case studies, the seminarshave provided a sound platform to engage with seafarers and superintendents and to shareexperiences and solutions.

Anchor type Blue clay Sand/shingle Rock with layer of mud/sand

Standard Stockless 3 to 4 x weight 3.5 x weight 1.8 x weight

HHP (AC 14) 10 x weight 8 x weight 2.4 x weight

Anchor holding power test


The UK Marine Accident Investigation Branch (MAIB) has investigated a number ofanchoring incidents and noted that the ships often found it difficult to weigh theiranchor cables in wind strengths overBeaufort Force 7.

The chain stopper (guillotine) is designed to be the strongest part of the anchoringequipment and should be engaged when aship is anchored and brought up. IACSrequirements for the chain stopper state:

‘A chain stopper should withstand a pull of 80%of the breaking load of the anchor chain. Thewindlass with brakes engaged and cable liftersdisengaged is to be able to withstand a pull of45% of the breaking load of the chain.’

A navigator’s responsibility for safe navigationdoes not end when a ship is brought up atanchor and it is essential that an effectiveanchor watch is maintained for the duration.Failure to do so can lead to the anchordragging, followed by the ship grounding,fouling submarine cables/ pipelines, or cominginto contact with another ship or structure.

If a ship is in lay-up – or at anchor for a longperiod – it is essential that a risk assessmentis carried out to decide how best therequirements for maintaining an effectiveanchor watch can be achieved.

In a busy anchorage, it is not uncommon tofind ships anchoring or passing in closeproximity to an anchored ship and an earlywarning about the potential dangers can beuseful to minimise any risks. Similarly,monitoring strong tidal streams or changesin prevailing weather conditions will requirea further risk assessment. Early and positiveaction should therefore be discussed, agreedand implemented, and this will only bepossible if an effective anchor watch is beingmaintained.

There have been a number of claims recentlythat were the result of anchor loss or damage,particularly due to delays in weighing anchorin heavy weather. In an anchorage exposed todeteriorating weather conditions, a ship willusually remain safely anchored so long asthere is sufficient scope on the anchor cableand the anchor is still set on the sea bed.Effective monitoring of the anchor positionand verification of the ship’s position withinthe swinging circle is essential to obtain anearly indication of dragging.

Once the weather starts deteriorating, a riskassessment will invariably lead to one of twochoices – to stay at anchor or to weighanchor and head for open sea.

If the decision is taken to stay at anchor,considerations should include:

• Whether lowering more cable in the waterwill ensure that the anchor flukes remainengaged;

• Whether dropping a second anchor would assist;

• Whether the proximity of other ships atanchor and the availability of the requisitesea room might be an issue.

In the last scenario, the prevailing weatherconditions, depth of water and scope of cablewill all dictate whether it will be feasible andsafe to weigh anchor. The safety of the crewon the forecastle must also be considered aswell as the capacity and capability of theanchor windlass.

In either case, early and positive action isessential, as deferring a decision indeteriorating weather conditions will onlyreduce the options available. It is alwayspreferable to take action when you canrather than when you have to.

It goes almost without saying that anydecision to stay at anchor or sail should notbe dictated by commercial considerations.Safety as well as practical and prudentseamanship must be paramount.

1 0 B R I TA N N I A N E W S D E C E M B E R 2 0 1 4


12 tonnes

118 kN

Current

5 x

draf

t or m

ore 1.

6 x

draf

t 0.5 x draft 0.2 x draft

25 tonnes

245 kN

40 tonnes

392 kN

Assumes a 2 knot current, 5° o" bow

70 tonnes

686 kN

Under Keel Clearance (UKC) effect

Snap back zones

Moorings secured on bitts

One full turn on leading post –recommended method

MooringMooring incidents analysed by theAssociation’s loss prevention team haveincluded a number of instances of mooringropes parting, allowing the ship to drift off theberth. In some cases crew have been injured,usually because safe procedures were notfollowed. Leaving aside the question of whythe mooring lines parted, it is important toconsider the ancillary risks associated withmooring equipment. The consequencesshould always be borne in mind, as thefollowing examples demonstrate:

• A crewman was caught in the bight of arope as it came under tension, causingbroken limbs and crushing injuries.

• Limbs have been caught in moving orrotating machinery.

• Injuries were sustained while a crewmanwas attempting to free mooring linesjammed on the mooring drum (whilemooring operations were still in progress).

To avoid this type of incident, it is worthproviding a reminder of current best practices:

• The effect of Under Keel Clearance (UKC)and the anticipated tidal stream at the berthshould be taken into consideration whendeciding the appropriate mooringarrangements.

• When mooring lines are under strain, all personnel should remain in positions ofsafety i.e. out of snap back zones.

• Slip and trip hazards should be identifiedand highlighted.

• Mooring lines should be secured on bittsrather than warping drums.

• If suitable leads cannot be provided for theship’s moorings, the master should takeadditional precautions, including shorteningthe notice period for the main engine to beavailable and making provisionalarrangements for tugs particularly if adverseweather conditions are expected.

Given the number of claims relating todamage to fenders, taking a picture of theberth and fenders just prior to berthing andjust after departing can help in defendingsuch claims.

These presentations, focusing on anchoringand mooring, aim to highlight the key risksassociated with such operations. They aresupported by the loss prevention team’scareful analysis of real-life cases. Lessonslearned and best practice information areshared with the audience who are thenencouraged to discuss the findings at safetymeetings, incorporating the results in theirown procedures and training programmes.

B R I T A N N I A N E W S 1 1


owners and charterers have been content tohonour charterparties and there have beenfewer disputes. In addition, the factorsmentioned above, which contributed somuch to FD&D claims experience in 2008 and 2009, are no longer present. The resulthas been that recent FD&D policy years haveincurred much lower costs, with the vastmajority of claims being of the type thattraditionally dominated this class prior to2008. These include disputes in relation to:

• Periods of off-hire and delay;

• Calculation of demurrage;

• Speed and bunker consumption;

• Quality of bunkers supplied to the ship;

• Small hull damage claims (i.e. those that fallwithin the hull and machinery deductible);

• Responsibility for additional costs arisingduring a charterparty such as the employmentof security personnel (whether on boardduring a voyage or in port).

The Association dealt with a number of casesduring 2013/14 that arose from more topicalissues. The threat of pirate attacks, particularlyin the Indian Ocean and Gulf of Guinea, hasinevitably led to charterparty disputes.

This was most vividly illustrated during the2008/09 and 2009/10 policy years, when thebanking crisis caused a dramatic collapse incharterparty hire rates. This, in turn, led to thewidespread non-payment of hire andcancellation of charterparties, with the resultthat the number and value of FD&D claimsreached record high levels.A number offactors combined to exacerbate the effect ofthe 2008 crash on FD&D costs.

Many charterers had undertakencharterparty commitments in 2007 and thefirst half of 2008, when hire rates were at theirpeak. This meant that, when hire was not paidor charterparties were cancelled, the lossessuffered by innocent parties wereconsiderable, often running into manymillions of dollars.

Many of the companies that reneged on theircharterparty commitments did not havesufficient cash or assets because their incomewas reliant on cargo shipments that haddried up due to the banking crisis.

The dry bulk market in particular was oftencharacterised by long chains of sub-charterers. When one company in thecharterparty chain failed, it had a dominoeffect, resulting in a series of sub-charterersfailing to pay hire.

Until 2009 it was possible to attach a debtor’selectronic fund transfers (EFTs) as theypassed through the New York bankingsystem using a procedure called Rule B. Asalmost all US dollar payments are made viaNew York banks, this was a relatively easy taskand, sometimes, the only means by which acreditor could obtain security for its claim. It was widely used in the panic situation thatprevailed in late 2008 and had a huge effecton the New York court system.At one stage, it is estimated that about one third of allproceedings in the New York courts involvedthe interception of EFTs.

Two court decisions in 2009 ended this stateof affairs. First, it was held that a company thatwas registered with the New York Secretaryof State could not be the subject of a Rule Battachment. This led to many non-UScompanies registering in New York in order toavoid their exposure to Rule B. Subsequently,and more importantly, the Second CircuitCourt of Appeals held that EFTs could not beattached using the Rule B procedure. Since thatdecision, it has not been possible to interceptEFTs being processed through the New Yorkbanking system in order to obtain security.

Although many sectors of the shippingmarket have remained depressed in the yearssince the 2008 crash, this has had the effectof reducing market volatility. As a result, most

Freight, Demurrage & Defence review Freight, Demurrage & Defence (FD&D) provides Members with cover for legal and associated costs inrelation to a wide range of shipping disputes, mainly arising from owning or chartering ships. For thisreason, the type, volume and cost of FD&D claims often reflect trends in the wider shipping market.



In addition to arguments about which partyshould bear the cost of additional insuranceand the employment of guards, theAssociation has handled disputes aboutdelays in performing voyages while waitingto join a convoy. There have also beendisputes about the routes taken by ships in order to minimise the risk of attack bypirates.

The imposition of trade sanctions in relationto countries such as Iran, Syria and (mostrecently) Crimea/Russia has also led to anumber of disputes. Such disputes frequentlyrelate to whether or not an owner orcharterer is obliged to perform charterpartyobligations that had been agreed before therelevant sanctions were introduced.

Generally speaking, the most expensiveFD&D claims are those that cannot be settledamicably and are only resolved by anarbitration hearing or court trial. These casesoften involve the most complex and/ordisputed facts and often there are large sumsof money are at stake. Arbitration hearingsand trials are expensive because of the needto have lawyers (often both solicitors andbarristers) and expert witnesses inattendance throughout. Also, in the case ofarbitration hearings, each of the arbitratorsmust be paid for his attendance at thehearing and for writing the award.

Furthermore, in England and some othercountries, the costs covered by FD&D areeffectively doubled if the Member isunsuccessful and a costs award is madeagainst them: FD&D also covers opponents’costs for which a Member may become liable.FD&D costs can also be significant in thosecases that tend to be particularly document-heavy, such as new building disputes,disputes about ship repairs and maintenanceunder bare boat charters.

English law and London arbitration are thepreferred choice of law and forum in the vastmajority of charterparties seen by theAssociation. However, London remains arelatively expensive place in which toarbitrate. New York is rarely encountered asan arbitration forum although it seems tohave made a small recovery recently. Lawyers’costs in New York maritime arbitrations aregenerally considered to be reasonable.Singapore has become a more popularchoice of arbitration venue although it has,perhaps, not developed quite as quickly assome expected and, in the Association’sexperience, does not appear to have anysignificant cost advantage over London.

The last year has seen one very importantdecision of the English High Court which mayhave a significant effect on future FD&Ddisputes. In The ASTRA (Kuwait Rocks Co. v.

ANN Bulkcarriers Inc. [2013] EWHC 865), theHigh Court held (albeit only obiter) that acharterer’s obligation to make punctualpayment of hire pursuant to Clause 5 of theNYPE 1946 form charterparty is a contractualcondition, a breach of which entitles anowner to terminate the charter and claimdamages for future loss of earnings. Thiscontrasts with the previously widely heldview that only a series of failures to pay hirewould be sufficiently serious to entitle anowner to end the charter and claim for loss of future earnings. Although the High Court’scomments are obiter, it is thought they maybe considered persuasive by arbitrators andother High Court judges, raising thepossibility that an owner may terminate acharter and claim damages for future loss ofearnings following a failure by charterers topay a single hire instalment on time. Itcertainly means that much more will be at stake if a charterer fails to pay hire,particularly when market conditions are volatile.

FD&D provides advice and cover for legalcosts to Members who suddenly, and oftenunexpectedly, find themselves in conflictwith parties with whom they are doingbusiness. Prompt notification of potentialdisputes can help to save significant costsand, wherever possible, preserve a workingrelationship.

Prompt notification of potential disputes can help to save significant costs and, wherever possible,preserve a working relationship.



One of the first international conventionsrelating to the health of seafarers was theInternational Labour Organisation’s (ILO)Medical Examination of Young Persons (Sea) Convention 1921. This was followed by the Medical Examination (Seafarers)Convention 1946. Both instruments wereconsolidated into the Maritime LabourConvention 2006 (MLC).

Regulation A1.2 of the MLC states that:

‘Seafarers shall not work on a ship unlessthey are certified as medically fit to performtheir duties.’

In 2013, the ILO published its Guidelines onthe medical examinations of seafarers. Theseupdated guidelines previously adopted in1997, entitled the Guidelines for ConductingPre-sea and Periodic Medical FitnessExaminations for Seafarers, and sought toharmonise medical standards, regardless ofthe nationality of the seafarer. The latestGuidelines acknowledge that the intention is‘to reduce the risks to other crew membersand for the safe operation of the ship, as wellas to safeguard [a seafarer’s] personal healthand safety’.

Under the heading ‘Purpose and Scope of the Guidelines’ there are three importantstatements:

1) These Guidelines are intended to providemaritime administrations with aninternationally recognised set of criteria foruse by competent authorities either directlyor as the basis for framing national medicalexamination standards that will becompatible with international requirements.

2) These Guidelines have been developed inorder to reduce differences in the applicationof medical requirements and examinationprocedures and to ensure that medicalcertificates which are issued to seafarers are a valid indicator of their medical fitness forthe duties they will perform. Ultimately, theaim of the Guidelines is to contribute tohealth and safety at sea.

3) The aim of the medical examination is toensure that the seafarer being examined ismedically fit to perform his or her routineand emergency duties at sea and is notsuffering from any medical condition likely to be aggravated by service at sea, to renderthem unfit for service or to endanger thehealth of other persons on board.

Regrettably, while the message conveyed bythe Guidelines is laudable, there is a seriousconflict with reality. The fact is that maritimeemployers are still struggling to employ andretain suitably experienced and qualified crew,because the demand exceeds the supply.

Furthermore, there is a conflict within themedical profession serving the seafaringcommunity as to the merits of conducting anenhanced pre-employment medicalexamination (PEME) in the first place. At arecent international medical conference held inNorway, the view was expressed by a numberof medical practitioners that it was an invasionof the rights of the seafarer to conduct teststhat exceed the requirements of the ILOGuidelines. This sentiment is in direct contrastto the stated purpose of the Guidelines: ‘toreduce the risks to other crew members andfor the safe operation of the ship, as well as tosafeguard their personal health and safety’.

A recent case handled by the Managers is agood example of this point. A 59 year old chief engineer was repatriated for medicalreasons. He had consulted a doctor,complaining of stiff and painful right and left shoulders, accompanied by fever andheadache. A review of his PEME reportdisclosed that he was described as ‘morbidlyobese’. He had hypertension, type II diabetesand eye problems. However, he answered ‘yes’in response to the question: ‘Do you feelhealthy and fit to perform the duties of yourdesignated position/occupation?’ Theshoulder problem was attributed to adegenerative back condition which, in turn,was linked to his obesity. Furthermore, he was diagnosed with cancer of the bowel.

The MLC and medical standards

After a long period of gestation, the MaritimeLabour Convention 2006 came into force on 20 August 2013. Described as a bill of rights forseafarers, it sets out the minimum standards forseafarers working on ships. One of those standardsrequires that the seafarer must have a medicalfitness certificate to work at sea. But what doesthat mean in practice?



Although cancer cannot usually be diagnosedin a routine PEME examination, it is possiblethat the cancer was a consequence of hisother medical conditions. With the benefit ofhindsight, it is clear that the man should nothave been employed. However, because hewas employed, his employer is nowcontractually obliged to cover the cost oftreating the conditions that have beendiagnosed since his repatriation. It is not clear whether the shipowner was aware ofthe contents of the PEME report and whetherthey had the opportunity to make aninformed decision about whether or not toemploy the chief engineer.

In another case, a master joined a tanker and only 11 days into his contract it wasnecessary for the ship to divert to secureurgent medical attention for him. Twomonths prior to joining the ship, the masterhad undergone a PEME and the certificationissued by the medical clinic performing theexamination answered ‘no’ to the question: ‘Is the applicant suffering from any medicalcondition likely to be aggravated by serviceat sea or to render the seafarer unfit for suchservice or to endanger the health of otherpersons on board?’ On hospitalisation at theoverseas port, the master was diagnosed tohave suffered an intracerebral haemorrhage(stroke). He was also noted to be sufferingfrom hypertensive cardiovascular disease,

diabetes mellitus, glaucoma and cataracts inboth eyes. The master admitted that he wasreceiving treatment for the hypertension,diabetes and glaucoma.

Both hypertension and diabetes can becontrolled by medication, but it is surprisingthat neither condition appears to have beendisclosed at the PEME. If they were, noannotation was made on his fitness certificate,which was in a form that was fully compliantwith the MLC medical standards guidelines.We do not know if the failure to discover thepre-existing illnesses was because they werecontrolled by drugs and therefore notdiagnosed, or because of the poor quality ofthe PEME. The fact remains that the masterwas clearly not fit and could quite easily havedied, but for the close proximity of the ship toa shore-based hospital, where he receivedurgent medical attention.

For some years now, P&I clubs have beenadvocating the importance of a fit andhealthy crew. Britannia produces a quarterlypublication called Health Watch, aimedspecifically at the seafarer, highlightingmedical conditions that are common amongseafarers and encouraging a more healthylifestyle. Other clubs operate PEME schemesaimed at identifying seafarers who are at risk,either because they are at risk of developing‘lifestyle’ diseases or because they have

already manifested the symptoms of illnessessuch as hypertension or type II diabeteswhich, if left unchecked can lead to moreserious, life-threatening medical conditions.

What we learn from the two cases above isthat, ultimately, it is the responsibility ofmaritime employers (owners and theiragents) to ensure that their medicalstandards are MLC compliant, and that theirseafarers are fit and healthy. It must beremembered that, for many seafarers, thedoctor performing the PEME may be theirprimary and only doctor. It is thereforeimportant that the examination provides anoverall and comprehensive picture of thehealth of the seafarer, particularly those atrisk of developing serious illnesses.



The Wreck Removal Convention A summary of the provisions of the Convention and a discussion of thepotential impact of the Convention on shipowners.

We are grateful to Andrew Hawkins fromMFB Solicitors in London for his assistancewith the editing of this article.



OverviewThe Nairobi International Convention on theRemoval of Wrecks (the Convention) wasadopted at an IMO Conference in Nairobi inMay 2007. It will come into force on 14 April2015 one year after Denmark became thetenth party state to ratify the Convention.

The Convention is designed to fill a gap inthe existing legal framework by providing aset of uniform international rules andprocedures to ensure prompt and effectiveremoval of wrecks. Notably, it extends therights of states to claim compensation for thecosts of locating and marking wrecks, and ofintervention to remove wrecks, outsideterritorial waters.

The Convention will permit a party state to:

• Remove a wreck that is a hazard tonavigation or the marine environment;

• Place financial responsibility for the removalof certain hazardous wrecks on shipowners;

• Make insurance, or some other form offinancial security, compulsory;

• Take direct action against insurers.

At the time of writing the following 11 stateshave ratified or acceded to the Convention:Bulgaria, Congo, Denmark, Germany, India,Iran, Malaysia, Morocco, Nigeria, Palau andUnited Kingdom.

Definitions

Convention areaThe geographical area of application of theConvention is the Exclusive Economic Zone(EEZ) of a state, as set out in the UnitedNations Convention on the Law of the Sea(UNCLOS). If a state has not established anEEZ, then the Convention applies to an areabeyond and adjacent to the territorial sea ofthat state, as determined by that state inaccordance with UNCLOS and extending notmore than 200 nautical miles from thecoastal baselines of the state.

ShipA ‘ship’ is given a wide definition and there is no minimum gross tonnage requirement.

A ‘ship’ can be a seagoing vessel of any typeand includes floating platforms, except whenthey are on location and engaged in theexploration, exploitation or production ofseabed mineral resources.

WreckFollowing a maritime casualty, a ‘wreck’includes:

• A sunken or stranded ship; or

• Any part of such a ship, including any objectthat is or has been on board such a ship; or

• Any object that is lost at sea from a ship andthat is stranded, sunken or adrift at sea; or

• A ship that is about, or may reasonably beexpected, to sink or to strand, where effectivemeasures to assist the ship or any property indanger are not already being taken.

HazardA ‘hazard’ is defined as any condition orthreat that either:

• Poses a danger or impediment tonavigation; or

• May reasonably be expected to result inmajor harmful consequences to the maritimeenvironment, or damage to the coastline orrelated interests of one or more states.

Affected stateAn ‘affected state’ means the state in whoseconvention area (see above) the wreck islocated.

Scope of application of the ConventionThe territorial sea of the state is not subjectto the terms of the Convention unless a stateparty specifically notifies the IMO that itsterritorial sea is to be included in theConvention. (The territorial sea normallyextends 12 nautical miles from the state’scoastal baseline.) A state party that has madesuch a notification may withdraw it at anytime by means of a formal notification ofwithdrawal to the IMO and this will takeeffect six months after receipt by the IMO.

Of the 11 states that have ratified or accededto the Convention, only Bulgaria, Denmark

and the United Kingdom have currentlyextended its application to their territoryand territorial sea. The other states willcontinue to apply their domestic legislationto the removal of wrecks within theirterritorial sea.

ExclusionsThe Convention does not apply to measurestaken under the International Conventionrelating to Intervention on the High Seas inCases of Oil Pollution Casualties, 1969(Intervention Convention 1969), as amended,or the Protocol relating to Intervention onthe High Seas in Cases of Pollution bySubstances other than Oil, 1973, as amended(Intervention Protocol 1973).

The Convention also does not apply towarships or other ships owned or operatedby a state, and used only on Governmentnon-commercial service, unless that statedecides otherwise.

Rights and obligations of owners andaffected states

Reporting wrecksThe Convention requires that the masterand/or the operator of a ship immediatelyreport to the affected state when that shiphas been involved in a marine casualtyresulting in a wreck.

The report must provide the name and theprincipal place of business of the registeredowner together with all the relevantinformation necessary for the affected stateto decide whether the wreck poses a hazard.This information must include:

• The precise location of the wreck;

• The type, size and construction of thewreck;

• The nature of the damage to, and thecondition of, the wreck;

• The nature and quantity of the cargo, in particular any hazardous and noxioussubstances; and

• The amount and types of oil, includingbunker oil and lubricating oil, on board.



The Convention provides a list of factors whichthe affected state must take into accountwhen deciding whether a wreck poses ahazard. For example, the depth of the water inthe area, tidal range and currents in the area,nature and quantity of the wreck’s cargo, etc.

Locating and marking wrecksIf the affected state decides that the wreckposes a hazard, either to navigation or to theenvironment, then it must take all practicalsteps to locate and properly mark the wreck.The state must also warn mariners and allconcerned states about the nature andlocation of the wreck as a matter of urgency.

Measures to facilitate the removal of wrecksIf a wreck has been declared a hazard thenthe registered owner of the ship is obliged toremove it. The registered owner may contractwith any salvor or other person to removethe wreck. The affected state is entitled to:

• Lay down conditions for such removalbefore such removal commences; and

• Intervene during the removal operation,only to the extent necessary to ensure thatthe removal operation is carried out safelyand makes sure that the marine environmentis protected.

The affected state must:

• Set a reasonable deadline within which theregistered owner must remove the wreck; and

• Inform the registered owner in writing ofthis deadline (if the registered owner does

not remove the wreck within the deadline,the affected state may remove the wreck atthe registered owner’s expense); and

• Inform the registered owner in writing thatit intends to intervene immediately incircumstances where the hazard becomesparticularly severe.

The affected state may remove the wreck bythe most practical and expeditious meansavailable in circumstances where:

• The registered owner does not remove thewreck within the deadline set by it; or

• The registered owner cannot be contacted;or

• Immediate action is required and the stateof the ship’s registry and the registeredowner is informed accordingly.

Measures taken by the affected state must beproportionate to the hazard and not gobeyond what is reasonably necessary toremove the wreck. The measures must stopas soon as the wreck has been removed andmust not interfere with the rights and interestsof other states nor of any other person.

Defence and limitation of liabilityavailable to the owners

DefenceThe registered owner must pay the costs oflocating, marking and removing the wreck,unless the registered owner can prove thatthe maritime casualty that caused the wreck:

• Resulted from an act of war, hostilities, civilwar, insurrection, or a natural phenomenonof an exceptional, inevitable and irresistiblecharacter; or

• Was wholly caused by an act or omissiondone with intent to cause damage by a thirdparty; or

• Was wholly caused by the negligence orother wrongful act of any Government orother authority responsible for themaintenance of lights or other navigationalaids in the exercise of that function.

Limitation of liabilityThe registered owner may limit liability inaccordance with any applicable national orinternational regime, such as the Conventionon Limitation of Liability for Maritime Claims1976 (LLMC) as amended by the 1996Protocol. However, many states (including theUnited Kingdom) have exercised thereservation contained in the LLMC to excludewreck removal claims when enacting theLLMC in their domestic legislation.Consequently, shipowners may find that theyface unlimited liability for the cost ofremoving wrecks or that a separate wreckremoval fund has to be set up, or that a higherlimit applies. As this is a potentially complexarea, any possible limitation will have to becarefully investigated on a case by case basis.

Exceptions to liabilityLiabilities that would otherwise be in conflictwith other IMO conventions, such as CLC,HNS, Nuclear Damage and Bunker OilPollution are excluded under the Convention.



Compulsory insurance or other financialsecurityIn common with other international maritimeconventions, for example the CLC and BunkerConvention, the Wreck Removal Conventionimposes a compulsory insurance requirement.

From 14 April 2015, when the Conventioncomes into force, it will be compulsory forships of 300 gt and above which fly the flagof party states, or are calling at ports orterminals in the party states, to havecertificates showing sufficient insurancecover or other financial security for wreckremoval in accordance with the Convention.

Compulsory insurance or other financialsecurity, such as a guarantee of a bank orsimilar institution, has to be maintained forthe purpose of covering the costs of locating,marking and removing a wreck within theConvention area, up to the limits provided bythe LLMC Convention for the registeredowner’s liability.

All International Group P&I Clubs will be ableto issue ‘Blue Cards’ to enable Members toobtain the Wreck Removal ConventionCertificates.

A certificate of appropriate insurance orother financial security must be issued to aship by the state where the ship is registered.Ships not registered in a party state mayobtain certificates from any state party. A state party may authorise a recognisedorganisation or institution to issue suchcertificates on its behalf. The originalcertificate must be carried on board the ship.

Following the legal regime established inother liability and compensationconventions, this Convention provides aright of direct action against insurers (orpersons providing financial security) for theregistered owner’s liability for any claimarising under the Convention. In thesecases the defendant may invoke thedefences that the registered owner wouldhave been entitled to invoke, includinglimitation of liability under any applicablenational or international regime. Thedefendant may also limit liability, even if theshipowner has lost the right to do so, to anamount equal to the amount of theinsurance or other financial securityrequired to be maintained under theConvention.

If a state party does not extend the scopeof the Convention to its territory andterritorial sea, it cannot rely on thecompulsory insurance provisions under theConvention to bring direct action claimsagainst the insurer if incidents occur in theterritorial waters of that state.

Time limitsA claim for costs incurred in relation to awreck will be time barred unless it isbrought within three years of the date onwhich the wreck is determined by theAffected State (in accordance with theConvention) to constitute a hazard. In anyevent, an absolute time bar will extinguishclaims not brought within six years fromthe date of the casualty.

Conclusion The implementation of the Conventioncould potentially increase the financialburden of wreck removal incidents on theshipowning community as a result of thewidened geographical application of strictliability, rights of direct action againstinsurers, and the broad definition of ‘wreck’.

However, the strict liability imposed on theshipowner is tempered to some extent, sincestates may only lay down conditionsconcerning the manner of removal, orintervene, to the extent necessary to ensurethat the wreck removal operation proceedsin a way that is consistent withconsiderations of safety and protection ofthe marine environment. It is also arequirement that measures taken by theaffected state are proportionate to thehazard and do not go beyond what isreasonably necessary. The impact of theConvention may also be limited by virtue ofthe fact that many wrecks occur withinterritorial waters, where shipowners willalready incur wreck removal liabilities undernational law.

It remains to be seen how many states willultimately adopt and extend the Conventionto apply to their territorial waters, andtherefore to what extent the Convention willhave a significant harmonising effect on thenumerous differing national law wreckremoval regimes which are currently inexistence.


© Alessandro Canova


Charterparties: safe port warranties revisitedWe are grateful to Philip Stembridge of Stembridge Solicitors Limited for this article.

© Anna Omelchenko2 0 B R I TA N N I A N E W S D E C E M B E R 2 0 1 4


IntroductionIn the recent case of Gard Marine & Energy Ltdv China National Chartering Co Ltd (THEOCEAN VICTORY) [2013] EWHC 2199 (Comm),the English High Court considered the extentof charterers’ responsibilities under a safeport/berth warranty and what the test is forassessing whether or not a particular port orberth is safe. The Judge (Mr Justice Teare)decided that charterers were in breach of thesafe port warranty in the charterparty on thebasis that the port of Kashima, Japan wasprospectively unsafe in circumstances wherethe ship was driven ashore and broke apartwhen attempting to leave the port in galeforce winds with heavy seas.

This article examines the Judge’s reasoningand considers whether the test of safetyunder English law has been expanded and ifthere has been any increase in a charterer’sresponsibilities under a safe port/berthwarranty.

FactsSince each unsafe berth/port dispute verymuch turns on the particular circumstancesinvolved, it is necessary to set out theunderlying facts in some detail.

The ship, a Capesize bulk carrier, waschartered on an amended NYPE form for a 5-7 month period ‘via safe berth(s), safeport(s)’. The ship was ordered by charterers to call at Kashima, where she berthed withinthe Central Fairway at the Raw MaterialsQuay on 20 October 2006 and commenceddischarge of a cargo of iron ore. The weatherstarted to deteriorate, with a Force 8 north-easterly wind increasing recorded by early 23 October. The weather had worsened byearly 24 October. By then the Central Fairwaywas exposed to Force 9 north/north-north-westerly winds gusting force 10 withprevailing swell from the north-east. In addition to the prevailing swell and windgenerated waves, the berth was affected by‘long waves’ which caused greater ranging orsurging of the ship while alongside.

There was disputed evidence on whether thecharterers’ representative (a local andexperienced mariner) instructed the masterto leave the port on 24 October, or whetherhe only suggested the master shouldexercise his discretion in deciding whether tostay at the berth or seek shelter outside theport. The master understood that he wasinstructed to seek shelter (in the event, thatwas the Court’s finding). Departure wasdelayed by the local pilots due to thedifficulty of unberthing the ship and turning180˚ in the strong wind. The wind and swellincreased, the ship started to roll and rangeagainst the berth and some of the mooringlines chafed and parted. Two, andsubsequently four, tugs attended the ship toassist. After an hour or so, the wind reducedto about force 8 and the pilot boarded forunberthing. Although the master preferred tostay, since the ship was relatively secure withthe tug assistance, he understood that thepilot and port authority required the ship toleave for reasons of safety.

On leaving the Kashima Fairway, the ship wasconfronted with gale force winds and heavyseas, lost steerage (albeit with full use of herengines) and with her port side exposed tothe gale, was set down onto the breakwater.The master attempted hard turns to port andthen starboard but without success. Thevessel went aground and broke apart. Luckily,the crew were able to abandon the ship sothere was no loss of life.

Another Capesize ship THE ELLIDA ACE hadbeen berthed close to THE OCEAN VICTORYand also suffered broken mooring lines.Having likewise received advice from thecharterers’ representative, she sought toleave Kashima on 24 October, got intodifficulties and grounded.

The Hull insurers of THE OCEAN VICTORY(‘the owners’) pursued a claim of US$137.6magainst the charterers for damages caused by charterers’ breach of the safe portwarranty in the charterparty.

Basic principleThis is easy to state, but not so straightforwardto apply. The starting-point remains thedefinition of Sellers LJ in The Eastern City[1958] 2 Lloyd’s Rep. 127 that ‘a port will notbe safe unless, in the relevant period of time, the particular ship can reach it, use it and returnfrom it without, in the absence of someabnormal occurrence, being exposed to dangerwhich cannot be avoided by good navigationand seamanship’.

THE EASTERN CITYwas particularly relevantsince the case concerned a ship ordered on a winter voyage to Mogador, Morocco whereweather conditions were unpredictable atthat time of year. In circumstances where theship was driven onto rocks after being forcedto sail, the Court acknowledged that everynavigable river, channel, port, harbour andberth has some element of danger (be itfrom tides, currents, swell or other forms) and that these risks can normally beovercome by proper navigation (by referenceto use of lights, buoys, signals, warnings andother aids) and proper handling of a ship:‘…the case for the charterers is not, and on theevidence could not be, that there were nodangers attendant upon the use of Mogadorfor loading, but that they were such that the‘Eastern City’ could and should have confronted them without the vessel beingallowed to run on to the rocks, and that shecould at all times have avoided the dangersand remained safe’.

Unless the incident is the result of anabnormal occurrence (one which wasunrelated to the prevailing characteristics of the port such as the once in a hundredyears hurricane) a charterer usually only hasto focus on whether the master could haveavoided the incident by the exercise of good seamanship and navigation or whetherthe master’s actions constituted a break inthe chain of causation between thecharterer’s breach and the incident thatcaused the damage.

© Anna Omelchenko B R I T A N N I A N E W S 2 1


There is a significant amount of case lawfollowing the decision in THE EASTERN CITYwhich is too great a topic to comment uponhere. This article will instead concentrate onthe central discussion in THE OCEAN VICTORY,namely: was there a break in the chain ofcausation which caused the incident; or, putanother way, was the true cause of thecasualty intervening negligence on the partof the master?

The decision of Mr Justice Teare The charterers denied liability, arguing that:

(i) A port was not unsafe because its systemsfailed to guard against every conceivablehazard;

(ii) No other ship had previously beentrapped in such conditions in the Fairway;and, alternatively,

(iii) If the port was unsafe, the cause of thecasualty was the master’s mistaken beliefthat he had been ordered to leave the portand/or negligent navigation of the ship.

In arguing the above, the charterers sought tointroduce a new test for determining safetyin that the port had only to be ‘reasonablysafe’. They argued that it would be unrealisticfor a port to have in place a system to guardagainst every conceivable hazard. Since noship had previously found itself in the samesituation as THE OCEAN VICTORY, the portshould not be criticised for failing to have asystem in place to address such a possibility.The basis of the charterers’ argumentoriginated from comments made by LordDenning MR in Kodros Shipping Corporation vEmpresa Cubana de Fletes (The EVIA) (No 2) 1Lloyd’s Rep. 334 at page 338 when consideringthe characteristics of a ‘safe port’,

‘To my mind it must be reasonably safe for thevessel to enter, to remain, and to depart withoutsuffering damage so long as she is well andcarefully handled. Reasonably safe, that is, in itsgeographical configuration on the coast orwaterway and in the equipment and aidsavailable for her movement and stay. In short, itmust be safe in its set-up as a port.’

Mr Justice Teare was not impressed with thisargument and, despite the lack of criticism ofLord Denning MR’s comments in subsequentcases, considered the approach based on THEEASTERN CITY definition to be the standard,i.e. a port/berth must be safe in fact, notmerely ‘reasonably’ safe. He then embarkedon a relatively complex analysis of theevidence.

The consideration of the evidence wasbroken down into four questions, assessmentof which was assisted by expert evidencefrom each party:

(i) When ordered to sail to Kashima, was therea risk the ship might have to leave the porton account of long waves and bad weatheror because she could not safely remain?

(ii) Was there a real risk that long wavesmight occur at the same time as gale forceconditions?

(iii) Did the safe departure of a Capesize bulkcarrier in gale force conditions from thenorth together with swell require somethingmore than ‘good navigation and seamanship’?

(iv) Were there any systems in the port whichprevented Capesize ships from beingexposed to the risk of having to leaveKashima in a northerly gale?

The first two questions were answered in theaffirmative.

On the third question, the evidence of theowners’expert was that ordinary seamanshipand navigation could not alone have ensureda safe exit from Kashima and that ‘Good luckwas also required.’ This was accepted by theCourt in that there was a risk or danger that aCapesize ship leaving Kashima in a northerlygale may be unable to maintain a course linein the narrow fairway and so be unable toleave in safety.

The fourth question was answered in thenegative, it being noted that the only warningsystem considered appropriate wasintroduced after THE OCEAN VICTORY incident.



The charterers also tried to show that therehad been a break in the chain of causationbetween the decision to leave Kashima andthe incident. Apart from contesting whetherthe charterers’ representative made anyrecommendation, the charterers pointed to:

(i) Pilot error in thinking it was safe to sail;

(ii) The master’s failure to refuse to sail;

(iii) The master’s failure to establish adisembarkation point for the pilot;

(iv) Various errors on the part of the master in the navigation by failing to use waypoints/parallel indexing; and

(v) Prolonged hard port/starboard on thehelm caused the vessel’s speed to dropleaving her beam to the weather.

In having found that the charterers’representative ordered the vessel to sail, Mr Justice Teare had no hesitation in findingthat the first three items did not affectliability. Any pilot error reflected the absenceof a port system for ensuring ships shouldsail or not; likewise the master’s failure torefuse to sail in circumstances where he hadtaken local advice.

While the failure to use waypoints/parallelindexing was found to be negligent, this didnot result in the master failing to appreciatethe vessel’s position in a relevant manner.

This left the hard port/starboard manoeuvres.The charterers submitted these were thedirect cause of the casualty and it was not acase where the master’s actions were takenin an ‘agony of the moment’ i.e. underextreme pressure.

Mr Justice Teare considered that if there wasany negligence on the part of the master insteerage, this was due to the lack of safety ofthe port: ‘The danger was not latent but, incircumstances where the local and experiencedadvice was to leave, the master had no realoption to stay. The master’s (assumed) negligencewas chronologically the immediate cause of thecasualty but that does not mean that it mustinevitably be judged to be the real and effectivecause of the casualty…This case was said notto be ‘an agony of the moment’ case but I thinkit was. The master, when deciding for how longto keep the hard port and hard starboard helmon, had a difficult decision to make for therewere risks either way.’ (at paragraph 174).

In so finding, the decision was reached infavour of the owners.

Increase in charterers’ responsibilities?Although viewed as a pro-owner case, thedecision in THE OCEAN VICTORY is not in itselfsurprising. It was accepted by the charterersthat the conditions experienced at Kashimain October 2006 were ‘at the upper end ofwhat might be expected from a non-tropicalsystem’. With the benefit of hindsight, themaster’s decisions taken in the heat of themoment, under pressure in heavy weatherconditions, were open to some criticism; butthey were the product of the situation anddid not amount to negligence sufficient tobreak the chain of causation.

The findings were very much in line with the decision in Kristiansands Tankrederi A/S vStandard (Bahamas) Ltd (THE POLYGLORY)[1977] 2 Lloyds’ Rep. 353 to which referencewas made by Mr Justice Teare. In THEPOLYGLORY, the ship was under time charterand was ordered to Port La Nouvelle. Whiletaking on ballast, the master and compulsorypilot decided to leave the berth due toincreasing wind. In leaving, as the ship wasstill light, one of her anchors dragged,damaging an underwater pipeline. Theowners settled the claim and sought anindemnity against the charterers as an unsafeport claim. The arbitrator held that althoughthe pipeline was broken as a result of thepilot’s negligence, this did not break thechain of causation between the order toproceed to the port and the damage. Thedecision was upheld by the High Court.

By contrast, in the case London Arbitration3/03 (where a ship grounded on leaving aberth in bad weather and the ownersclaimed that there was a ‘lack of system’ inensuring timely sailing) the Tribunal foundthat the underlying and intervening causewas failure by the crew to coordinatereleasing the stern line with heaving up ofthe starboard anchor combined with a failureto use the ship’s engines quickly enough andwith sufficient power.

While there has been no increase in acharterer’s responsibilities in THE OCEANVICTORY, if the more complex approachtaken by Mr Justice Teare is adopted, therewill perhaps be even greater focus on theevidence in future unsafe port/berth cases.Indeed, most of this lengthy case concerneda close analysis of the evidence. Such anapproach in future cases could increase theprospects that in some cases a charterer willbe able to identify substantive negligence ofa master or pilot as an intervening cause, soescaping liability for an alleged breach ofsafe port/berth warranty. This underlines theimportance of promptly gatheringcontemporaneous evidence as soon aspractical after a potential unsafe port/berthincident has occurred.



The Britannia Steam Ship InsuranceAssociation (HK) Limited (‘Britannia HK’) isthe Association’s latest overseas office, withresponsibility for both the traditional HongKong correspondency work for all Membersand also the claims role for Members basedin Hong Kong which has, in the past, beenmanaged from London. The office is headedup by David Harley, a Divisional Director ofTindall Riley (Britannia) Limited who hasbeen seconded to Hong Kong from theLondon office.

Britannia HK has taken over the duties ofSureness Marine Services who were theexclusive correspondents in Hong Kong.Britannia’s relationship with Sureness datesback more than 50 years, to 1963, when itsforerunner was jointly listed as a portcorrespondent in Hong Kong. Thisrelationship was cemented in 1990 whenSureness, under the leadership of AlisterInglis, was first appointed as Britannia’sexclusive correspondent in Hong Kong. Over the years, the role of Surenessexpanded; they were not only dealing withmatters in and around Hong Kong itself, butwere also assisting Members by liaising withport correspondents and lawyers in China.For example, in 2012 Sureness handled 70‘wet’ cases (collisions, FFO, pollution) inmainland China and had developed a firstclass reputation for successful claimsnegotiation with Chinese interests.

Overall, Sureness were handlingapproximately 10% of the total number ofclaims for Britannia’s Hong Kong Members.

Hong Kong has close links with mainlandChina and is designated as a SpecialAdministrative Region of the People’sRepublic of China. As China has grown inimportance in the world economy, withexpansion of its ports and more of thecountry opening up to international trade,the role of Sureness also developed. In 2007the first mainland Chinese Members werewelcomed into the Association. Togetherwith the existing and loyal Hong Kongmembership, the decision was made to turnthe successful Sureness correspondency intoBritannia HK, providing a strong base in HongKong and affirming the importance of theentire region to Britannia.

In December 2013, the new Britannia HKoffice moved from the Sureness premises tonew offices nearby. All the existing Surenessstaff remain employed by Britannia HK andcontinue to play the same valuable role forthe membership. In addition to handling thecorrespondency work for Britannia Members,the office also helps Members who requireassistance in Hong Kong and liaises withcorrespondents in China. The Hong Kongoffice also handles both P&I and FD&D claimsfor Britannia Members based in Hong Kongand China.

David Harley joined Tindall Riley in 1998 andwas formerly in charge of the Hong Kong,China and south east Asia claims team inLondon. As well as being in charge of theBritannia HK office, David also handles P&Iand FD&D claims for the Hong Kong andChinese Members. He is assisted in this areaby Wing Wai. Wing, a graduate of Hong KongUniversity, joined Britannia HK in March 2014,having practised for a number of years as asolicitor in Hong Kong. In addition to beingHong Kong qualified, Wing is also admittedas a solicitor in England and Wales. Wingspeaks English, Cantonese and Mandarin.More recently, Eske Munk joined BritanniaHK on secondment from the London office.

The correspondency side of Britannia HK,previously handled by Sureness, is carriedout mainly by Capt. CK Kai and Dr. SanmingChen, assisted by David Cheung, HK Chiang,Connie Chang and Dicky Luk. Capt. Kai is anexperienced mariner and worked as amarine surveyor before joining Sureness in 1994. Dr. Chen joined in March 2013 andpreviously worked for China P&I Club inHong Kong. Both Capt. Kai and Dr. Chenregularly travel to Chinese ports in order tomeet with the port correspondents andlawyers and to negotiate claims on behalf of Britannia Members. All the staff workingon the correspondency side speak English,Cantonese and Mandarin.

A new office in Hong KongThe Hong Kong branch of Britannia opened its doors in the Wan Chai district of the city in December last year.


© Yiu Tung Lee


Designed and produced bythework

Printed by Healeys Print Group

This newsletter is printed onClub Silk which is FSC® certified.It was printed by an FSC,ISO14001 certified and CarbonBalanced Publication printer,using vegetable oil and soyabased inks.

FSC® – Forest StewardshipCouncil. This ensures that there isan audited chain of custody from

the tree in the well managedforest through to the finisheddocument in the printing factory.

ISO14001 – A pattern of controlfor an environmentalmanagement system againstwhich an organisation can becertified by a third party.



ManagersTindall Riley (Britannia) LimitedRegis House45 King William StreetLondon EC4R 9AN

Tel +44 (0)20 7407 3588Fax +44 (0)20 7403 3942 www.britanniapandi.com


britannia news 28.11.14 britannia news 28.11.14 03/12/2014 … · 2017-10-18 · 14 the mlc and...

Documents