tsc triton 1 2013

Sign up for the Mariner Attitude Survey

3

Be awareof RETLAclauses in bills of lading

The Swedish Club

No. 1 - 2013 April

Page 10-13Forum shopping in collision claims – know your limits

Page 16 -17

ARMEDGUARDSprotect German-flagged vessels

Page 7

THE SWEDISH CLUB TRITON 1-2013

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LeAder | Underlying drivers of casualty | cost escalation 3

risk & operAtioNs | The ”off records” renewal! 4-5

Loss preveNtioN | The Swedish Club's operations review | – SCORE 6

p&i | Be aware of RETLA clauses in bills of lading 7

Fd&d | Re-defining the scope of an owner's | obligation to repair – The ”Kyla” 8-9

LimitAtioN | Forum shopping in collision claims – know | your limits 10-13

the swedish CLub | The Academy invites companies to sign up for ACAdemy | the Mariner Attitude Survey (MAS) 13

| New team member 13

| New MRM licensees 13 | Out and about with MRM 14-15

pirACy | German-flagged vessels guarded by private | security companies 16-17

| Somali piracy – past, present and future 18-20

LeGAL | Update 21

Fd&d | Irrecoverable costs in London arbitration: | the solutions 22-23

CLub iNFormAtioN | Notice Board 24-25

| hans Filipsson & tord Nilsson | Changing of the guard in piraeus 26-27

| Staff presentation: | martyn hughes – new Fd&d manager 28

| News from Gothenburg 29

| News from Piraeus 30

| News from Asia 31

| News from Norway 32

| Out and about 33

| Staff news 34

| Out and about 35

| In memoriam Anders holmberg 35

| Club quiz 35

| Club calendar 36

Content | No. 1 - 2013 April

The Swedish Club is a mutual marine insurancecompany, owned and controlled by its members. the Club writes protection & indemnity, Freight,demurrage & defence, Charterers' Liability, hull &machinery, war risks, Loss of hire insurance and anyadditional insurance required by shipowners. the Club also writes hull & machinery, war risks and Loss of hire for mobile offshore units and Fpso's.

Head Office Sweden

visiting address Gullbergs strandgata 6 411 04 Gothenburg postal address p.o. box 171 se-401 22 Gothenburg, sweden tel +46 31 638 400 Fax +46 31 156 711 e-mail [email protected] emergency tel +46 31 151 328

Greece 5th Floor, 87 Akti miaouli Gr-185 38 piraeus, Greece tel +30 211 120 8400 Fax +30 210 452 5957 e-mail [email protected] tel +30 6944 530 856

Hong Kong suite 6306, Central plaza 18 harbour road, wanchai, hong kong tel +852 2598 6238 Fax +852 2845 9203 e-mail [email protected] emergency tel +852 2598 6464

Japan 2-14, 3 Chome, oshima kawasaki-ku, kawasaki kanagawa 210-0834, Japan tel +81 44 222 0082 (24-hour tel) Fax +81 44 222 0145 e-mail [email protected] emergency tel +81 44 222 0082

Norway house of business, 6th floor postal address tjuvholmen Allé 17 N-0252, oslo, Norway tel +47 9828 1822/9828 0514 mobile +47 9058 6725/9486 1205 e-mail [email protected] emergency tel +46 31 151 328

The Swedish Club Triton is published three times a year and distributed free of charge. the swedish Club triton is an editorially independent newsletter and opinions expressed by external contributors are not necessarilythose of the swedish Club. Articles herein are not intended 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 Gothenburg.

Editorial Advisory Board maria berndtsson, susanne blomstrand, hans Filipsson, birgitta hed, Johan kahl-meter, Anders Leissner, Lars A. malm, Lars rhodin, tony schröder, Carola weidenholm.

Production co-ordinator susanne blomstrand.

PR-consultant trs public relations Ltd., London.

Layout eliasson information, Gothenburg.

Cover photo istockphoto.

Print pr offset. 13055200b

© the swedish Club Articles or extracts may be quoted provided thatthe swedish Club is credited as the source.

www.swedishclub.com


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dear members and associates

there is a lot of talk in the marine insurance industry

about major casualties and how underwriters respond to

such events. small errors or omissions result in significant

incidents for shipowners and their insurance partners. the

consequences of casualties are taking on new proportions.

the public view is zero tolerance from an environmental

standpoint and a “fix it” approach, whatever the cost may

entail. the “invisible” shipping industry has come into the

limelight again.

underwriters are concerned about cost escalation in

assessing severity and exposure. traditionally we generally

follow inflation. today’s claims will be three to four per

cent more expensive next year, everything else being

equal. this is a known fact. but, there are so many more

elements driving the escalation, which takes severity to

new heights. the equation is more challenging to make

nowadays.

the international Group has looked into the main cost

drivers in casualties. it does not take rocket science to

determine that the geographical location of incidents

and the resources available to respond are absolutely

decisive. one should however not forget that government

intervention plays a vital role. it is often not how you

respond and how effective the actions taken are, it is a

matter of how you are seen to respond. there are plenty of

examples supporting this.

we will spend time on this subject at this year’s AGm,

during the “members’ day” part of the event. it is beneficial

for all concerned to get a “feel” for the drivers to understand

the magnitude of the exposure we are up against.

studying root causes of casualties can be a complex

task. At first sight, it is easy to ascertain that things have

gone wrong. however, the more analysis carried out

about incidents, the more complicated matters get. most

shipboard training programmes focus on behaviour.

behaviour is determined by attitudes though. if mariners

do not have the required attitude, skills are less relevant.

we have launched the “mariner Attitude survey” at the

swedish Club Academy to supplement the maritime

resource management training programme. it is well

worth looking at.

2013 will be a challenging year for both shipowners and

underwriters. premium increases are unwelcome news for

anybody, in particular during tough trading conditions.

the Club was well served in 2012 by excellent investment

returns, however, we cannot ignore the underlying drivers

of claim severity that we need to factor in. sustainable

underwriting of exposure is the only way forward.

we have spent a lot of time and effort recently

strengthening our organisation with competence at

all our offices. running a members’ club is knowledge

management and a constant endeavour – there is no

finishing line! perception of “service” is to know one’s

ability and have confidence. As a member and stakeholder

you should have confidence in that we are staffed to meet

all needs going forward. we are ready to act.

Leader | MD Lars RhodinPH

oto

: Jon

as Ah

lsén

Underlying driversof casualty cost escalation

Lars Rhodinmanaging director


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As always the P&I renewal was challenging this year. It was even more so because of the un-supportive freight markets. To add further insult the effect of the recent years’ catastrophic claims filtered through the system in the form of significant increases in the International Group’s Excess Re-insurance cost. This is a cost which all clubs pass on to their members. The features of this renewal were all about the principle of mutuality and the impact of large claims on the mutual system.

All Clubs were exposed to very difficult renewals this year. Compared with previous years, the big difference with this renewal was that even though some owners could rationally appreciate the long-term benefits of mutuality, some of them felt compelled to take action as they simply had no other way

of meeting their overall financial goals.

Large claims between USD 9-70 million are treated differently than other claims from a

records point of view. They are different in the sense that we only take into account a maximum of USD 3 million on members’ records. The additional “off records” exposure (USD 67 million excess USD 3 million) is supposed to be covered by “P&I Pool Claim Allowance” and “P&I Abate-ment”. The former is there to also cover the exposure of other clubs’ larger claims.

Off records exposureIn a perfect world the charges applied by all clubs should suf-fice to cover the expected claims. The problem is that recently the reality has been far worse than even the most conserva-tive estimates in this respect. The unfortunate consequence is that there is a lack of funds to cover the cost of all recent catastrophic claims. They have “outperformed” expectations, particularly in relation to severity.

This additional “off records” exposure is intellectually chal-lenging to “sell” to those owners with a benign loss ratio. The

majority of the Club’s members have a loss ratio below 70%. Whilst this is considered in the renewals, the fact remains that “lucky guys” need to contribute towards the misfortunes of the “unlucky guys”. It’s an important job that needs to be done when we explain to our members that as far as the Club’s large claims go the principle of mutuality works and that everyone needs to contribute.

To argue that owners also need to approach other clubs’ larger claims with the same open mind is equally important but due to a perceived greater remoteness of those claims, slightly more difficult.

The principle of mutualityThe fact of the matter, which most owners will appreciate and accept, is that the International Group’s pooling mecha-nism is a most cost-effective way of sharing risk and over time the cost will be even between clubs. It’s also a fact today that many members place their business in different clubs and to that end they are affected on a direct basis by more than one club’s individual performance. The way to look at a large claims exposure for members has less to do with the indi-vidual club entry and more to do with the overall level of large claims in the International Group system. It is clear from historic data that pool claims in their nature are random and volatile. The short-term effect on a single club can therefore be significant. The long-term effect will be less and as mentioned previously will level out over time.

The Swedish Club’s P&I renewalTurning to the Club’s own renewal this year you will appreci-ate, which is understandable, that most members wanted the Club to give due consideration for long standing loyalty and

The ”off records” renewal!

Lars A. Malmdirector, risk & operations

Risk & operations | Renewal

”...there is a lack of fundsto cover the cost of allrecent catastrophic claims.”


5

The ”off records” renewal!

“We expect a lot more to come from our establishment in Norway”

very good performance. The Club gave due consideration but as you will appreciate we need to strike a balance be-tween giving consideration and managing pricing against exposure.

It is also safe to say that when a member is a bit “un-lucky” they do not wish to pay a disproportionally high increase. This would, however, be the unfortunate logical consequence of clubs giving too much consideration for benign records.

Again, this renewal and renewals to come will, to a much greater extent than before, be about the “off records” expo-sures. The International Group is the only viable alterna-tive and mutuality works. It is understandable that mem-bers may be less interested to some extent in listening to our arguments in this respect.

This is understandable because shipowners’ business is not insurance. Shipowners’ business is to keep their freight earning-machines doing good business. This is difficult in today’s markets. If the income is not sufficient one has to look at cost savings in order to meet budget targets.

General reflection on the state of the Marineinsurance marketThe market as a whole had expected some reaction from re-insurers (due to some large claims in the market), which in turn might have had some impact on the direct side. No such effect has yet materialised. It has been said many times before, but we can again simply acknowledge the fact that there is still a lot of capacity willing to invest in Ma-rine insurance.

The Swedish Club’s Marine Renewal 1/1 2013Our renewal at 1/1 was rather uneventful and as men-tioned above we had perhaps expected some impact from the large claims and that some capacity decided to with-draw. No real effect has materialised yet. We have to utilise our strong position as a quality provider within this seg-ment to a greater extent than before, but we also need to adapt to the fact that in some cases we need to compete with pure capacity providers. As long as we can do that profitably, we will do so.

Team Norway – more to comeWe expect a lot more to come from our establishment in Norway. Team Norway is slowly but surely building up a firmer long-term presence in Oslo. In due course the office will be doing all classes of insurance from Oslo, but mean-while the Gothenburg office will support them. The Nor-wegian market has a lot of potential and to us it is still, to a large extent, untapped. The core business of Team Norway is Energy and associated with the Energy business is the Off-Shore Supply Vessel (OSV) segment of shipping. It is a natural step for us to make a proper assessment of whether OSV is our next step in expansion for Team Norway.

PHo

to: iSto

ckph

oto

Supply vessel at drilling rig.


6

Loss Prevention | SCORE

IntERActIvE root cause analysis (IRCA) has now been estab-lished for loss prevention and is crucial in identifying root causes. Our hands-on loss prevention is effective at identifying problems and recurring issues that we believe are not addressed or rectified correctly.

To assist our members, we think it is important to take this a step further. We believe this can only be achieved by working even

closer with our members. This is why we are launching our new service, called SCORE.

The purpose of SCORE is to identify risk areas, where preventive measures need to be improved or implemented to minimise risks.

Proactive safety culture can prevent most casualtiesWe strongly believe that a company with a dedicated organisa-tion to improve safety can prevent most casualties. This can be addressed with a proactive safety culture instead of a reactive one. Unfortunately, there is no easy solution for implementing an effi-cient safety culture, as it is a slow and complicated process.

SCORE will review the company’s processes and identify wheth-er there is an efficient safety culture in place. This will be done in cooperation with the company, as it is essential that the suggested improvements are tailored to the specific company.

The importance of identifying risksIdentifying risks and implementing preventive measures will be beneficial not only for us as an insurer but also mainly for the com-pany, as a casualty is so much more costly than the insured value.

Insurance will protect the member against financial disaster but it cannot protect against all other negative effects such as loss of reputation, loss of business, negative publicity, injuries, loss of life and the resources that need to be allocated to handle the casualty. This is what we want to help prevent.

Our goal is to assist the member/company in minimising the risk of a serious casualty and to reduce the claim frequency.

The Swedish Club’s OperationsReview – SCORE Joakim Enström

Loss prevention officer

“SCORE will review the company’s processes and identify whether there is an efficient safety culture in place.”

Identified recurring issues:The crew does not follow company procedures The company has failed to implement procedures

correctly Procedures were not sufficient in dealing with

associated risks The Safety Management System (SMS) and other

procedures overlooked important issues People do not recognise risks or believe it is acceptable

to take risks There is a lack of training both onboard and ashore

SCORE will include:Reviewing the company’s claim statisticsBenchmarking the company against similar

companiesVisiting the office and vesselsVerifying the SMS has been implemented correctly

onboard and in the officeHas the company’s culture and goals been

implemented within the organisation?Reviewing the company’s loss prevention programmeHas the company implemented measures that address

the identified problems?

CertificationAfter a company has successfully completed SCORE, it will receive a certificate that is valid for five years. This will include an interme-diate review and if necessary an annual review. To be able to main-tain a professional service there will be a nominal fee.

For more information, please contact Joakim enström, Loss prevention officer, [email protected]


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P&I | RETLA clauses

cAn An ownER rely on a clause in a bill of lading that states that even if the bill provides that the goods were received in ap-parent good order and condition, the goods were necessarily not received in apparent good order and condition? The answer to this question is “no” according to a recent English court decision (Bref-fka & Hehnke GmbH & Co KG and others v. Navire Shipping Co. Ltd and others (Saga Explorer) [2012] EWHC 3124 (Comm).

The case concerned a shipment of steel pipes loaded at Ulsan for carriage to Los Angeles, San Francisco and Vancouver. The load port survey contained a number of comments relating to rust stain-ing and surface oxidisation of the steel pipes, and recommended clausing the bills’ and mate’s receipts. However, neither the mate’s receipts nor the bills of lading were claused. Instead, upon the ship-per’s request, the owners agreed to issue clean bills of lading with the usual statement that the goods were shipped “in apparent good order and condition” and in addition the bills of lading contained a so called RETLA clause (named after the US case, Tokio Marine & Fire Insurance v. Retla Shipping), reading as follows:

“If the goods as described by the Merchant are iron, steel [or] metal..., the phrase ‘apparent good order and condition’ set out in the preceding paragraph does not mean the Goods were received… free of visible rust or moisture... If the Merchant so requests, a sub-stitute Bill of Lading will be issued omitting this definition and setting forth any notations which may appear on the mate’s or tally clerk’s receipt.”

Clause made bill falseNotably, RETLA clauses sometimes appear on the face of a bill of lading where the carriage involves iron, steel, metal products or timber. The aim of the clause is to qualify the term “apparent good order and condition” by clarifying that, when the cargo was received for shipment, it was not necessarily free of visible rust or moisture, staining, chaffing etc. As a result, the carrier would be able to issue clean bills of lading even though the mate’s receipts have been claused.

When the cargo of the Saga Explorer was discharged the pipes were found to be heavily rusted and cargo interests brought in a claim under the bills of lading. There was no suggestion that there had been significant deterioration in the condition of the cargo during the voyage, so the main issue was the nature of the repre-sentation as to the condition of the cargo made by the owners on shipment. The owners sought to rely on the RETLA clause and

Anders Leissnerdirector, Corporate Legal

Be aware of RETLA clausesin bills of lading

argued that the clause should be interpreted as meaning that all surface rust, of whatever degree and extent, was excluded from their representation as to the apparent good order and condition of the cargo. However, the English court held that the RETLA clause could only be a qualification regarding superficial rust but not the overall quality. Hence, since the loaded cargo at the loadport was in worse condition than merely having superficial rust, the representa-tion “apparent good order and condition” in the bills was held to be fundamentally false and deceitful. The claim by cargo interests was allowed.

Unenforceable Letter of IndemnityThe decision highlights the master’s duty to record the cargo’s apparent order and condition accurately, based on his honest and reasonable opinion. There is no real substitute for clausing the bills where the condition of the cargo at the time of shipment requires it. Failure to properly describe the condition of the cargo leaves the owners open to allegations of being party to a misrepresentation.

There was yet another adverse implication for owners following the court’s decision. The owners had namely agreed not to clause the bills of lading in return of an LOI (Letter of Indemnity) from the shipper. At least under English law an LOI will provide no recourse for owners where they knew, through the master, of the actual condition of the cargo at the time the clean bills were issued and the LOI given. In those circumstances, their actions will be deemed wrongful and the LOI will consequently be unenforceable.

PHo

to: B

anan

astock


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FD&D | Charterparties

whERE An h&M (Hull & Machinery) insured value is stipulated in a time char-terparty, the English High Court has re-cently held that the charterparty cannot be frustrated by damage to the chartered ves-sel which costs less than the H&M insured value to repair. As a result of the case Bunge S.A. v Kyla Shipping Company Lim-ited [2012] EWHC 3522 (Comm) (The “Kyla”), shipowners may be obliged to carry out repairs which cost more than the vessel would be worth once repaired.

The damage to The “KYLA”On 4 May 2009, the 27 year old MV “Kyla” was struck by another vessel while berthed at Santos, Brazil. The “Kyla” was not at fault for the collision. At the time of the collision, the vessel was just over three months into a 12-15 month time charter to Bunge. The vessel’s owners obtained surveyors’ reports following the collision which indicated that the cost of repairing the vessel would be in excess of both her sound repaired value and her insured value.

On 3 July 2009, owners notified Bunge that the charterparty had been frustrated as a result of the collision. Owners also declared the vessel a constructive total loss and abandoned the vessel to hull and ma-chinery underwriters. The vessel’s hull and machinery insured value was USD 16 mil-lion. Bunge disputed that the charterparty was frustrated and claimed against owners for the losses they had suffered as a result of owners declaring the charterparty to be frustrated.

The arbitration – charterparty frus-trated by cost of repairThe claim went to arbitration in London in February 2011. The arbitrator held that the damage to the vessel caused by the col-lision would have taken approximately 180 days to repair, and that this was insufficient to frustrate the charterparty. In relation to cost of repair, the arbitrator held repairs would have cost USD 9 million. The parties

Simon Chumas and Jenny Salmon ad-vise in relation to wet and dry shipping and insurance disputes, acting princi-pally for shipowners and their insurers. they specialise in the investigation and handling of all claims (wet and dry) arising out of marine casualties. In ad-dition, they deal with the various con-tractual disputes which regularly arise from casualties. they also handle both hull and P&I marine insurance cover-age disputes.

Holman Fenwick Willan is an interna-tional law firm and one of the world’s leading specialists in shipping, mari-time transportation, insurance, rein-surance and trade. Holman Fenwick Willan’s shipping lawyers provide a comprehensive service to the global maritime business community, with over 200 lawyers worldwide specialis-ing in maritime law.

Jenny SalmonAssociate, holman Fenwick willan LLp, London

Simon Chumaspartner, holman Fenwick willan LLp, London

Re-defining the scope of an owner’sobligation to repair – The “K YLA”

agreed for the purposes of the arbitration that the vessel’s sound market value at the date of the collision was USD 5.75 million. The arbitrator held that, in circumstances such as these, where the cost of repair far exceeded the value of the vessel, no prudent owner would repair the vessel. Performance of the charterparty after the casualty had become radically different to that which the owners had agreed, and the charterpar-ty was frustrated as a result of the collision. Charterers appealed the arbitrator’s deci-sion to the English High Court.

The extent of owners’ obligation to repair The charterparty between owners and Bunge was on an amended NYPE (New York Produce Exchange) 1946 form, which included the usual obligation on owners at Clause 1 to “keep the vessel in a thoroughly efficient state”. The charterparty also in-cluded an express term at Clause 41 which provided:

“41.1 Owners warrant that throughout the currency of this Charter Party the vessel shall be fully covered by leading insurance compa-nies/International P&I Clubs acceptable to the Charterers against Hull and Machinery, War and Protection and Indemnity Risk.[41.2]…41.3 Insurance full style and valueHull and machinery: USD16,000,000 Lon-don, Norway and USA Markets”

Charterers argued before the High Court that Clause 41 formed part of a scheme in the charterparty requiring own-ers to repair any damage to the vessel dur-ing the currency of the charterparty which it would cost less than or up to the vessel’s insured value of USD 16 million to repair. In this case, charterers argued, the charter-party obliged owners to carry out the USD 9 million repairs to the vessel and the arbi-trator had been wrong to say that the char-terparty had been frustrated.

Owners asserted that Clause 41 was not intended as an allocation of risk which would displace the principles of frustration. Rather, the insured value was stated in the charterparty for charterers’ information to allow them to calculate the likely cost of any additional insurance premiums for which they were responsible.


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The High Court – allocation of risk of damage to ownersThe High Court approached the question by reviewing the terms of the contract to determine whether Clause 1 NYPE 1946 and Clause 41 of the “Kyla” charterparty amounted to an allocation of the risk of damage up to the vessel’s insured value to owners. In its judgment issued in De-cember 2012, the Court held that it did. The Court held that the presence of the warranty at Clause 41 made it impossible for owners to say that what had occurred (namely a casualty giving rise to repair costs USD 7 million less than the vessel’s insured value) amounted to something radically different to the performance of the con-tract which had been contemplated when the contract had been concluded. The usual principle that insurance is irrelevant to the charterparty contract had been displaced by Clause 41.

In reaching this decision, the Court said that the numerous practical difficul-ties which such an allocation of risk would cause to owners (such as having to fund the repairs themselves if insurers were slow to pay or if the vessel’s mortgagee bank were loss payee) were to be disregarded. It is noteworthy that, in the case of the “Kyla”, owners did not receive payment from hull and machinery underwriters until over a year after the incident. Owners should bear in mind that other concerns, such as the age of the vessel, should also now be consid-ered irrelevant.

What does the decision mean for shipowners?It is likely to come as a surprise to shipown-ers that reference to a chartered vessel’s hull and machinery insured value in the charterparty could affect their obligations to charterers in case of serious damage to the vessel. Clauses containing a continuing warranty to insure at a specified insured value (like Clause 41 of the “Kyla” charter-party) are common. The Court’s decision

Re-defining the scope of an owner’sobligation to repair – The “K YLA”

in this case makes clear that, where a char-terparty contains such a clause, an owner cannot declare a charterparty frustrated where the cost of repair will be less than the vessel’s insured value. Instead, the ship-owner must repair the vessel and continue to perform the balance of the charterparty, even if the repairs cost more than the re-paired vessel will be worth such that no prudent owner would otherwise undertake the repairs.

The decision creates uncertainty, as the circumstances in which the vessel’s insured value will be taken as the benchmark for frustration are not clear. It is possible that the “Kyla” principle will apply in every case where there is a continuing warranty to insure and charterers are aware that the vessel’s H&M insurance is likely to be on an insured value basis, even where the ves-sel’s insured value is not stated in the char-terparty.

ConclusionShipowners should be cautious when they see a continuing warranty to insure in a proposed time charterparty which speci-fies the vessel’s hull and machinery insured value. In the event of a casualty, an owner might find that as a result of the warranty, he has to carry out commercially uneco-nomical repairs to a vessel – even one near-ing the end of her trading life.

Concerned shipowners should take legal advice on any such proposed clause and consider with their lawyers whether the wording of the clause can be amended to avoid such an outcome. In any given case, the question of whether a clause or clauses amount to an allocation of the risk of dam-age to the vessel to an owner will depend on the construction of the charterparty as a whole.

The owners of the “Kyla” are seeking to appeal the decision. Simon Chumas and Jenny Salmon acted for the owners in this case.

PHo

toS: B

y cou

rtesy of Kyla Sh

ipp

ing

Co Ltd


10

Limitation | Forum shopping

After a major casualty, such as a collision, you in most cases look to bring the matter to a jurisdic-tion more favourable to you. This is often a quick affair where each side scrambles for an advantage. The main reason being that there are different limitation regimes around the world capping the amount of the overall losses. The nature of each loss which is subject to limitation is also different from country to country. In this article, to illustrate the dynamics of these aspects, we present a somewhat simplified “voyage plan” applied to an imaginary scenario.

Lucky A Happy B

USD 5 million (repair costs, loss of hire and other conse-quential losses)

USD 15 million (for a total loss of ship and other con-sequential losses)

USD 50 million (costs for wreck removal)

USD 5 million USD 65 million

Convention

Ship

1957 1976 1996

Lucky A 2,333,450 SDR (about usd 3.5 m)

5,718,500 SDR(about usd 8.6 m)

13,700,000 SDR(about usd 20.5 m)

Happy B 1,133,390 SDR(about usd 1.7 m)

2,922,500 SDR(about usd 4.4 m)

7,000,000 SDR(about usd 11.5 m)

The case scenarioTwo ships, Lucky A and Happy B, collide while both in ballast. Both ships suffer substantial damage and Happy B sinks as a result of the collision, ultimately becoming subject to a wreck removal order. Fortu-nately, all crew members are unharmed and there is no apparent pollution.

The claimsIt is important in collision claims to get an early assessment of the nature and quan-tum of your claims. By the same token, and leaving aside liability for the moment, you should make a similar assessment of the other ship’s claims.

It should also be considered whether there could be any other potential claim-ants. In the above scenario, there was no cargo on either ship and no pollution. How-ever, the authorities will normally require Happy B to remove the wreck rather than removing it themselves. As a result, the claim for the costs of the wreck removal will likely be in the form of an indemnity claim from Happy B against Lucky A in propor-tion to the latter ship’s liability in the colli-sion. There may also be an order to remove any remaining bunkers and other pollutants on board (which can translate into consider-able costs, perhaps under SCOPIC) but this will not be considered further in this article.

Let us assume the above, very much sim-plified, claim figures. (table 1).

Limitation of liabilityOnce there is a rough idea of the likely claim amounts you should be conscious of whether limitation of liability will come into play. There will probably be a first look at this before any further detailed assess-ment on the collision liability between the ships is carried out.

The concept of limitation is an impor-tant aspect of maritime law. The limita-tion regimes are based on Conventions on Limitation of Liability for Maritime Claims (LLMC), which are mainly the 1957 LLMC and the 1976 LLMC or the 1996

Table 1.

Table 2.

Forum shopping in collision claims

KnoW youR LImItS

Mats Segolsonsenior Claims executive, team piraeus


11

Protocol to LLMC 1976. The conventions can be acceded to, and implemented into national law, differently from state to state. IMO provides a general overview on its website of the status of the conventions in individual countries. There will also be an increase of the limits under the 1996 Proto-col but this increase is not yet in force.

The Conventions list what types of claims are capable of being subject to limi-tation (“limitable claims”). In principle, limitation applies to all limitable claims arising in connection with one particular incident. Some claim items, however, typi-cally claims for pollution and salvage are usually not subject to this limitation. Limi-tation is calculated on the basis of a vessel’s gross tonnage (“GT”) but be wary of using the correct GT figure as it varies depend-ing whether you apply the 1957 or the 1976 Convention. The amount of limitation is expressed in special drawing rights (“SDR”) where presently 1 SDR equals roughly USD 1.50.

Limitation can be used as a defence to the claim on another party (where there are just the two parties involved) but it can also be used in a “global” sense, i.e. to limit an owner’s liability to all claims that might arise from multiple claimants in cases in-volving, for example, damage to another

Forum shopping in collision claims

9 continues on page 12

ship and her cargo. The size of the limita-tion fund is calculated in the same way but with global limitation, of course, the fund is actually established in court and admin-istered by the applicable procedures of that court.

In the above scenario, there are no per-sonal injury claims and the calculation would be for property claims only. In case there had been personal injury claims those claims would have been treated separately and calculated differently for the purpose of limitation. Assuming that Lucky A has a GT of 35,000 and Happy B a GT of 17,000, the limitation amounts would, re-spectively, for each ship and for the three above limitation regimes, be as illustrated above (table 2).

Liability for the collisionWho is likely to be the receiving party and the paying party of the two ships? It is im-portant to remember that in many cases the collision liability between the ships will often have a significant impact on who will be on the paying and receiving end, in particular when the claim amounts on each side are more comparable.

An assessment of the collision liability is made based on the facts and circumstances of the collision. A study of the vessel’s voy-

age data recorder (“VDR”) and other con-temporaneous evidence should give a rela-tively good idea of this liability.

Let us assume that liability is 60/40 in favour of Happy B. The liability apportion-ment is applied to the claim amounts of each ship. In the above example Happy B is liable for 40% of Lucky A’s loss of USD 5 million, i.e. USD 2 million. Lucky A, on the other hand, is liable for 60% of Happy B’s loss of USD 65 million, i.e. USD 39 million. The two claims are then set-off leaving a balance of USD 37 million to Happy B. Of course that sum would be capped by any limitation Lucky A may rely on. This is how liability and limitation are normally allocated and applied but it is ad-visable to be aware that under some legal regimes there may be a somewhat different approach, so do not always assume that the process will always be the same.

It should also be considered whether limitation against either party can be bro-ken but suffice here to say that in the vast majority of cases you cannot break limita-tion. Therefore, it is clear that Lucky A will be the paying party and the question is just how much Lucky A has to pay given limita-tion.

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12

Limitation | Forum shopping

9 continues from page 11

The preferred limitation regimeLucky A will be on the paying end and will, therefore, attempt to limit its liability to Happy B to a smaller amount in a coun-try applying the 1957 LLMC or the 1976 LLMC. Lucky A will also attempt to find a jurisdiction that allows for limitation of the wreck removal claim and together with all other property claims.

Happy B, on the other hand, will look for the exact reverse position. Happy B will consider a limitation regime preferably in a 1996 LLMC country, which would allow it to recover as much of its claim as possible. Happy B will preferably also look to com-bine this with a jurisdiction where either limitation does not apply to its indemnity claim for the wreck removal costs, or where such limitation is treated in a separate cat-egory with, in effect access, to an additional fund for the same amount.

Had cargo been on board and damaged that may, suffice here to say, also have in-fluenced the choice of jurisdiction to an extent. The same may apply in case of any personal injuries. The race to establish juris-diction is now on.

Identify suitable jurisdictions –a checklistNow you have a good idea of what limita-tion you are looking for, you should next consider accessing such limitation in an ap-propriate jurisdiction. A claim arising from a collision normally creates a maritime lien for which you can arrest a ship and, thereby, also create jurisdiction. You may also consider constituting a limitation fund accordingly. Unless security has, or can be agreed on separately, a ship arrest will also give access to security for your claim.

It is important to remember that the preferred choice of jurisdiction depends on the unique circumstances of each case, each with its own factual matrix.

18 “way points” to consider

1 Where is your own ship currently berthed or anchored? If its position immediately after the collision puts it in a position where it can be arrested in an unfavourable jurisdiction then consideration needs to be given whether she can be moved, even a short distance, to remove that risk.

2 Where will the ships call next?

3

Will either ship call at an intermediate port for repairs?

4

Will your ship call at a suitable jurisdiction where a third party (like cargo interests) may or may be induced to arrest your ship?

5 If you cannot, or prefer not to arrest at the next port of call, what is the future sched-ule or trading pattern of either ship?

6

Consider a sister ship arrest or associated ship arrest (e.g. in South Africa) if possible.

7

Consider filing a writ in rem against the opposing ship in a suitable jurisdiction be-fore its arrival there. This may give you an advantage on the basis of “first come, first served”.

8

Is there a “natural forum” for the collision claims? Did the collision occur in territo-rial waters of any state and what nationality are the parties are obvious questions?

9

What is the quality of the legal system where you consider obtaining jurisdiction? You also need to consider foreseeability, costs and time in this respect.

10

If you are likely to be the paying party you could seek to secure jurisdictions which are known to be slow in progressing litigation for obvious tactical reasons but, at the same time, consider how they assess collision lia-bility - not all countries apportion on a per-centage basis in increments of say 5%. In some countries the division is much more crude i.e. 50 / 50 or 100 / 0 which could, ultimately, end up being a poor option.

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Are there any grounds for breaking limita-tion and if so where is this best tried? It is generally very difficult, if not virtually im-possible, to break limitation but it may be slightly easier under the 1957 regime.

12

Consider attempting to establish jurisdic-tion by other means than a ship arrest, for example where the owning company is reg-istered or where you already have dispute with say a cargo interest or a sub-charterer.

13

If the other side has already purported to establish jurisdiction do you need to make an appearance in that jurisdiction to pre-serve your rights and/or can you file an appearance under reservation to keep your other options open?

14

Even if the other side has already obtained jurisdiction, and constituted a limitation fund in a certain country, is this recognised in other jurisdictions? Some countries (e.g. China) have not signed up to any of the limitation conventions but have only adopted their own version of the conven-tion limits. As a result, other states may not be bound to recognise a limitation fund in China, as they otherwise would under the Conventions (compare with Article 13 of LLMC 1976).

15

If the other side has started an action al-ready in one country and you are contem-plating starting proceedings elsewhere, will the other country likely refuse jurisdiction in these circumstances as matter of interna-tional comity (i.e. the desire to avoid con-flicting decisions of the courts of different countries)? Clearly, there is little point in spending time and costs pursuing an alter-native action in such jurisdictions.

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When considering another jurisdiction in points (14) and (15) above, assess the inher-ent risks in parallel, or concurrent, proceed-ings. In addition to the challenges of forum non-conveniens arguments, proceedings in one jurisdiction may be stayed in favour of the other jurisdiction. Findings in either jurisdiction may potentially, but not nec-essarily, also create estoppels in the other jurisdiction.

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Are the likely competing jurisdictions in EU countries? If so, consider obtaining a limitation decree or constituting a fund in


13

the Swedish Club Academy | MRM

Martin Hernqvistmanaging directorthe swedish Club Academy Ab

FollowInG the first MAS seminar conducted in Hamburg, Germany on 6 No-vember, 2012, the Mariner Attitude Survey will soon be in full swing as more compa-nies are becoming interested in knowing more about the survey. Adding to that, two companies from Northern Europe have al-ready expressed their interest in taking part in the MAS project, and one company has already signed up.

An important feature of the survey is the opportunity for participating companies to suggest additional questions that are relevant to the company and its operations,

which will then be integrated into the sur-vey. The Swedish Club Academy ensures that taking part in the survey will require minimal effort from the shipping company, as it is our belief that having an anonymous survey conducted by a third party will ensure far more honest answers from the respondents than an internal survey can. After the survey is completed, there will be a data evaluation with recommendations of the appropriate measures to be taken.

There have been two seminars already conducted on the survey this year, the first on 28 February in Manila, and the second in Singapore on 6 March. Both seminars were enthusiastically received by representa-tives of the attending shipping companies.

For more information about the mariner Attitude survey, please contact the Academy’s project Coordinator Lorraine m. hager on +46 31 638 492 or email [email protected]

Yuqi YaoAge: 24Title: Project AssistantYuqi comes from the city of Wuhan in central Chi-na. She came to Sweden in 2010 to study at Blekinge Institute of Technology and graduated with an M.Sc. in Industrial Economics and Management, in the summer of 2012. Yuqi also has a BA in Economics and Arts from Hubei University, Wuhan.

In her spare time, she likes to translate Japanese manga to Chinese and to edit

videos. She also loves travelling as she believes that walking on the road can give a person more knowledge than simply reading in a room.

As Project Assistant, Yuqi’s main tasks will include translating texts from English to Chinese, establishing new contacts and relationships in the Chinese maritime in-dustry and assisting with the production and editing of videos for the Academy. She will play a very important role as contact person and interpreter between the com-pany and its Chinese contacts.

new Licensees since last tritonharren & partner ship management Gmbh & Co. kG, bremen, Germany

NttA Nautical technical training Academy bv, Groningen, Netherlands

sAmAJu Academy, Åstorp, sweden

shanghai Costamare, shanghai, China

The Academy invitescompanies to sign up for the Mariner Attitude Survey (MAS)

The Swedish Club Academy’s new team member

the preferred EU country since between EU countries, and under EC law, the other EU member states are in principle obliged to recognise each other’s judge-ments (see the Seawheel Rhine, a Dutch Supreme Court case dated 29 September 2006).

18

As an alternative, should you amicably agree law and jurisdiction and the terms of limitation with the other side? Ami-cable means to resolve a dispute is often preferred and may save substantial sums in costs. However, when negotiating law and jurisdiction do keep in mind that, in most common law countries, limitation is regarded as being part of the “procedural“ law as opposed to the “substantive” law. Procedural law is considered to be subject to the lex fori or the law of the Court. So, if you agreed for the case to be heard in say jurisdiction “A” but subject to the law of country “B” then you would have po-tentially agreed to the limitation regime of country A. That would be a problem for you if you were expecting to be the receiving party and country A applied the LLMC 1957 limits instead of country B’s LLMC 1976 or 1996 Protocol limits which would be much higher.

Concluding remarksDo not lose sight of the bigger picture when assessing limitation and suitable jurisdictions for your collision claim. A successful outcome may depend on more than limitation and jurisdiction. If the early indications on claims and liability bring limitation into play then it is a driv-ing factor and you need to consider your options early. However, very often it is the case that the options in terms of securing a favourable jurisdiction are limited (by trading patterns and the like) and there are inherent risks in pursuing actions in multiple jurisdictions. Thus, races for lim-itation and suitable jurisdictions can easi-ly become a lawyer’s paradise and it makes sense to explore at an early stage with the other side an amicable agreement on law and jurisdiction. If appropriate, perhaps this can be coupled with some variation on applicable limitation. In any event, know your limits as you plan ahead!


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the Swedish Club Academy | Out and About with MRM

The Mariner Attitude Survey was launched in Hamburg, Germany with a 3-hour seminar. In this photo,

Fifteen new MRM Workshop Leaders and one previously certified Workshop Leader attended the seminar in Manila hosted by Wallem Ship Management. Participating companies represented in the photo with Martin Hernqvist are Wallem Ship Management, Anglo-Eastern Ship Management, APL Co Pte Ltd, BSM Crew Service Center, C-Man Maritime Inc., Consolidated Training Systems Inc., GPN International Maritime Training Center Inc., Marlow Navigation Training Center, OSG Ship Management, Wavelink Maritime Institute, ABB Marine Academy, IDESS Maritime Centre (Subic) Inc., Wärtsila Land and Sea Academy, Pacific Basin Shipping, Besiktas Likit Tas. A.S, European Training & Competence Centre, Louis Dreyfus Armateurs, OSM Crew Management, OSM ROHQ, and Rickmers Reederi GmbH & Cie. KG

Participants of the first MRM WSL training for 2013, in Gothenburg carefully listened to the presentations being given during a session. The participating organisations were Harren & Partner GmBh & Co. KG, Northern Crewing Services GmbH & Co. KG, Nova Contract, Norwegian Maritime Officers Association, NTTA Nautical Technical Training Academy BV, Star Cruises, SAMAJU Academy and Vestfold University College.

Closely following the MRM WSL training in Manila the week before, a trip to Singapore meant another MRM event for the Academy. Here, Martin Hernqvist (far right), is accompanied by representatives from Wallenius Marine, Wallenius Wilhelmsen Logistics, Wavelink, STET, Singapore Maritime Officers’ Union and AET Shipmanagement.

Piraeus, 23-24 October 2012

An international Workshop Leader training event in Piraeus, Greece at the end of October. Participants from left to right: Zhang Hongnan of Shanghai Costamare Ship Management, Bernd Ulbricht of HPS Hamburg, Theodora Stavropoulou of C.M.M. Inc., Elias Andersson of Chalmers University of Technology, Martin Hernqvist of The Swedish Club Academy and Konstantinos Bourliaskos also from C.M.M. Inc.

Hamburg, 6 november 2012

Manila, 12-13 November 2012

Gothenburg, 12-13 February 2013

Singapore, 5 March 2013

Subsequent to the MRM WSL training, the afternoon of March 6th was dedicated to a MAS seminar with many representatives of the Singaporean shipping community. The following companies attended: AET Shipmanagement Singapore Pte Ltd, Apex Ship Management Pte Ltd, Bourbon Offshore Asia Pte Ltd, BW Fleet Management, China Navigation Pte Ltd, Columbia Shipmanagement (Singapore) Pte Ltd, DDW-PaxOcean Shipyard Pte Ltd, Epic Ship Management Pte Ltd, Executive Ship Management Pte Ltd, Goodwood Ship Management Pte Ltd, Hong Lam Marine, IMC Industrial Group, JR Orion Services Pte Ltd, Maritime Education and Training Services Pte Ltd, MOL Ship Management (Singapore) Pte. Ltd, MSI Ship Management Pte Ltd, Norgas Carriers Pte Ltd, NYK Shipmanagement Pte Ltd, Sentek Marine & Trading Pte Ltd, Singapore Maritime Officers' Union, STET Maritime and Wavelink, Toll Logistics (Asia) Pte Ltd, Wallenius Marine Singapore, Wallenius Wilhelmsen Logistics, Wavelink Maritime Institute, Western Shipping Pte Ltd, VLK Traders (S) Pte Ltd, World Tankers Management Pte Ltd.


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the Swedish Club Academy | Out and About with MRM

The MRM WSL network in India has expanded with an additional 14 new MRM WSL licensees who participated in the 2-day seminar at the Holiday Inn Hotel, Mumbai International Airport. A refresher course on the second day was attended by one of the licensed MRM Workshop Leaders based in India. The participating companies were: Bibby Ship Management, Fleet Management Training Institute, Kuwait Oil Tanker Company and SEASPAN Crew Management India Pvt Ltd.

To conclude 2012, Spain’s first MRM training provider held a Workshop Leader training event. Ten new MRM Workshop Leaders from Centro Jovellanos completed the 3-day MRM WSL training under the supervision of Martin Hernqvist at Gijón, Spain.

Another successful MRM WSL training was conducted in the Philippines just after 3 months from the last run in November 2012. Martin Hernqvist (centre) is joined by the participants coming from Bernhard Schulte Shipmanagement, OSM, ST Education & Training Pte Ltd, Veritas Maritime Training Center Inc, IDESS Maritime Centre (Subic) Inc., Pacific Basin Shipping (HK) Limited and Southfield Maritimes Training Foundation Inc.

Buxtehude, 7 november 2012

The Swedish Club Academy team was hosted by NSB Academy at their headquar-ters in Buxtehude, to give a Workshop Leader Seminar. NSB is now Germany’s fifth train-ing provider of the Maritime Resource Management course. Following the seminar, NSB now have six qualified MRM Workshop Leaders.

Mumbai, 20-21 November 2012 Gijón, 11-12 December 2012

Manila, 27-28 February 2013

Singapore, 6 March 2013

Managing Director Martin Hernqvist addresses the gathered representatives of Hamburg’s maritime industry.


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thE IntERnAtIonAl Maritime Bureau Piracy Reporting Centre (IMBPRC) reported worldwide incidents of more than 300 attacks or hijackings of seagoing vessels as of December 2012(www.icc-ccs.org). These figures show the continuous threat to the shipping industry by piracy and the need for shipping nations to protect their shipping community. This has been acknowledged by the German government, and the German parliament (Bundestag) resolved an Act on 13 De-cember 2012 to permit armed guards on board German-flagged vessels that have been licenced in a specific approval pro-cedure. Whereas originally the new Act would have become effective from 1 Au-gust 2013, this date will now be suspended to January 2014. The delay has resulted from difficulties in agreeing on the specific requirements that the security companies must fulfil. These requirements will be published in a separate regulation prior to the effective date of the Act.

Two aspects of the lawThe new law contains two aspects, one covering the conditions and procedures which have to be followed in order to permit armed guards on board German-flagged vessels and the other one dealing with an amendment to the German law on weapons. The first aspect, the licens-ing procedure, required an amendment of the German Trade, Commerce and In-dustry Regulation Act (Gewerbeordnung (GewO)). The Federal Authority for Eco-

German-flagged vessels guarded by private security companies

Jan-Erik Pötschke joined Ahlers & Vogel in 1999 and has been a partner since 2002. He is a member of the German Association for International maritime Law (Deutscher Verein für Internationales Seerecht), the German Association for transport Law (Deutsche Gesellschaft für transportrecht e.V.), the Ger-man/Singapore Legal Association (Deutsch Singapurische Juristenvereinigung e.V.) and the transport Law Commission of the Inter-national Association of young Lawyers (AIJA).

Dr Jan-Erik PötschkeLawyerAhlers & vogel, hamburg

cludes nautical and technical knowledge, identifying and evaluating risk situations, de-escalation techniques, fire fighting knowledge and – to a certain extent – legal knowledge.

It is not expected that the training or examination of the personnel will be veri-fied by the German authorities. The focus will be on disclosure of documents and information about the internal organiza-tion and manuals of its procedure regard-ing planning, implementation and conduct of operations at sea in case a vessel is at-tacked. Further details will be known once the regulations are published, which is ex-pected to be in April 2013.

The security company must have third party liability insurance cover, cover-ing claims for personnel injury, damages and consequential damages which the shipowner or third parties, in connection with the implementation of the security measures, may sustain. Once the licence is granted by the BAFA and the Federal Po-lice, the Bundesamt für Seeschiffahrt und Hydrographie (BSH) will be informed and, upon application by the shipowner, will approve an amendment to the best management practices on board and the manning of the vessel.

ValidationThe licence will be valid for two years only. The reason for the time limit is the lack of factual possibilities for the BAFA to check the services of the armed guards on board seagoing vessels. Hence, the govern-

Piracy | Armed guards

nomics and Export Control (Bundesamt für Wirtschaft und Ausfuhrkontrolle (BAFA)) in corporation with the Federal Police (Bundespolizei) is in charge for the licensing procedure. The specific provision dealing with the licensing of security com-panies is § 31 GewO.

RequirementsThe requirements which a security com-pany has to comply with will focus on the company’s profile and structure. The company has to show that its personnel have the knowledge and skills to act as armed guards on board a vessel. This in-


17

ment has decided to limit permission to two years and will then, if requested, evaluate the situation before extending the licence for another two-year period.

Application for a licenceSince only very few security companies of the 160 -180 companies worldwide are domiciled in Germany, it is expected that non-German companies will apply for a licence with the BAFA and that the documentation required by the BAFA will mostly be filed in using English. The authorities will be prepared to deal with this, however they may insist on some of the documents being translated into German.

Another interesting renewal is that, provided the security company consents to it, the BAFA will list its name on its website. The intention is to create transparency and support the shipping industry with a list of licenced security companies.

Permission for weaponsThe German law on weapons (Waffeng-esetz (WaffG) had to be amended to provide for an unanimous procedure for granting permission for weapons to be used on board German-flagged vessels,

German-flagged vessels guarded by private security companies

independently of the domicile of the secu-rity company. The WaffG is also applicable to weapons and ammunition used for pro-tecting seagoing German-flagged vessels (§ 28 para 1 WaffG). It has also been ruled that the permit required by the German weapons law is linked to the validity of the licence of the security company.

Furthermore, there is no longer a re-quirement to obtain a separate permit to bring weapons or ammunition into the territory of Germany, i.e. weapons and am-munition which will be used on board a German-flagged vessel can be brought on board that vessel without an additional separate permit. The local law in the port states where the weapons are brought on board has, however, to be followed by the security companies.

The authority for weapons in Hamburg will be in charge of the permits for the use and possession of weapons and ammuni-tion on board. The kinds of weapons which are not allowed to be used are weapons of

war. This means that, for ex-ample, machine guns, full and semi-automatic guns or hand grenades are excluded.

The piracy problem will not be resolved by thisThe amendments to the German GewO and WaffG do not deal with the question of what kind of action is legal to defend an at-tacked ship. According to German criminal law (StGB), the scope of activities of armed guards on board

is limited to the general rules on self-de-fence and help in need. Armed guards do not have more legal rights in defending at-tacks of pirates than any other crew mem-ber, although they have different means.

The attack on a vessel by pirates is a self-defence situation, which would allow armed guards to use their weapons but they need to choose the mildest available remedy to stop the attack, which will be a decision made about the individual case. Hence, the licence for armed guards is not a “licence to kill” but one to effectively protect the crew and shipowner against pi-racy and other attacks by qualified experts. The piracy problem as such, however, will not be resolved by this.

What is the newpositionof German Law?


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PIRACy | Somali Piracy today

SoMAlI pIRAcy has been the major threat to interna-tional shipping since 2007, but it can be traced back to 1994, when the first hijacking for ransom took place. The hijacked vessels and the ransoms paid have been an almost daily part of shipping life and in even in the international media it has played a significant role. At one point almost 1,000 seafarers were held for ransom on the coast of Somalia.

2012 saw a dramatic reduction in Somali pirate activity with attacks dropping from 214 in 2011 to 50 during 2012. Of these 50 the vast majority (46) occurred during the first part of 2012, while in the second half only four incidents took place. By the end of 2012 Somali piracy was back to 2007’s levels.

So what is the explanation for this drastic reduction? Some people have suggested that it was due to the merchant ships arming themselves with private armed guards. As we will see below, it is not quite as simple and there are not one or two single decisive factors, but actually a range of param-eters that together have decided the levels of Somali piracy. These can be formulated as follows:

PIRATES:1. Capabilities. Vessels and equipment as well as the

overall infrastructure of pirates.2. Intentions. Tactics, strategy and business objective

of the pirates.3. Opportunities. Chances for taking advantage of

merchant vessels’ vulnerabilities. Return on invest-ment for Somali pirate investors and alternative in-vestments and business options. Politico-economic developments in Somalia that are shaping the situa-tion on land and thereby the opportunities.

MERCHANT MARINE:1. Capabilities. In this case elements such as hardening,

speed, vessel type, use of PMSCs 2. Intentions and opportunities, such as market rates,

charter, freight and fuel cost. 3. Trading routes defined from (2) and (1).

NAVIES:1. Capabilities. Number of vessels and helicopters de-

ployed. Sensor effectiveness. 2. Intentions. Types of operations, ranging from show-

ing the flag to offensive onshore attacks. 3. Opportunities. Options for exploiting pirate vulner-

abilities as well as political and military signalling. Rules of engagement.

4. Political and financial realities and the limitations they impose.

ENVIRONMENT: 1. Geography, ocean currents, weather.2. Local patterns of maritime activity.

PiratesThe Somali pirates’ level of activity has declined since early 2011. This is mainly due to the increasing difficulty in hi-jacking ships they have encountered and less due to onshore changes in their operating environment. The number of pi-rates intercepted, captured or lost at sea has increased.

The number of ships being hijacked has fallen, making the venture less tempting for the rank-and-file, leaders and financiers. There are, however, still active syndicates. These groups have seen a fall in their success rates, capturing fewer

SoMAlI pIRAcy– past, present and future

Hans Tino Hansenmanaging director & Ceorisk intelligence, vedbaek, denmark


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SoMAlI pIRAcy– past, present and future

Incidents per sea zone, 2008-2011

9 continues on page 20

PHo

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S Navy

mozambique C

somali basin

indian ocean

ships per attack and facing disruption by Naval operations quicker than previously. The main component in the fall-ing success rate has been the shipping business and Naval counter-piracy strategy. The low-tech capabilities of the pi-rates are still there and when pirates have faced a poorly pro-tected ship in the right circumstances, they are successful in employing their tried and tested, low-cost methods. Where

pirates have successfully hijacked a vessel, the outcome (in terms of ransom) has been equal or higher to what has been previously obtained.

The pirates’ investors have seen their return of investment fall, both in actual cases and in potential return of invest-ment. This fall and relatively increasing returns on other more secure criminal or legal investment has had a profound effect on investment in piracy. Since the cost of entry into piracy is low and all the resources are easily available along the Somali coast, the pirate investors can quite quickly re-turn to piracy should the situation again change in their favour.

In summary, pirate activity has declined, reducing the overall likelihood of occurrence. Their capabilities are in-tact – particularly because they do not need much to carry out attacks – but they are currently facing a more adverse operating environment and have not adapted their tactics to overcome this.

Merchant marineSince 2008, merchant vessels have increasingly deployed better security measures, including both toughening these up and procedures through Best Management Practices (BMP). Finally, the use of armed guards has been common since late 2010.

The most pressing issue for shipping companies recently

Arabian sea/Go oman

Gulf of Aden

red sea/bAm


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has been cutting costs. Faced with an historically long spell of de-pressed freight rates and increasing bunker rates, companies are increasingly looking to improve operating margins. This is done increasingly by “slow steaming” and by reducing deviation around areas of known pirate activity, when an armed team is onboard.

NaviesThe Gulf of Aden is well covered by Naval assets, whereas the Ara-bian Sea and Indian Ocean are less covered. Naval operations di-rectly against pirate assets in the area are arguably one of the most influential factors in the decline of pirate attack occurrences. The counter-piracy operations have taken pirate attack groups out of the equation before they could even enter the attack areas. With a force level of approximately 25-40 Naval vessels in the area at any given time, only a handful of ships are actually available for counter-piracy operations along the Somali coast. The rest are being replenished, doing national or World Food Program escorts and monitoring the IRTC. It appears that Naval forces have become more effective in monitoring and cutting off active pirate attack groups after their first attack. This entails shorter “life spans” of PAGs and a reduction in total attacks carried out.

Budget cuts in European countries have already led to some Na-vies scaling back. It is likely that more will follow and since the escorting and monitoring of the IRTC has priority, the counter-piracy operations against the Somali east coast will suffer.

EnvironmentGeography is a fixed parameter, but various areas provide different natural boundaries or opportunities to the pirates and the level of their impact on pirate operations will depend on pirate capabilities

and tactics. The weather and currents arelargely stable and change according tomonsoon and transitions periods. In general, weather and currents can be seen as “everything equal”, but sometimes the monsoon pe-riods are less harsh in certain areas and therefore give better oppor-tunities for small boat operations.

Local traffic patterns play a role in as much these may include other armed criminals such as smugglers or fishermen that are armed due to fishing area disputes, where both types may not be positive to having pirate skiffs in the middle of their operations. At the other end, small boat traffic may be favourable to pirate opera-tions as it increases the possibility of blending in and hiding. Even the use of hijacked dhows as motherships provides an opportunity to hide at dhow anchorages, which may lead to opportunities for attacking merchant ships at anchor such as the hijacking of the Fairchem Bogey in 2011.

ConclusionAs outlined above Somali piracy can be described via a number of parameters. These impact on the general level of threat and are dynamic over time. What contributes to a high risk today might gradually change. Three things in particular is interesting in this case: the societal situation in Somalia, the use of vessel protection and the naval presence.

Mogadishu, the capital of Somalia, currently experiences a bet-tered security situation. In the case that an economic and political improvement should also take place in Puntland and Galmudug State, piracy might be impacted. There is unfortunately no current signs of this happening in any significant way.

The use of BMP and armed guards have played a significant role in reducing the pirates likelihood of success. Although it has great-ly reduced the risk for the individual ships that have correct BMP measures and armed guards embarked, the use of vessel protection has not in itself lowered the likelihood of running into a pirate at-tack group. The pirates are being deterred over time by encounter-ing resistance and hardened ships and it has reduced the number of attacks in a gradual way. But it must be understood that there are still plenty of targets that are available to the Somali pirates.

So in that way, the naval presence has been the real important parameter for reducing piracy. By attacking pirate staging areas and intercepting pirate attack groups off the coast of Somalia, the naval presence has played a large role in reducing piracy close to its roots. Followingly, if the political decision makers look back at relatively peaceful 2012 and 2013 when making budget decisions, there is a risk that a reduction in naval forces will leave room for pirate ex-pansions once again.

Therefore, at least until the situation on land has improved, it is the task of the shipping community to maintain proper levels of security measures as well as making sure that politicians and naval commanders understand the importance of continued naval coun-ter-piracy operations in the Horn of Africa Area.

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PIRACy | Somali Piracy today

Incidents off India December 2011-12 (MaRisk by Risk Intelligence)


21

Anders Leissnerdirector, Corporate Legal

Legal | Update

EARlIER thIS yEAR Japan became the latest country to pros-ecute pirates. There has, however, been notable disinterest amongst states in bringing pirates to justice. Almost two-thirds of the overall prosecutions (185) have taken place in two countries only, Kenya and the Seychelles. On the occasions when other states have taken the lead, there is often a link between the vessel and the country, as in the case of Japan when the attacked vessel was a Mitsui OSK Lines tanker. There is however no legal obstacle for states to take action. International law treats pirates on the high seas as hostis humani generis – an enemy of all mankind – and as such they are prosecutable and punishable in any country. It is to be hoped that ongoing efforts made by the UN Office on Drugs and Crime to improve prisons in Somalia, Kenya, the Seychelles and Mauritius will facilitate the law enforcement of these ghastly acts.

Pirate attacks are declining On the same topic there was good news from the International Maritime Bureau the other week. Piracy on the world’s seas has fallen to a five-year low, with 297 ships attacked in 2012 compared to 439 in 2011. Worldwide figures were brought down by a huge reduction in Somali piracy in 2012 compared to 2011. No doubt the presence of armed guards onboard vessels, coupled with other measures, has contributed towards this positive trend, although it should not be forgotten there are still 585 mariners being held hos-tage at gunpoint worldwide.

Makeover of German Maritime LawGermany is in the process of updating its 150 year-old Maritime Code. Reportedly, the leading concept in the new Code, which at the time of writing is expected to become law any day, remains the Hague-Visby Rules, although there are influences from both the Hamburg and Rotterdam Rules. One novel feature is that the concept of mandatory liability provisions has been abandoned so the parties will have greater possibilities of making their own agree-ments. Needless to say, the new German Code is a sign that Ger-many does not believe in a universal acceptance and application of the Rotterdam Rules and it is therefore a hard blow against the sup-porters of those Rules generally. In addition, the German Law on

the Arrest of Vessels has been substantially amended with Dutch law being used as the role model and it will no longer be required a submit evidence of a claim to carry out an arrest. Presumably, Ger-many should now be added to the list of arrest-friendly places, for good or bad depending on whose side you are on.

Sweden publishes shipping action planThe Swedish government has published a shipping industry plan in response to grow-ing demands to save the country’s struggling maritime sector. Reportedly, the plan is short of substance but long on visions and it remains to be seen what concrete outcomes there will be. One contentious point is the tonnage tax

that the government has refused to introduce to date in contrast to many European states, although the door has not been completely shut. A solid (political) document in other words. More sanctions... Both the EU and the US have imposed a new round of sanctions against Iran (see Notice Board page 27). For us as an insurer there seem to be a particularly cumbersome provision in Section 1246 of the US Iran Freedom and Counter-Proliferation Act of 2012, imposing sanctions on any person (including non-US persons) that knowingly provide insurance for any activity that violates any US sanctions on Iran. The implications of this provision are, of course, very difficult to foresee, but clearly this is not an area where one should try to cut corners and we therefore constantly need to refine our procedures for control and compliance.

Maritime Labour Convention revisitedWe have previously reported that the question about whether costs for repatriating crew in cases of the shipowner’s insolvency should be included in P&I cover, was discussed by the boards of the P&I clubs. The position has now been clarified – the costs from 2013/14-policy year are included in P&I up to the clubs’ retention USD 9 million, but on a loan basis. The boards obviously found an elegant solution that addresses both state requirements for finan-cial backing and the concern for mutualising this controversial risk.

The long armof the law…

…stretches for pirates

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FD&D | London arbitration

Andrew Batessenior Fd&d Claims managerteam Asia

whEn A DISpUtE breaks out over the performance of a charter the natural ten-dency is to focus on who’s at fault. This might take place in circumstances where the member is in the middle of a chain - the innocent bystander so to speak. Thank-fully the majority of disputes settle before they get into arbitration and everyone walks away paying their own costs. On the other hand, back-to-back maritime arbitra-tions in London can last for years and the implications of costs awards can become just as serious as the underlying amounts at stake.

The belief that parties in the middle of a chain are ‘neutral’ is a dangerous as-sumption insofar as litigation costs are concerned. Yes neutrality might apply to the substantive issues but it is not the same with costs. A neutral middle party can po-tentially be faced with a huge costs liability and with no recourse action to make him ‘whole’. This article will focus on how to avoid one’s exposure to such irrecoverable costs.

The Arbitration Act The power of arbitrators to award costs is contained in section 61 of the UK Arbitra-tion Act 1996. They have power to award costs of the arbitration, which represents the successful party’s legal costs and the tribunal’s (and the institution’s) fees. It probably does not include the cost of ob-taining security, for example arresting a ship in a foreign jurisdiction.

Irrecoverable costs in London arbitration: th e solutions

Furthermore, as many readers will al-ready know, the costs payable to one’s rep-resentatives (lawyers and the technical ex-perts) is not ordered to be paid up 100% by the losing party. The reason is explained in section 63: the paying party is given ben-efit of the doubt as to whether those actual costs are reasonable and proportionate.

The conduct of the successful party can lead to a tribunal curtailing or, alternative-ly, enhancing the costs award. For example wrongly pleading part of a case, leading to wasted costs both sides; or denying any costs for two failed claims out of, say, five (known as ‘issue based’ assessment).

Costs don’t carry overBased on the principles outlined above the tribunal may determine the recover-able costs of the arbitration as it thinks fit. However it is not open to an arbitra-tor to make an order that a party in one arbitration must pay the costs of a party in another arbitration. Whilst the Arbitra-tion Act provides that the parties are free to agree otherwise (typically agreements

to consolidate two arbitrations, which are rare), in the absence of such agreement the tribunal only has power to award costs of the arbitration.

This was confirmed in the 1981 case of The Antaios, which is still good law today. That involved four concurrent arbitrations arising out of back-to-back charters. Each party who had been successful in one ar-bitration, but unsuccessful in the other, could not pass on liability for the costs he had to pay his successful opponent.

The implications Taking the familiar setting of two mari-time arbitrations based on back-to-back charters: an unsuccessful claimant head owner will only have to pay the nominal cost incurred by his head charterer in de-fending the claim since the head charterer has simply passed submissions up and down the line.

The true cost of defending the head owners’ claim has been incurred by the sub charterers, and they will be awarded substantial costs against the innocent head charterer. Yet the head charterer cannot pass that cost liability on the head owner, nor can he recover his costs of pursuing the sub charterers even though, but for the head owners’ actions, neither set of costs would have been incurred.

The solution The element of prejudice is obvious. So what can be done? The answer is for the

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FD&D | London arbitration

party in the middle to plead a separate cause of action in damages against (using the example above) the head owners for the sub charterers’ costs plus his own costs of pursing his claim. The general rule is that damages will be recoverable if a claimant establishes a breach of contract or duty (The Sargasso) and such losses (costs) were within the reasonable contemplation of the parties. Terms in a fixture recap contain-ing express warranties coupled with “BTB head charter with XYZ” might satisfy the reasonable contemplation test.

It is important to remember that the ordinary rules on damages apply. Looking at another litigation scenario: did party A’s (the defendant head owner) breach (a) cause party B’s (the middle party) costs liability to party C (the claimant sub char-terer)? (b) was the type of loss too remote? and (c) has party B properly mitigated?

These three rules interact and overlap. For example, the costs of an application by party B for security for costs against party C may be deemed to have not been caused by party A’s breach; or that it is not the type of loss which party A can reasonably contemplate because party C is a substan-tial entity who should not have to pay se-curity for costs in the first place. The loss is too remote.

What, when and why? Your lawyer should provide sound advice on tactics because they need careful con-sideration. Instead of defending a claim

Irrecoverable costs in London arbitration: th e solutionsshould a party in the middle simply have paid it and avoided the cost liability in the first place? Or should that party have defended it without passing it on? In The Vakis T the claimant owners brought an unsafe port claim against the head charter-ers, which the latter defended.

The head charterers also passed the claim on to their sub charterers. The head owners’ claim was however spurious. The arbitrators found that the true cause of the damage to the ship was in fact unseawor-thiness, and in the High Court Langley J rejected the head charterers’ claim for costs liabilities to the sub charterers because the commonsense conclusion was that the ef-fective or dominant cause of the loss was their decision to pass on a spurious claim.

Another example of a contested damages claim is seen in the 2012 case The Chada Naree. The arbitrators decided that a party in the middle was not entitled to recover damages for his own liability for costs in the arbitration above because he was not party to any arbitration with the head owners. He was merely party to an internal contract with another company in the same group, and that other company was party to the head charter. The tribunal held that there was no costs liability capable of being claimed as damages. The High Court reversed that decision on the grounds that all litigants in the chain had treated these two group companies as one, i.e. as ‘the disponent owners’; liability for the breach of the contract flowed down

the line of charters and the same breach gave rise to the same liability for costs as damages.

Other scenariosThere are other situations where costs can be claimed as damages and where good tac-tics can pay dividends.

Same parties, different deal: one in-stance is where the same parties are in-volved but the claimant is relying on a dif-ferent cause of action in a different forum.

This arises for instance where a claimant incurs cost defending a claim brought in breach of an exclusive jurisdiction agreement. In Union Discount v Zoller a New York suit allegedly in breach

of such an agreement was struck out. The general approach to costs in New York is that each pays his own costs. The claimant therefore went on to claim these costs in English proceedings based on breach of the jurisdiction agreement and the Court of Appeal duly awarded damages.

Member’s management time: costs as damages can also include managerial ex-penses incurred by a party in dealing with the problems caused by a breach. The main consideration is the dominant purpose: if the purpose was preparation for litigation then the expenses can only be recovered as litigation costs, not as damages. If say on the other hand management commissioned an expert’s report for the purpose of main-taining the vessel’s class, without a view to litigation, then both management time, and the cost of the report, may be recover-able as damages. The line between costs and damages can be hard to draw but, none-theless, it might pay off if members record their management activities for appraisal further down the track.

Conclusion The above shows us that there are many permutations of litigation and the cost consequences which can result informs us-ers of London arbitration to think ahead carefully about those consequences as they examine the underlying merits of the dis-pute. The rewards and savings are there but achieving them owes everything to good case management.


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Club Information | Notice Board

The Eider case– a satisfactory outcomethE clUb InSURED the vessel, the Eider, a bulk carrier, for P&I insurance. The Eider went aground at the port of Antofa-gasta in Chile on 31 October 2005 and spilled about 127 tons of oil, including heavy fuel oil and diesel oil and caused pol-lution stretching for 7 miles along the coastline. A Pool claim was made.

An extensive clean-up operation followed and took over three weeks to complete. The Club paid clean-up costs of around USD 5,000,000. Numerous groups of people associ-ated with marine interests in the region filed claims against the ship and the shipowner. The ship was arrested and the owner and master of the ship were fined.

The Club set up a limitation fund pursuant to Chilean law of USD 26,000,000 in local currency by way of a Club Letter of Undertaking in the Court of Antofagasta against all the claims and settled the fines on behalf of the owners to release the vessel from the arrest.

The Eider sailed from Antofagasta after some temporary underwater repairs were carried out. The total gross claims amounted to USD 238 million.

After long, hard settlement negotiations and protracted court proceedings for seven years through the Court of An-tofagasta, the court of first instance, Court of Appeals and the Supreme Court, the last claim for environmental damages was finally dismissed by the Supreme Court of Chile, the highest court in the country.

This case came to an end with the landmark ruling of the Supreme Court. The Club’s local lawyer and correspon-dents worked hard and effectively, and achieved a satisfactory outcome. The case cost the Club about USD 9,000,000.

Environmental salvageovER thE pASt tEn yEARS, the International Salvage Union (ISU) has pursued that salvors should be entitled to greater remuneration to better reflect the efforts made by them to minimise damage to the environment.

Discussions have been between the industry stakeholders via the offices at Lloyd’s Salvage Group, but have not led to a consensus to amend the current Lloyd’s Open Form (LOF)

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regime. Another level of discussion has taken place to make a change to the 1989 salvage convention, which was up for re-view at the Comite Maritime International (CMI) conference at Beijing in October 2012.

The outcome of the discussions at the conference did not support the proposed changes to the 1989 salvage convention as put forward by the ISU, except for widening the geographi-cal definition of damage to the environment in article 1 (d).

Bearing in mind the recent discussions about exposure to the insurance industry following the two recent marine casu-alties, Costa Concordia and Rena, it is likely that the debate about SCOPIC funding and wreck removal may have an ad-verse effect on future discussions about enhanced compensa-tion under LOF or changes to the convention.

Onerous port conditions and P&I coverthERE ARE An IncREASInG number of ports’ Condi-tions of Use wordings being submitted to us and other clubs for consideration. These conditions occasionally contain oner-ous, not to say unreasonable, provisions imposing unlimited liability upon the arriving vessel. The conditions of the port of Abu Dhabi is one example which contains unusually burden-some provisions. Members are encouraged to always contact the Club when faced with a request to sign similar conditions. Failure to use best endeavours to avoid signing a contract im-posing onerous terms on the member can result in prejudiced P&I cover.

Iran sanctions on 2 JAnUARy, President Obama signed into law the Iran Freedom and Counter-Proliferation Act (IFCPA) of 2012, which entails an ex-

pansion of the extra territorial reach of US-Iran sanctions that now extend to the shipping industry. As an example, entities in the Iranian shipping sector have been labelled

as “entities of proliferation concern” whose assets should be blocked and it is prohibited to provide significant support and services to these entities. IFCPA also provides a ban against in-surance of any activities that violates any US sanctions on Iran. In addition, the EU has issued Council Regulation 1263/2012 essentially prohibiting (1) the purchase and transport into the EU of Iranian natural gas (2) the storage of Iranian petroleum products (3) the proviso of a wide range of services to Iranian vessels and vessels owned or operated by Iranian entities (4) dealings with Iranian financial institutions.

For detailed information about the iran sanctions please seewww.swedishclub.com


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DNV and GL to mergeon 20 DEcEMbER 2012, Det Norske Veritas (DNV) and Germanischer Lloyd (GL) announced that they have signed an agreement to merge. The new entity will be called DNV GL Group. It will be one of the world s leading classification societ-ies and risk experts. The global headquarters for all business seg-ments will be located in Hövik, Oslo. The maritime business unit will be in Hamburg, Germany. The merger will require approval from different competition authorities around the world before the actual merger can take place.

Maritime Labour Convention thE IntERnAtIonAl lAboUR oRGAnIzAtIon (Ilo) Maritime Labour Convention, 2006 (MLC) will come into force on 20 August 2013 with the purpose of providing protection and fair working conditions for seafarers. A problem which has been highlighted by the effects of the financial crisis is abandoned seafarers and the right to repatriation in cases involving a ship-owner’s insolvency.

As a consequence of the implications the Convention has on owners, the P&I Rules have been revised as of 20 February to reflect the requirements under the MLC. With the aim of sat-isfying the unspecified requirement under the MLC to provide financial security, Rule 3 section 1 (g) has been introduced and we are thus hopeful that the Certificate of Entry will satisfy the MLC financial security provisions. The IG Secretariat is in close contact with the parties involved including the States that have ratified the MLC to assist and safeguard the interests of owners.

Rule 3 section 4 has also been revised to confirm that the Pay to be Paid Rule is not applied in relation to crew claims, although that has long been the agreed position.

more information on the mLC can be found in our p&i Circular 2559/2013 dated 6 march 2013.

The Swedish Club AGM and eventsthE AnnUAl GEnERAl MEEtInG will be held in Gothenburg on Tuesday 18 June 2013 and adjacent activities on 17-19 June.

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Germany modernises maritime law thE REFoRM bIll has been approved by Parliament and is supposed to come into force around April 2013.

In general, the revised law establishes a contemporary body of law by reducing the amount of provisions by

half and installing a systemized structure. De-tailed rules on charter parties and practice-

orientated provisions on different forms of freight contracts,

as well as the introduc-tion of electronic bills of lading, are just examples of the amendments being

implemented. The central modifications of the revised law affect

rules on liability of the parties involved in the transport chain. The abolishment of the exclusion of liability for nautical errors, which was considered to be an anach-ronism with regard to the modern engineered shipping industry next to deleting the fire defence are some of the key aspects.

In addition the new law introduces a legal concept of li-ability of the “performing carrier”. This rule aims to syn-chronise liability between shipper and performing carrier without the latter being a contractual party.

Finally, the revised law facilitates and accelerates the ar-rest of ships. Whereas arresting a vessel used to be a complex procedure that has rarely been made use of the new regula-tions in principle require a money claim against the vessel only.

For details contact dr. marco remiorz at dabelstein & passehl in hamburg: [email protected]

New chairman of IUMI’s Ocean Hull CommitteelARS RhoDIn has been appointed chairman of IUMI’s Ocean Hull Committee. The International Union of Marine Insurers is the main world-wide body for marine insurers address-ing issues relevant to the industry, such as exposure trends, legislation, statistics and loss prevention. Ocean hull in par-ticular is the essential forum to discuss and exchange ideas of common interest to hull underwriters identifying chal-lenges and opportunities in the marketplace and, not least, safety issues in shipping.


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changing of the guar d in piraeusAn EARly MIDDAy in May 1980 Hans Filipsson set foot in Greece for the first time. He arrived as a seaman onboard the Swedish Orient Line vessel Bardaland. The cargo consisted of various forestry products from Scandinavia, like timber and paper, and the unloading took about ten days. Already the first weekend, when visiting the island of Aegina, Hans was hooked. Since, he has returned several times, both on business and holiday.

Now, 33 years later, 1 April 2013, he will return by air – this time to settle down to take over the rudder as General and Area Manager of our Piraeus team and office.

After his seagoing career, Hans turned to insurance and has been working on both the claims and underwriting side for more than 20 years.

“I guess I have both shipping and insur-

Back againafter 33 years

ance in my blood; my father was responsi-ble for P&I claims at the shipowner Bro-ströms in Gothenburg,” he explains.

Hans joined The Swedish Club as an Underwriter in 2010. In September 2011 he was appointed Deputy Area Manager for Team Gothenburg and now it is time to embrace Greece and Team Piraeus with his energy and drive. At first he will work alongside of Tord Nilsson to get into the routines. (You can read more about Tord on the next page.)

“I am happy to see him staying with the organisation in a new role as Senior Man-ager for Underwriting and Special Risks at the head office in Gothenburg; that will be a welcome support for me and the team to further develop our business in Greece.”

Developing relationshipsHans is a keen sailor and has been sailing in the Mediter-ranean several times. His prefer-ences have been in the south west coast of Turkey and the Greek islands.

“Greece is one of my favorite places, so when I was asked to succeed Tord as Gen-eral and Area Manager, there was only one answer: YES in capital letters!”

The family was easy to persuade and in August his wife Christina, son Marcus and daughter Elin will follow his example. They are all planning to study in their new home country.

“I have never been living abroad before; the closest I came was my three years at sea with the Singapore-based Thome Ship Management, so I am really looking for-ward to moving to Greece, doing what I like the best: working in the shipping market.”

The Swedish Club has always had a strong commitment to Greece and Greek shipowners.

“’My mission will be to further build our business and to develop long-term relation-ships in the market, but also see to that the team continues to deliver at the high level which The Swedish Club is known for.”

“Irrespective of which company you

M/S BARDALANDArrival at piraeus may 23, 1980end of sea passage: 12:10pilot on board 12:202 tugs connected 13:00First line 13:15All fast 13:45departure 13:30 June 3, 1980 bound for thessaloniki

Club Information | Staff

work for, there is a big difference between being at the head office and a local branch office. To make a comparison, you can look at the head office as the shipowner’s office and the local branch office as one of their ships; and I have to admit, I think it suits me the best to be on board.”


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The peculiarity of saying “yes” has taken Tord Nilsson to many places and jobs over the years. This time it has brought him from Area Manager for Team Pi-raeus in Greece back to Gothen-burg and the head office, but in a quite new role as Senior Manag-er, Underwriting & Special Risks.

When Tord said “yes” to the post of Assistant Underwriter at The Swedish Club in -96 he didn’t know it would take him around the world. In one year he was promoted to Underwriter and in 2000 the “yes” in him took him to the post as Managing Director of our Hong Kong office, where he stayed for five years. Back in Gothenburg and Team Göteborg I, as Area Manager and Senior Underwriter, he sat tight

for four more years until it was time for anoth-er “yes”, when he was of-

fered a position in Greece. Before moving to Greece, Tord had

only been there once on a four-day business trip in 1998.

“But I have always been curious about new things and been looking for new experiences, so it feels natural to me to take on a challenge like a new job in a new culture, says Tord.”

Cradle of shippingHe describes his years at the Piraeus of-fice as an interesting, fun, fruitful and rewarding experience.

“The world’s biggest merchant navy is managed and controlled from Greece, and Piraeus is loaded with a variety of shipping companies. There is no place like this in the world – this is where it happens in our line of busi-ness!,” Tord explains.

“We have great members in Greece and the team has created a good envi-ronment for delivering the expected

changing of the guar d in piraeus

Carola WeidenholmCorporate Communications

service, which characterises of The Swedish Club. The office and staff – and even some of our members – have become like an extended family to me that I will miss very much when I go back to Sweden. We have been working closely together as a team and devel-oped the business as well as each other,” says Tord.

“Hans Filipsson, who will succeed me in Piraeus (see previous page), will arrive to a well-functioning and service-minded team. I am sure he and his family will feel at home in the new country, new office and new culture. And don’t forget the beautiful environ-ment, good food and the best climate in the world!”

Developing underwritingOn 1 July it is time to say goodbye and move back home to Sweden and the new position as Senior Manager for Underwriting & Special Risks. His almost 20 years’ of underwriting expe-rience from different parts of the world will stand him in good stead to struc-ture the business process and make us work in a smarter way, to benefit both the Club and the members. Another important task is to evaluate the need for further training amongst the un-derwriters. The market moves fast and to stay in the front-line we need to de-velop our knowledge at the same pace.

“I really like underwriting and the whole process that surrounds it. The plan is for me to take an overall per-spective on underwriting, develop new insurance products and support the business activities. I like to create new solutions and look for innovations – there is always another way of looking at things!”

”I likesaying yes!”

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New FD&D Manager

Wherever I laymy hat that’smy home…

England, France, Australia, Greece and now Sweden – Martyn Hughes likes not only to visit new countries but also to live in them! “I think I am pretty flexible and have always ap-preciated a challenge,” he says. “I am also very interested in different cultures as well as learning new lan-guages – and what better way than to stay abroad for some years.”

It started already before university when he went to Paris to work at Marks & Spencer for a year. During the summer vacation the following year, he worked for an English law firm in the same city. He did the same the year after at Holman Fenwick & Wil-lan’s Paris office, which was his first en-counter with marine law. He later trained with that firm and stayed on for three years as a qualified solicitor. A secondment for six months to the Lon-don P&I Club ended with him joining them in 1990. After two years he was offered a post in their Piraeus office in Greece, where he stayed until 1997 – the last two years as Manager. Back at the Club in England, he got the next interesting offer six years later – to go and work for the Aus-tralian correspondent Aus Ship. This was too good to resist, so in 2003 he, his wife

Carola WeidenholmCorporate Communications

and two daughters packed their bags and boarded the plane for Sydney to stay for almost four years. In 2007 they were back in the UK and Martyn returned to the London P&I Club’s head office again.

23 years of P&I and FD&DLast year Martyn was informed of an open post as FD&D Manager at The Swedish Club’s head office in Gothenburg. At first he had no plans to switch to another job but in the end he couldn’t resist the chal-lenge of a new culture in a country he had never visited before.

“This is an opportunity for me to do stuff I know well but in a new environ-ment, and at the same time it is nice to live in a city like Gothenburg where the pace and work-life balance are different from London”, says Martyn and continues: “The job also brings new experiences as The Swedish Club is a hull mutual and it is interesting to see how that interacts with P&I and FD&D first hand.”

Martyn is a welcome addition to the Club staff with his long experience of a variety of claims and his international ex-perience of handling both P&I and FD&D cases. The Swedish Club and he have known each other for a long time and have, over the years, worked on the same cases from time to time.

“The Swedish Club has a good reputa-tion in the marine business for its excel-lent service. And the staff I have been in contact with have always been professional and considerate, which were two other rea-sons for me to want to join the Club” he explains.

Martyn in briefName: martyn Hughes

Age: 50

Hometown before Gothenburg: London, uK

Family: two daughters; Zoë 20 and Siân 18 who live and study in the uK

Spare time: likes reading, cooking, running and bike riding when he has time off. He is also into music and lis-tens to everything from Beethoven to ABBA and even some Greek bouzouki which he got from his years in Greece. At one time he sang in the school choir and even got to perform at the Royal Albert Hall a couple of times.

Background: martyn graduated from Birmingham university (uK) in 1984 with a degree in Law. He qualified as a Solicitor in England with Holman Fen-wick & Willan, then spent 13 years with the London P&I Club, including 5 and half years in their Piraeus office, han-dling a mix of P&I and FD&D claims. In 2003-07 he joined the correspondent Aus Ship in Sydney before returning to the London Club for another six years. He has worked continuously in mari-time Law since 1987.

Of current interest: our new FD&D manager in team Gothenburg since 7 January.

Club Information | Staff


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Club Information | News from Gothenburg

Tony SchröderArea manager team Gothenburg

AnothER REnEwAl has passed. The 2013/14 renewal prompted more concern than in many years. Article after ar-ticle in various shipping papers forewarned owners and clubs about a predicted clash of wills. The state of the shipping mar-ket pointed south and claims too. In the aftermath we can now see that whilst it was an extraordinary prolonged and tough renewal, the result is satisfactory and we should all be pleased – members and the Club alike.

There sometimes seems to be a misconception that under-writers are fat cats (an impolite way of referring to someone who is very rich and powerful). This could not be more wrong. We are mutuals. We are governed by our members for our members. Our task is to handle the randomness of risk. To be able to pay claims running into millions of dollars. Some mem-bers might ask themselves – more so during the P&I renewals than the rest of the year – is there a benefit in moving your ves-sels to a new club to avoid the increases levied? There might be, if you do not have the confidence that your present club is do-ing a good enough job managing members’ claims and premi-ums, in the volatile world of marine insurance.

The history of insurance is a long tail. Insurance is long-tailed. And volatile. It is a story about paying premium for a risk. Claims happen, and over time they happen to most shipowners. But do I need to contribute? “Could a large claim happen to me?” Like the ‘black swan’ theory most people today know that it is quite likely that something unlikely will happen. *

The term metamorphoses to suggest that a perceived impos-sibility might later be disproven. It lies outside the realm of regular expectations. Costa Concordia being just one such event. Titanic another. But for the observer, the shipowner, even a medium-seized casualty might be that surprise occurrence.

The philosophical problem is that rare events are not visible in past cases. Almost all consequen-

tial events in history come from the unexpected – yet human beings later convince themselves that these events are explain-able, in hindsight. But underwriters know it can happen. **

Hence we have a task to build robus-ness and durability against these large claims.

However, in recent years not only large claims have increased, but also attritional claims. In particular, liabilities for cargo and personal injury, both in terms of fre-quency and in terms of severity. All these factors have caused mutual underwriters to ask their good members for larger con-tributions to be able to assist shipown-ers in the rainy days - and they do come! Albeit sometimes as scattered showers. There is always a risk of a particular event occurring that is so unlikely to happen and difficult to predict that many choose to ignore its possibility. Is there a fat chance that frequency, severity and volatility could happen to me? That the fat tail of probability can hit me?***The answer is – yes!

The Clubs are just instruments to try to help members with handling risk, and right now premium increases have been a necessity to handle that risk. We need to be robust, for our members’ sake, to handle that impulsive and obnoxious fat tail of probability!

Speaking of robustness, Team Gothenburg has been further reinforced with Martyn Hughes, FDD Manager, Martin Birgersson, Senior Claims Executive, P&I, Fredrik Bergqvist, Claims Executive, P&I and Daniel Kilgren, Underwriter. Martyn is an English solicitor joining us from London. Martin, Fredrik and Daniel are all Master Mariners, albeit with different and diversified backgrounds. Four people who bring a lot of new strength, energy and vigour to our team.

A warm welcome to you all!

the fat tail of probability

*the black swan theory, or theory of black swan events, is a metaphor that describes an event that is a surprise (to the observer), has a major effect, and after the fact is often inappropri-ately rationalised with the benefit of hindsight. such events, considered extreme outliers, collectively play vastly larger roles than regular occurrences. in eng-lish, when the phrase was coined, the black swan was presumed not to exist.

**A black swan event depends on the ob-server. For example, what may be a black swan surprise for a turkey is not a black swan surprise to its butcher; hence the objective should be to "avoid being the turkey" by identifying areas of vulnerability in order to "turn the black swans white".

***Fat tails are basi-cally a statistical dis-tribution phenomena. most people who are familiar with the well-known ‘bell curve’ will be able to visualise the fat tails as a bell curve with the opening of the bell stretched out – making the opening fatter. the fat tails phenomenon is most often an unexpected result.


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25FEBRUARY

18FEBRUARY

wE hAvE oncE AGAIn passed 20 February, the magical date for P&I insurance. These renewals have been more diffi-cult than renewals in recent years. The reason for this is that we have a convergence of the worst shipping market since the late 70s and early 80s, affecting shipowners and a large number of huge claims affecting insurers. P&I results for all of the clubs in the International Group (IG) have been hit by major claims over the past few years which have had an impact not only on retentions but also on the IG Pool, which we share with the other P&I clubs, as well as the Excess of Loss reinsurance programme that we also share with the other IG clubs. The in-creases of premiums of the Excess of Loss programme seem to have come as a bit of a shock to many owners.

We feel that we have talked about the impact of the major claims with our members and what impact they would have on reinsurance, but it seems as though there were many that had not braced themselves for the impact. Historically, Excess of Loss reinsurance increases or reductions are very small with a very limited impact on overall premiums, so the big increase for this year was a bit of a shock to many owners. Given the fact that any increase in the cost of insurance is bad news for own-ers, the combination of General Increases, although modest, combined with major Excess of Loss increases was really bad news.

The International Group clubs have had to pay for a number of high profile and extremely costly claims incurred by its members over the past few years. Due to the fact that shipping has been suffering quite a lot since 2008/2009, most clubs have tried to keep premiums to a minimum. Major claims coupled with relatively low premiums and a lot of new tonnage flowing in at low premiums, has led to quite a few IG clubs feeling the impact and having to substantially raise their General Increases.

The Swedish Club has not been spared from these P&I effects. We do however try to spare our members as much as we can from increases as we need to look after their best interests while looking after our own best interests.

This will be my last letter from Greece as I will be moving back to Sweden soon. I have really enjoyed and cherished my four years in Greece. It is a wonderful country with the best cli-

mate in the world, mountains and seasides that are extraordi-narily beautiful, food that is to die for and wonderful hospital-ity. Unfortunately the economic woes have severely impacted the country and its people during my years here and I hope my departure coincides with a turnaround for the Greek people and their businesses.

Hans Filipsson will take over from me and will be starting in early April. Hans has been an acquaintance of mine for the past 20 years, after he married one of my former colleagues’ best friends, and in the past six month I have got to know him better. I think he will take over where I left off and that there will be a seamless transition between the two of us. You will not notice much of a difference as Hans is perfectly capable for the role of General Manager of The Swedish Club in Greece. Best of luck Hans!

The members of the Club in Greece include some of our lon-gest standing members and they, together with the rest of the membership, have always showed great support to us and I will miss you all. The staff in the office are incredible and their com-mitment to the Club, to me, and its members is second to none. Leaving Greece feels a bit like leaving my family but I am sure that I will continue to be involved in the Greek business going forward and that I will still be around and even come to see you all from time to him. So thanks a lot for all your support and see you soon!

Tord NilssonGeneral manager/Area managerteam piraeus

the magical date has passed

Club information | News from Piraeus

19FEBRUARY

21FEBRUARY

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25FEBRUARY

time to focus on future progressp&I REnEwAl for 2013/14 is over. Thanks to our members’ support we did well in Asia. We managed to achieve the renew-al target on premium increase and we came out of the renewal with a slight increase in both number of entered ships and gross tonnage. In addition we received over half a million gross tons of committed new tonnage over the year. We renewed all the existing charterers’ P&I insurance contracts, and added three new accounts. Given all the circumstances, in particular the bad freight market, we should be happy with the outcome.

When renewal is over it is time to focus on future progress. When members renew insurance contracts with the Club it is up to us to keep our promise to our members and provide good service in return. This of course is a continued effort.

Last year we lost two senior staff member from our Hong Kong office. We filled in these vacancies by employing two qualified solicitors from well-known shipping firms in Hong Kong; and we also boosted our resources in marketing and business development. We will be adding more staff at our of-fice over the course of the year. We will soon have 15 people at our Hong Kong office with a very wide spectrum of expertise,

lawyers, master mariners, and marine engineers. Adequate resources provide an important foundation for efficient, effec-tive and quality services. We are aiming to build up one of the strongest teams among our peers in Hong Kong and provide better service to our members.

I would like to take this opportunity of informing you that we will be holding a Marine Insurance Seminar in the autumn this year in close proximity to Hong Kong. We have done this four times, once every three years. It proves to be a popular event. Many of our members in Asia send representatives to at-tend and we look forward to seeing you this autumn.

Ruizong Wangmanaging director/Area managerteam Asia

Club Information | News from AsiaPH

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Club Information | News from Norway

MAIn REnEwAlS of our Energy business (MOU/FPSO) started in early February. The market has been and still is, more or less flat, with some pressure on rates for larger fleets with good loss records. Deductible levels remain unchanged but with some upward adjustments for accounts with claims. The new Nordic Plan has been applied on all 2013 renewals led by the Norwegian market.

Norwegian shipowners have endured the global financial difficulties somewhat better than many of their international peers. A diversified overall fleet structure combined with strong balance sheets, and in some cases major restructuring of operations and finances, have put many in a position to now exploit market opportunities. According to Clarkson Research, Norwegian shipowners placed orders for 134 newbuildings representing some USD 17.4 billion, in 2012. This constitutes half of all European orders and more than twenty per cent of the world order book.

A rapidly expanding offshore oil and gas sector is a major contributor to this and more than fifty per cent of the Norwe-gian order books are offshore service vessels (OSVs). The Nor-wegian controlled OSV fleet is the most modern in the world and represents some 600 vessels. The Swedish Club has histori-

cally not targeted this market. By establishing of a stronger presence in Norway and our entry into energy insurance two years ago, we are now exploiting further possibilities as far as diversification is concerned in the Norwegian market.

At the same time, our presence in the traditional Norwegian deep sea segment has also been strengthened over the course of the past few months and we aim to further increase our visibil-ity and share of the market. By recruiting more local staff this year, especially on the claims side, we will soon be a full service Swedish Club office. We will be moving to new offices further out on Tjuvholmen in May and if you’re in the vicinity then, or perhaps during Nor-Shipping, which is in the first week of June, please come and see us.

Establishing a stronger presence in norway

Tore ForsmoArea manager team Norway

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From left: Mr Nick Ghiouzelakis (Arion Enterprises Inc.) his daughter Valina Ghiouzelakis and Dionysios Valaveris (Grecomar Shipping Agency Ltd.)

Club Information | Out and About

Seminar in Odessa, November 2012MARlow nAvIGAtIon ran a Full Management Seminar for two days in November 2012 at Odessa, Ukraine. The seminar was well attended and the participants included senior officers from both Marlow Navigation Cyprus and Germany together with office staff.

A number of interesting and important topics were presented for the participants and The Swedish Club Loss Prevention Officer

Joakim Enström and P&I Claims Executive Karoline Alfredsson, were invited to hold a half-day seminar concerning loss prevention as well as give the officers greater insight to the elements of P&I insurance. Following the seminar, some of the officers went on to do an MRM course. Judging from the participants’ comments, the event was greatly appreciated and the Club is happy to have been a part of such a great initiative by our member.

Christmas Dinner in Piraeus, 13 December 2012

Mr George Agathokleous in the middle, his son Andrianos Agathokleous to the left (British Bulkers Inc) and Tord Nilsson (The Swedish Club).

More pictures can be found onwww.swedishclub.com/News/Circulars and Out and About

thE clUb’S Lucia Dinner, held once again at the Yacht Club of Greece, opened the festive season with traditional Swedish food and lots of smiles. The Scandinavian Church Choir, together with Swedish Club staff members, helped to create a warm, festive en-vironment for all our guests, who really look forward to attending our dinner each year.

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Club information | Staff News

HEAD OFFICE GOTHENBURG

Fredrik Bergqvist, Claims Executive P&I, joined Team Gothenburg on 3 December 2012. He is a Master Mariner with seven years’ seagoing experience and previously worked for Damen Shiprepair Götaverken in Gothenburg.

Martin Birgersson, Senior Claims Executive P&I, joined Team Gothenburg on 14 January 2013. He is a Master Mariner with more than ten years’ seagoing experience and holds a B.Sc in Business Administration specialised in Shipping & Logistics. He previously worked for the Port of Gothenburg.

Oscar Holmqvist, Assistant Claims Executive, joined Team Gothenburg on 10 December 2012 on a one-year traineeship. He holds a B.Sc in Shipping & Logistics from Chalmers University of Technology in Gothenburg.

Martyn Hughes, FD&D Manager, joined Team Gothenburg on 7 January 2013. He is a qualified Solicitor and prior to joining The Swedish Club, was employed at the London Club. He has worked continuously in Maritime Law since 1987.

Erik Johansson has been appointed Head of Underwriting at Team Gothenburg with effect from 1 April 2013.

Daniel Kilgren, Underwriter, joined Team Gothenburg on 17 January 2013. He has a degree from the Master Mariner Programme at Chalmers University of Technology in Gothenburg and seagoing experience as a deck officer. He previously worked for Codan Marine in Gothenburg.

Tord Nilsson will return to the head office in Gothenburg on 1 July 2013 and take up the position of Senior Manager, Underwriting & Special Risks.

Jacob Vierö, Director, Marketing & Business Development, joined the Club on 22 February 2013. He has a solid background in sales and marketing on the international scene. For the past five years he has been employed by Kuka Nordic AB as Sales and Marketing Director for the Nordic and Baltic region. There will be a more detailed presentation of him in our next issue of Triton.

PIRAEUS

Hans Filipsson has been appointed Area Manager at Team Piraeus with effect from 1 April 2013.

HONG KONG

Lansee Man, Claims Manager, FD&D and P&I, joined Team Asia on 1 March 2013. She is a Solicitor, qualified in England, Wales and Hong Kong. She previously worked for Ince & Co in Hong Kong.

Staff news


what

is the term ”radar” coined from? 1 Acronym for Radio Detection and Ranging X It is just a Reflective Palindrom 2 Acronym for Random Detecting and Arching

how many Liberty ships were built

between 1941 and 1945? 1 2.710

X 999 2 1.776

what is the name of the first ship

entered for P&I risks with The Swedish Club?

1 Stavros X Håkan 2 Göteborg

mail your answer to [email protected]

the first right answer will be awarded a Club give-away.

CLU BQU i z

Winner of Club Quiz 3-2012winner of Club Quiz in triton No 3-2012 is mr baris savci of kaptanoglu holding, istanbul, who will be awarded a Club give-away.

the right answers to the questions are:2 Republic of GuineaX 6X 1982

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Anders holmbergin memoriam

It is with great sadness that we have to inform you of the passing of our dear friend and colleague Anders Holmberg.

As a fully qualified Master Mariner, Anders served on tank ships and RoRos be-fore starting with the Club in 1987. He focused primarily on P&I claims through-out his career at the Club. In particular, he developed great skills and talents in the field of environmental claims where his interest in nature and wildlife played an important role.

Anders was known for his direct approach to matters where “yes” was “yes” and “no” was “no”. This strong feeling of justice was often combined with his own par-ticular sense of humour.

Anders was highly valued in his endeavours, not only by us but also by the whole P&I community. He will be sadly missed by all of us who had the good fortune of working with him.

Naming ceremony of the ”Nordlotus”, January 2013At thE nAMInG cEREMony at Sumitomo Heavy Industries’ ship-yard in Tokyo Bay on 19 January this year, Cilla Rhodin, our Managing Director Lars Rhodin’s wife, had the honour of being Godmother of the Aframax tanker Nordlotus, entered with the Club. The ship is owned by REEDEREI NORD Ltd, Limassol, Cyprus, which is a long standing member of the Club.

Christian Oldendorff, REEDEREI NORD and Godmother, Cilla Rhodin.

Club information | Out and About / In Memoriam / Club Quiz


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CLub CALeNdArFor further upcoming events, please refer towww.swedishclub.com/Club Calendar

2013 22-26 April marine insurance Course Gothenburg

7 May Lunch seminar Copenhagen

15 May Club evening hamburg

16 May Club evening bremen

17-19 June AGm events Gothenburg

17 June board meeting Gothenburg

18 June Annual General meeting Gothenburg

www.swedishclub.com

tsc triton 1 2013

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