Viewpoint Douglas Jacobsohn, President and Chief Executive Officer, Skuld

The 1990’s have been very good to Skuld, during which time we have achieved the following: • Increased our tonnage by some 75% over a period of 5-6 years, probably more than any other P&I club. The growth has lifted the Association from being a relatively minor to a major club. Still with some 50% of its business in the Scandinavian market, Skuld continues to be the No. 1 P&I player in that market. However, we have also increased our business expansion in other parts of the world, establishing a strong presence in all shipping markets that are of some significance. • During this same period, our reserves increased from the prudent minimum required by regulatory authorities to the current level of approx. USD 100 million. • Produced positive insurance results during the entire period. • Strengthened and improved the organisation, which has enabled us to provide even better service to our members. • Continued to develop our loss prevention activities, thus reflecting our quality standards and requirements that remain an inseparable part of our business. • Embarked on development of a new IT system (to be completed 2000/2001). The last two years have been different. Under the pressure of a continuously growing overcapacity in the market that has led to a corresponding fall in premiums, Skuld has responded i.a. as follows: • We have adopted a policy of

Changing times prudence and consolidation in our underwriting. • We have adopted a revised and more focused organisation following the process known as Skuld2000, previously mentioned in this column. These changes have laid the foundation for a more coherent organisation and clarified the chain of command. • We have looked critically at our own expenditures and adopted several measures designed to bring down cost levels. An example is how using new legislation enabled us to close down our Paris office without, however, cutting down on the service we provide to our French members. Skuld is opening the policy year 2000/2001 with a fleet that is down by 2.5 million GT compared with the fleet at expiry of the previous year. A considerable part of this reduction can be traced back to those policies which have guided our underwriting during the last few years and which will in all likelihood be reflected in future claims levels. Is this fleet reduction specifically, and such a policy of consolidation generally, the price to be paid for the rapid growth in the 1990’s? Did Skuld ‘buy tonnage’ at the wrong end of the market? We know that is not the case. The bulk of such growth has materialised through organic growth with our existing members. There is no basis for arguing that there exists any correlation between time of entry into the Association and level of claims. The fact of the matter is, as with all P&I Clubs, quite simply that

loss records vary within the membership and, unless corrective action is taken, some will develop negative loss ratios over time. Despite negative results towards the end of our policy year 2000/ 2001, Skuld’s claims levels continue to be marginally below budget. Even so, there is unfortunately every reason to expect that the bottom line will be far from satisfactory. The main reason: downward pressure of premium levels following overcapacity in the market, coupled with a volatile finance market. Some might argue that we can take comfort from the fact that the rest of the insurance industry is experiencing the same negative development. Having a common problem, however, does not resolve the situation. For each and every one of us the state of the market is an external factor. We can only take what action is necessary. What pro-active and other measures Skuld will be taking to confront this market turbulence is under continuous consideration by the Board and the management. We will do whatever is necessary in the interests of our members whether short-, mediumor long-term. We are in the fortunate position of being able to make use of those financial and human resources built up during previous years.

Douglas Jacobsohn

Beacon Bergesen – the change of an institution Page 11

CEDRE – when disaster strikes Page 3

What makes an American jury tick? Page 14

Smitten in California Page 21

Number 1 April 2000

newsletter

1

Beacon Skuld newsletter

In this magazine

you will find: NEW MILLENNIUM, NEW OPPORTUNITIES

Skuld takes the next steps into cyberspace

Page 2

CEDRE – when disaster strikes

Page 3

How to achieve MAJOR cuts in the costs of medical services in the USA

Page 5

Maritime litigation to follow special procedure in China

Page 7

An effective approach to dealing with stowaways

Page 9

The change of an institution

Page 11

What makes an American jury tick?

Page 14

Fill-in-that-form, and all the others

Page 15

Watch out! 1: Equipment containing pyrotechnical material should be treated with utmost care! 2: Nigerian sports levy!

Beacon (Skuld newsletter) is the official publication of Assuranceforeningen Skuld (Gjensidig), and is published quarterly. No. 1 April 2000 Issue 172 P.O. Box 1376 Vika N-0114 Oslo, Norway Tel +47 22 00 22 00 Fax +47 22 42 42 22 Telex (56) 71091 SKULD N.

Risk management – what’s in it for us?

Page 19

SMitten in California

Page 21

Bills of Lading – the flip side

Page 23

Legal notes 1: Pumping warranties Different jurisdictions, different views 2: NYPE clause 8: Charterer’s orders and safe ports 3: Damage to tugs by striking – P&I or H/M cover?

Page 25

New face in Skuld

Page 30

Contact Skuld

Page 30

Viewpoint: Changing times

Page 31

Editor in chief Arild Wegener

Repro and printing GAN Grafisk AS

Editorial staff Lise Larson

Entire contents ©1999, all rights reserved. Reproduction in whole or in part, without written permission from Skuld is prohibited. Opinions expressed by writers in Beacon are not necessarily those held by Skuld. Skuld assumes no responsibility for unsolicited material.

Editorial committee Tor Erik Andreassen Jane Davey Charlotte Djerf Lars Dueled Thomas Bjørn Larsen Anne Liversedge

email:[email protected] Visit our website: http://www.skuld.com

Page 17

Layout NBBJ Reklamebyrå AS

Front Page: Bergesen’s Berge Sigval

The month of March came with a bang at Skuld this year: on 8 March Håvar Poulsson, 4th generation in a family that has managed Skuld since the establishment of the Association (with the exception of the period 1981-88) handed in his resignation. He thought it was time for someone else to saddle and mount the horse. He left the top job under a shower of heart-felt, grateful words and – he will continue to be around in his new advisory role to the Chairman of the Board and the new CEO Douglas Jacobsohn. Svein Erik Amundsen is the first ever topman at Bergesen d.y. who is not a member of the Bergesen family. In this issue of Beacon he outlines the company strategy and culture, their ideas for the future. Message no. 1: yes, they will continue to be in shipping, to go after good looking opportunities and leave it to others to design web sites. And their four current investment areas may be joined by others. Would you like to reduce your (considerable) medical costs in the USA by 50% or more? There is a way to do just that and it is called ‘medical auditing’. It is a process whereby a medical provider’s bill is analysed by a professional auditor who is trained to evaluate medical bills and to ensure that they contain appropriate charges for services rendered. Pamela Milgrim of Anchor Marine in New York is familiar with the issue and presents the opportunities. Happy Reading. Arild Wegener

2

Skuld takes the next steps into cyberspace

Communication on Internet

By Mona Vestum, IT Manager, Skuld

The purpose behind Skuld’s IT strategy is to ensure that strategic business activities make full and effective use of emerging technology. Skuld is about to build an IT infrastructure and architecture that will provide support into the future. The use of Internet technology as a communication and distribution medium and new standard systems from the market, gives us the right basis for the development of the new business systems. We are working with an experienced implementation partner to accomplish the IT programme of 2000. Powerful and integrated new systems for Skuld will go live at the end of 2000. The benefits of the new systems can be summarised as follows; • Create new business opportunities. New technology gives a basis for improving the organisation’s business performance. • Improve the competitive position of the organisation. • Provide executive management with information to support the development and implementation of the company’s strategy. • Improvement of member service. Skuld will be in a position to serve the member better and faster with up-to-date information.

• Improvement of business processes. Existing manual routines will be replaced by automatic processing in the systems. • Improvement of data quality. Right information at the right time and right quality. The organisation will be served with information for decision-making at all levels. • Change of competence in the organisation. By participating in the project, people become committed to the new system. Training will be given to all employees to raise the IT skills in the whole organisation. • Work time spent on core business activities rather than data gathering. This gives valuable people the possibility to spend more time on market activities and other key business activities. The IT architecture described in the figure above, shows what kind of IT support we want at different levels. At the operational level we find the business systems: the basic data is stored here to support our business processes (e.g. claims and underwriting) and support processes (e.g. finance and human resources). At the business process level, we will find aggregations and selections of the basic data, presented in a data warehouse as deci-

sion support systems. These kind of systems are mainly for analysts. At the strategic level, the data are transformed into executive support systems. The end users will have access to a user friendly system, giving them the right information at the right time. The executive information system will give an overview of the vital performance measures of the organisation, with the possibility to obtain more details in the systems on the business process level and the operational level. To define the right performance measures, we want to build upon the concept of a balanced scorecard. The balanced scorecard is a tool to logically link an organisation’s vision and strategy to a set of critical success factors and performance measures. As such, the scorecard is the keystone of the measurement definition process. Our business partners will get access to information appropriate to their needs. The information will be distributed and communicated using Internet technology.

3

Beacon Skuld newsletter

CEDRE – when disaster strikes By Arild Wegener, Vice President Public Affairs, Skuld

It is 12 December 1999. The Erika has just broken in two and spilt 14 000 tonnes of oil which in the very near future is going to pollute 400 km of French beaches which normally, weather permitting, are filled by merry European holidaymakers. It is likely to be a disaster. So it is time to call in CEDRE.

Nothing ever goes quite as planned. Heavy fuel oil is a non-dispersible, hard-to-pump product. Drift of slicks is a very safe bet. Response vessels have to be gathered from all over Europe. The oil reaches a coastline which has never had the pleasure of meeting a black tide, and definitely not on Christmas day, which this happened to be. Birds die by the tens of thousands. Shovels and buckets are once more put back to work. The media roar with anger. The French organisation is tested to bursting point. CEDRE is shaken. All in all a very familiar situation on a spill site. LA FRANCE EXPOSÉE

France is exposed to marine misfortunes; situated along one of the busiest sea-lanes in the world it also has more than its fair share of foul weather. There is in other words plenty to keep CEDRE busy. Even by global standards the Centre has a unique position – a national centre of competence on any aspect relating to pollution of the marine environment. Mr. Michel Girin, the director of the Centre, is justifiably proud of it. Users of the Centre are anyone in categories such as shipowners, car-

go owners, local or central government, foreign governments, P&I clubs and the IOPC Fund. The geographical area of interest is not just the French coast, but any marine environment. Testing of anti-pollution equipment features prominently on the menu. Any piece of equipment to be purchased by the government has to subjected to rigorous testing by CEDRE. NEW AREAS OF OPERATION?

So far CEDRE’s area of operation has been limited to pollution resulting from accidents. Mr. Girin would like to expand the boundaries to include permanent and semi-permanent sources of pollutuion as well – fixed object pollution. PROGRESS, AFTER ALL

Anyone even vaguely familiar with maritime activities knows there is no such thing as zero risk – staying awake during the Erika accident is actually sufficient. Even so, Mr. Girin sees several things to draw satisfaction from: • The number of spills has gone down, down and down again. • Dispersants can be used more extensively than in the past,

without inflicting unacceptable damage to the environment. While max. 24–36 hours used to be a good thumb rule, the corresponding figure is now two and a half days. Reason: the substance has become less toxic – and more efficient. • Booms have become lighter and therefore easier to use. • Pumps, too, have become lighter, more efficient and easier to use. Aluminium is used more extensively. • Finally, skimmers, have also become more efficient. Strategy and concepts have also changed. Previously, the thinking tended to rotate round the “perfect”, tailormade, Rolls Royce type vessel. The only problem was they cost huge sums of money and more often than not, were unsuitable for the job. (One job in 20 years did actually occur.) Now, the prevailing thinking is for a standard supply vessel full of booms and skimmers. Versatile, cost-effective, always at hand, and suitable for any kind of job. Bringing grand ideas down to earth and finding rational solutions to practical problems is definitely on CEDRE’s agenda.

4

Michel Girin at CEDRE’s training centre

FA C T F I L E

• CEDRE = Centre de Documentation, de Recherche et d’Experimentation sur les pollutions accidentelles des eaux. • Set up by the French government in 1978, in the wake of the “Amoco Cadiz” accident. • A non-profit association, its area of operation is research, testing, training, and advice on emergency response, in relation to all aspects of marine pollution – except undertaking the cleaning itself. • A key ingredient in the work is a 24 hour advisory service. • Manned by a staff of marine biologists and other categories of highly trained personnel the Centre is operated on a modest budget of Euro 2.4 millions, 40% of which is provided as core funding by the Ministry of Environment, the balance coming from public and private contracts. • CEDRE is headed by a Board of 26 members, drawn from a long range of private and public institutions. Currently the Chairman of the Board is the mayor of Brest. • In 1999 CEDRE moved to new premises of its own, situated in the port of Brest.

When pollution strikes call in CEDRE

5

Beacon Skuld newsletter

How to achieve MAJOR cuts in the cos Costs of medical care in the USA are higher than ever

By Pamela Milgrim, Vice President of Anchor Claims Services Inc., New York

The cost of medical care in the United States is ever-increasing and when an owner must provide medical treatment for an ill or injured crewmember in the United States, there is often a concern that the shipowner is being overcharged and that medical providers are “padding the bill” by charging for services that may not have been appropriate under the circumstances. What can an owner do in these situations? This article is written to advise owners of certain steps they can take to reduce medical expenses and ensure that they pay only what is reasonable and appropriate for the care provided. MEDICAL AUDITING – WHAT IS IT?

Medical auditing is a process whereby a medical provider’s bill is analyzed by a professional auditor who is trained to evaluate medical bills and ensure that they contain appropriate charges for services rendered. Bill review services can be performed in all 50 States with reductions of medical costs averaging between 20% to 40% in most States. Utilizing these companies can result in substantial savings for owners.

The medical treatment afforded a crewmember will not be negatively affected by the retention of a professional medical auditing firm. HOW DOES IT WORK?

Medical auditing firms use several methods to secure discounts for an owner. In some cases, they have “preferred provider” arrangements with thousands of American hospitals and doctors who have agreed to substantial reductions in their charges.

They can also analyze medical bills, negotiate with the health care providers to get discounts, and provide case management services when appropriate. For example, some medical auditing firms have contracts with hospitals which serve to limit the amount of money to be charged per day for a hospital stay. Hospitals enter into these agreements and are bound to accept these lower fees as a matter of contract law. While the bill re-

6

sts of medical services in the USA ceived may indicate a charge of USD 2,000.00 per day for a hospital stay, the contract the medical auditing firm has with that particular hospital may limit payment to USD 800.00 a day. If an owner engages the services of a medical auditing company, the owner could secure a saving of USD 1,200.00 per day for the hospitalization of a crewmember. Thus, in the event of a 7-day hospital stay, the hospital charges of USD 14,000.00 could be reduced to USD 5,600.00. In some cases, where there is no “preferred provider” arrangement, the medical auditing company can obtain significant savings for an owner by detecting mistakes or improper codes on the medical bills. Statistics show that approximately 40% to 50% of medical bills contain errors. In many instances, these errors improperly increase the charges presented to an owner. Medical auditing companies can also assist owners to identify bill duplication. Many of the bills prepared by hospitals and other medical practitioners include codes rather than verbal explanations of services provided. Thus, without the benefit of a medical auditing company, it is virtually impossible for an owner to identify duplicate bills. These companies can also review procedure codes to ensure they are appropriate for the condition being treated. HOW MUCH WILL IT COST?

No fee is paid to the medical auditing company if no savings are achieved. If a medical auditor is unable to re-

duce your bill, the owner is not charged. As a general rule, medical auditing firms earn as their fee a percentage of the reduction achieved. Different medical auditing companies have different fee structures; some charge as little as 20% and others charge as much as 35% of the savings obtained. EXAMPLES OF SAVINGS ACHIEVED BY MEDICAL AUDITS

Not surprisingly, the reductions achieved by medical auditing firms vary from case to case. In some cases, there is only a 10% or 20% reduction. In other cases, the reductions are quite remarkable. Here is just a sampling of recent successes: • The owner received medical bills totaling USD 10,683.00 and the auditor secured a reduction of USD 4,010.93. Thus, the owner paid only USD 6,672.00. • The owner received medical bills totaling USD 7,061.15 and the auditor secured a reduction of USD 3,528.04. Thus, the owner paid only USD 3,533.31. • The owner received medical bills in the amount of USD 25,373.62 and the auditor secured a reduction of USD 13,404.11. Thus, the owner paid only USD 11,969.51. The benefit provided by medical auditing companies is most vividly illustrated in a case involving a crewmember who underwent an angioplasty procedure and was repatriated home approximately 1 week later. The local agent, who was unaware of the types of services medical auditing companies provide, retained the services of a

local company (fictitiously named “The XYZ Company”) to gather and process medical bills and assist in filling drug prescriptions for the crewmember. The XYZ Company presented the owner with bills totaling approximately USD 48,000.00. Anchor, after conferring with the Club and the owner, suggested that the bills be sent to a medical auditor for review and possible reduction. The XYZ Company resisted Anchor’s efforts to have the bills audited. Instead, the XYZ Company proposed that a 10% reduction (a savings of approximately USD 4,800.00) be given to the owner if the bill was promptly paid. Anchor recommended that the owner and the Club reject this proposal. All parties agreed, and we sent the medical bills to an auditing company. The results were simply astonishing! The bills were reduced by over USD 31,000.00 and the owner was only obligated to pay approximately USD 16,000.00. For their services, the medical auditing company received 21% of the savings achieved, which, in this instance, totaled approximately USD 6,600.00. As a result of the medical audit, the net savings to the owner were approximately USD 24,400.00. Had the owner accepted the proposed 10% or USD 4,800.00 reduction made by The XYZ Company, the owner would have incurred approximately USD 43,200.00 in medical expenses. Anchor encourages owners to be wary of companies, like the ficti-

7

Beacon Skuld newsletter

Maritime litigation to follow

Special procedu tious XYZ Company, who demand that they receive payment and claim they will then, in turn, pay the medical providers. We suspect that some of these companies may pay the reduced rate and then retain as their fee the difference. In this case, if the owner paid USD 43,200.00 to The XYZ Company directly, The XYZ Company might have been able to pay the medical providers a total of USD 16,000.00 and then pocket the remaining USD 26,200.00. CASE MANAGEMENT

Medical auditing firms can also provide telephonic and on-site case management services in complex cases. Case managers gather information about the medical condition of the ill or injured crewmember as well as plan, co-ordinate and monitor the treatment of that crewmember. These services can be rendered on an as-needed basis, until medical stability or total medical recovery is achieved. As a general rule, case management is most beneficial in instances involving a catastrophic injury or illness, or in cases where high medical costs are expected. Early, pro-active intervention greatly serves to minimize cost and expedite repatriation once the crewmember’s condition improves and he is deemed fit to travel. In one case, Anchor immediately engaged the services of a case manager to assist in dealing with the medical treatment provided to a first assistant engineer who sustained second degree burns

to his face, neck, arms and knees. The crewmember was evacuated from the vessel by USCG helicopter to a nearby clinic and, once his condition stabilized, was transported by commercial air ambulance to a hospital with a burn unit capable of treating the crewmember’s injuries. The case manager retained, who was a registered nurse, effectively communicated with the treating physicians and hospital staff and was able to “speak their language”. Also, this expertise undoubtedly assisted in getting prompt and accurate information about the nature and extent of the crew member’s injuries as well as his need for continued care following repatriation. At the same time, the case manager also assisted greatly in containing and reducing medical costs. The bill for case management totaled only USD 400.00. This was indeed money well spent.

July 1st this year sees the introduction of an important new law in China – The Maritime Special Procedure Law. Until now, maritime litigation in China has generally followed the Civil Procedure Law, which has become either vague or silent in connection with existing judicial maritime practice. The new law now clarifies many areas of uncertainty. In addition, the law codifies a number of judi-

CONCLUSION

In the future, owners should consider utilizing the services of a medical auditing firm to control costs incurred when ill or injured crew members receive medical treatment in the United States. In more serious cases, such as burns as well as head and spinal cord injuries, owners should consider retaining the services of a case manager to assure proper, cost-effective treatment.

cial practices adopted by the maritime courts, although such practices have not been enforced with sufficient authority or under any express stipulations:

1. JURISDICTION

The maritime court’s jurisdiction has been extensively broadened. Concerning the contractual choice of forum, the new law reaffirms the party autonomy under the principle of convenience and actual connection. However, in the event of all the disputing parties being foreign

8

Hong Kong By Patrick Wang, Regional Vice President, Skuld, Hong Kong

ure in China persons or entities, the choice of Chinese maritime court shall be enforceable, even if the dispute has no actual connection with China. 2. ARREST OF VESSEL

The new law has adopted many provisions found in the 1999 Arrest Convention. The right of arrest has also been extended. Consequently, ships can now be arrested for claims relating to wreck removal, as well as insurance premiums including mutual insurance calls. A sister ship can also be arrested provided that she is owned at the time of the arrest by the owners, demise-, time- or voyage charterers liable for the underlying claim. A demand for excessive security by the claimant may result in compensation for damages sustained by shipowners, and the enforcement of such a claim – including any claim for wrongful arrest – can be made against the security provided to the maritime court for the arrest of the ship. 3. ARREST OF CARGO

This right has, for the first time, been specified in detail in the new law. However, the right can only be exercised against the cargo owned by the respondent. 4. MARITIME MANDATORY INJUNCTION

This is a new provision which will be ground for a practice that has already been adopted by the courts. It provides mandatory relief to protect the applicant’s legitimate interests from being infringed by the respondent’s act or omission. The in-

junction may include an order for the discharge of cargo, delivery of the cargo, etc. The application shall be supported by provision of security to protect the respondent in the event of a wrongful application. 5. PRESERVATION OF EVIDENCE

Again, this provision has recognised the practice that evidence may be preserved by mandatory measures prior to the commencement of proceedings, a practice that lacked any authority before. Consequently, shipboard documents may be investigated and seized under such an injunction prior to the commencement of the proceedings to see whether, for instance, the B/L was ante-dated. 5. MARITIME SECURITY

The maritime security covers what is required in the procedure relating to maritime claim, maritime mandatory injunction and maritime preservation of evidence. It is now expressly provided that the type and amount of the security shall be subject to the agreement of the parties to the dispute. The maritime court will only intervene and decide in the event that no agreement can be reached. Further, the agreed security may be posted either to the court or to the claimant himself. This now opens the door for a P&I Club Letter of Undertaking being directly accepted in China, say for the release of a ship from arrest. This could save considerable time and costs for the member and his Club. 6. SERVICE

Court documents may now be

served by any means as long as receipt can be confirmed. This may possibly include service by e-mail. 7. DIRECT ACTION AGAINST INSURER

This appears to be a novel provision which enables the victims to sue the insurer underwriting the shipowner’s liability for oil pollution or any guarantor for the liability of oil pollution damages in the event of oil pollution from a ship. It would be interesting to see whether defences in the insurer’s policy will be upheld in the event of such direct action. It is also interesting to note that the direct action is available only for damages in connection with oil pollution, and not with pollution caused by chemical or other hazardous substances. 8. SET UP OF MARITIME LIMITATION FUND

This procedure is prompted by the fact that China has become a party to the 1976 London Convention, but has no procedure to implement the Convention. Detailed procedures are now available for shipowners, charterers, operators, salvors and insurers to apply for the set up of the limitation fund. No doubt the new law will have a far reaching effect in the practice of maritime law in China. It is a law that should be welcome in principle but care should be given to the possibility of new problems it may create.

9 Beacon Skuld newsletter

A number of common characteristics:

An effective approach to dealing with stowaways By Aires Rodrigues, Director, A.R.M. International,

The presence of stowaways on board is becoming more diffi-

Durban, South Africa

cult, costly and very delicate to handle. As immigration regulations and controls are being tightened, so too are the human rights of stowaways being increasingly protected and strengthened.

Shipowners and their P&I Clubs have recognised the necessity for a stowaway specialist or organisation/network to handle the documentation and repatriation of stowaways in a manner that is practical, efficient and cost- effective. At present, most P&I Clubs have a special unit dealing exclusively with this matter. CONSIDERABLE INTERESTS AT RISK

The stowaway specialist has to find a way to disembark the “subject person” as quickly and efficiently as possible, and if not properly accomplished, this can interfere with the commercial operation of the vessel and its owners, and even lead to damaging and costly situations/complications for the vessel and crew. The Master should prepare himself and his crew with the necessary and practical “tools” to deal with the problem. Below is a list of some of those practical “tools”: • Practical StowawayQuestionnaires in various languages/dialects. • A record and understanding of the various languages spoken by the ship’s crew, this being regularly updated when new members are signed on.

• A user-friendly help guide*, which should include various “tips” on how best to handle a stowaway on board as well as regular updates on important issues pertaining to this subject. • Adequate telecommunication systems/facilities on board to deal with the handling and documentation of a stowaway. • A comprehensive list and contact details of stowaway specialists around the world who can be relied upon for immediate assistance as well as regular updates on risk of stowaways and immigration regulations in various regions/ports. African stowaways generally have the following characteristics and behaviour, which should be noted and carefully verified by a stowaway interviewer : • They prefer to board a vessel from a neighbouring/other country instead of from a national port. This strategy is to confuse the document-issuing parties in an attempt to derail the entire process and repatriation, if indeed their true nationality cannot be ascertained. • Stowaways seldom divulge their true nationality or identity, often claiming to stem from a region/

country in turmoil for the abovementioned reasons. • They sometimes obtain some form of documentation, either officially through false declarations and inadequate official investigation procedures/ systems or through illegal channels, thereby creating confusion and finally derail their repatriation. THE SOUTH AFRICAN LOOPHOLE

In South Africa, illegal aliens have found a loophole in the local immigration regulations, in the form of a document termed “Temporary Permit to Prohibited Person”, also called “Section 41 (1) Permit”. This document is issued to an undocumented immigrant in South Africa who claims political/ refugee asylum. At this time, a stowaway in possession of a “Section 41 Permit” is in a position to find ad-hoc work in a South African port with the intention to stow away. This document and all its aspects will be discussed in a future article. The stowaway specialist should, if contacted or requested by masters, owners or their P&I Club, assist with immediate advice, techniques and necessary aids to ensure a safe, successful and expedient resolution to the problem. This backup must

* Skuld’s booklet “Safely with Skuld – How to prevent losses on board ship” provides useful advice for officers and crew. The section on stowaways can be useful in developing a ‘user-friendly help guide’, as suggested by Aires Rodrigues.

Extracts from “Safely with Skuld – How to prevent losses on board ship”

Stop stowaways boarding

Thoroughly search the ship before sailing

be available on a 24-hour basis due to the time differences experienced by the inter-continental trading of vessels. After a telephonic interview of the stowaway on board by a specialist, with the assistance of relevant interpreters, the specialist can obtain adequate travel documentation for the disembarkation and repatriation/ relocation of the stowaway. A close working relationship with diplomatic contacts and official channels around the world will assist the specialist in achieving his objective.

If discovered, hand stowaways over before sailing

Collect the stowaway’s papers

ASSISTANCE IN PORTS REQUIRED

The repatriation of stowaways is not only reliant on a strong and effective presence in ports, but also on the specialist organisation’s reliable airport network. Some exercises are affected and even aborted at transit points due to inadequate planning, poor presence and/or assistance at these crucial places. A true specialist is a person/ company willing to provide that extra bit of effort and information, to help with cost-effective repatriations whilst minimising the risk factor.

Keep the stowaway alone in a secure area

After a few days make a thorough search for ID papers

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11 Beacon Skuld newsletter

The change of an institution Svein Erik Amundsen, Managing Director, Bergesen d.y. ASA

By Arild Wegener, Vice President Public Affairs, Skuld

Over the last couple of years one of the pet stories of the business press has been that Bergesen is losing faith in shipping. They do not know what to do with their considerable amounts of money and they may – possibly/conceivably/probably – look to other pastures in the future.

Then they • bought four VLCC’s • acquired options for two more • entered into a contract for one ore-carrier • announced that they would convert another tanker to FPSO • announced that they were looking for opportunities in further shipping segments • made it known that Bergesen would not be converted into an Internet or pharmaceutical company – in short, that they were in shipping to stay. As a means of bringing idle speculations to rest, this was as effective as anything. In a country known for reverence of its maritime history, Bergesen is a national institution. Sig. Bergesen d.y., himself a legend and a master practitioner of the art of colourfulness, set up the company in Stavanger in 1935. Through most

of its 65 years of existence it has been Norway’s biggest, wealthiest and most profitable shipping company. Tankers – big tankers – have been the leading investment area through most of its history, resulting in its position as the world’s largest independent tanker owner. Other hallmarks have been prudence, opportunism, longterm strategies and thoroughness in all its doings. NEW MAN AT THE HELM

1998 marked the end of an era: someone from outside the Bergesen family took the reins of the company. Svein Erik Amundsen, a veteran of shipping and finance, was appointed managing director, and Morten Sig. Bergesen moved to the position of chairman of the board. Beacon met with Amundsen the day after the publication of the 1999 results. Outcome: down 50% from the previous year, excellent (plus NOK 430 million) by anybody else’s standards.

Presenting the results at the previous day’s press conference, Amundsen also took the opportunity to hammer home the message of Bergesen’s long-term commitment to shipping. Yes, they intended to stay in their four investment areas: gas, VLCC’s, bulkers and offshore and yes, they might do additional things in shipping, too (LNG has been named as one candidate). An inhouse task force has been assigned to do the necessary stone-turning. For the benefit of Beacon’s readers, Amundsen recaps his and the company’s thinking on the four current investment areas: GAS

This is the number one area now, in terms of investments (two thirds of total steel values). Their presence in gas transport is long term and likely to expand in the future. The Bergesen fleet is employed in pools, which allows the company to be the, or a, market leader in all segments. The

12 Make way! Bergesen’s latest investments put pay to rumours that the company might diversify out of shipping

biggest ships are commercially operated out of the Bergesen head office, the medium-sized tankers by Exmar of Belgium and the smallest, since last year, by A.P. Møller. The benefits of being a market leader are not to be denied. However, for Amundsen, size and choice of organisation is not primarily a matter of moving the market, but of being even better at providing flexible services and designing customeroriented solutions. Closeness to the market, to the charterers, is defined as a sine qua non by the company and this philosophy guides their actions. VLCC’S

This is the area steeped in the heaviest traditions at Bergehus but which nonetheless has given rise to plentiful speculations about Bergesen’s choice of strategy. They must be read against the background that Bergesen was the only major player not to order new tonnage in the 90s. So while

Bergesen declared time and time again that new orders would be placed if and when the right opportunities arose, their existing fleet grew older. Two events have changed all that: six VLCC’s have been sold for scrap and four new vessels, under construction at Hitachi Zosen, have been bought, each at a cost of approximately USD 65 million. (Options for two more, have later been declared.) Amundsen finds it particularly gratifying that their move will not add to the future tanker fleet and that the vessels, already under construction having previously been ordered by Golden Ocean, will be delivered over the next 15–16 months. Will they order even more? Amundsen says they will continue to be opportunistic. They will take opportunities if they find them sufficiently interesting, otherwise not. He describes the changes in the tanker market as welcome but still

not sufficiently far-reaching. The degree of consolidation is inadequate. And the thresholds to entry into the trades are still too low, a market for “every man and his dog”. Industrialisation has still not reached the level where it should be. CONSOLIDATION

He therefore welcomes developments such as the establishment of the Tankers’ International VLCC pool. All sorts of factors, personality clashes not least, have prevented such innovations in the past. Step one for Bergesen is to sit down with their good friends on the customer side. Then they will make up their minds whether to join the pool or not. NEW ATTITUDES

Amundsen sees changing attitudes towards age and safety. Charterers’ scepticism towards elderly ladies is growing and hydrostatic balanced loading is not exactly a favourite

13 Beacon Skuld newsletter FACT FILE Bergesen d.y. ASA

Svein Erik Amundsen

• Founded in 1935 • As of 1 January 2000 the company owned and operated a fleet of 101 vessels consisting of 71 gas carriers, 20 crude oil carriers, 2 FPSO vessels and 8 dry bulk vessels. • Total employment was 3,441 persons including 3,165 mariners. • Total revenue in 1999 NOK 5,200 million • Net result same year NOK 430 million

• Born 1943 • Married, no children • After 12 years with Waage (which he helped to wind down) he joined Bergesen in 1977. Mainly involved on the financial side. Appointed deputy managing director in 1986 and managing director in 1998. • Hobbies: Golf (handicap 17), wine, outdoor life including fly fishing.

among oil companies either. Twenty years is gradually becoming the new upper limit and at 25 it is definitely game over. Scrapping levels will be determined accordingly, presumably at a reasonably satisfactory level regardless of the freight market. The Erika incident is an extra boost to these changes. Amundsen’s message to feverish politicians is therefore: take a deep breath. The market is changing regardless of your actions, and new measures must be implementable and practicable.

Soon the tanker Berge Hus will also be able to look forward to a future in oil production. THE COMPANY CULTURE

Amundsen says Bergesen would like to be associated with a number of quality characteristics: dynamism, customer-orientation, stringent safety requirements – and financial solidity. Cost-effectiveness and profitability is always the bottom line, while the ability to adjust and to change is built into the concept of dynamism.

DRY BULK

COSTS

Dry bulk is defined as a niche business at Bergehus. The vessels are large and the customer relationship particularly close, with 90% of vessels on long-term contracts to charterers in Europe and Japan. One more vessel is on order, but in general terms the company does not see dry bulk as a growth area.

Despite the fact that results are not exactly causing panic with the company, new economy measures will be introduced. Basically, shipping is a low-cost industry that provides a homogenous service and quality can never be a substitute for competitive prices, says Amundsen. Where those cuts will be applied is still under investigation. One-third of the seafarers are Norwegians, nearly all of them officers. They make up a large portion of the officer corps at the company. Norway’s politicians have taken a lot of flak recently from the shipping community over the lack of shipping policy predictability and long-term thinking. Amundsen shares the concerns and points to the difficulties associated with longterm planning in an environment

OFFSHORE

After many years of close observation, offshore emerged as a separate reporting area last year. Berge Hugin, a joint venture project with Statoil, was first off the blocks. The tanker Berge Charlotte was converted to a FPSO with no supporting employment contract, but was recently signed on to work for two years for Triton Energy in Guinea.

increasingly known for its shortterm changes, but states that Bergesen’s location in Oslo, Norway is not an issue on the company agenda. THE SKULD CONNECTION

Although the Bergesen company was first established in 1935, it is considered part of a lengthier history. Previous generations were cofounders of Skuld in 1897, and on 27 January of that year Hafrsfjord, Sjøgutten and Kronprinsesse Victoria were entered into the Association. The first instalment of the premium was charged to them one week later: NOK 501.00. Today Skuld is the P&I insurer of Bergesen’s fleet of Very Large Gas Carriers. Amundsen believes in the importance of keeping an active and dynamic marine insurance community in Norway, of which Skuld is an important part. He sees changes in the future: probably fewer players who will find their organisations and modus operandi increasingly tested. Bergesen wants competition and quality, which requires an environment of sufficient size, availability and innovation. The way the business is organised is of lesser importance.

14

What makes an American jury tick?

By Virginia Ryker, Claims Manager, Skuld

The American trial system has long created problems and confusion for maritime industries. Despite the fact that Admiralty matters fall under the jurisdiction of U.S. Federal Courts and therefore have no juries, personal injuries to passengers, crew members, and longshoremen often fall outside the scope of Admiralty jurisdiction and wind up subject to the “whim of the jury”. A review of Florida verdicts in back injury cases from January 1998 to December 19991 illustrates the point. For “back injury” claims in which non-surgical treatment was followed, jury verdicts ranged from USD 10,000 to USD 164,884. When surgery was involved the discrepancies were even greater – ranging from USD 3,443 award for sick wages only, to over USD 500,000 in cases where treatment required more than one surgical treatment.

phenomenon of the American juries, last November Skuld sponsored a personal injury mock trial with the assistance of San Francisco maritime trial attorneys Norman Ronneberg and Edward M. Bull. Audience participants heard the evidence presented by several witnesses and experts in the matter of an injury to a longshoreman. After the evidence was presented, several juries comprised of audience members were asked to deliberate and decide the case. Despite hearing the exact same evidence and finding negligence on the part of both the plaintiff and the defendant, the juries greatly disagreed on the degree of contributory negligence on the part of the plaintiff and the amount of the plaintiff’s damages. The results of the jury panels are shown in the table below. SO WHAT DOES MAKE AMERICAN JU-

MOCK TRIAL

RIES TICK?

To try to help our members and friends understand the

What nearly all of the participants

Jury 1 Jury 2 Jury 3

in the mock trial came to appreciate was just how much jury members’ perceptions are shaped by the jury member’s own individual history and personality. For those who took part in the jury deliberations, it also became quite clear that certain jury members who had very strong feelings about the case tended to dominate the discussions and control the group. Several jury members also commented that because they wanted to reach an unanimous decision, they compromised their own position on the issues for the sake of the group. These are comments often echoed by real world juries. IMPORTANCE OF JURY SELECTION

Finally, it became clear to participants just how important the jury selection phase of a trail is. As every good jury trial lawyer knows, effective jury trial planning must include proper attention to jury selection. 1

Source: Florida Jury Verdict Reporter

% of fault attributable to Plaintiff

Lost past and future earnings damages, if any

Pain and suffering damages, if any

Total award to Plaintiff after % of fault applied

25% 50% 88%

Undecided USD 46,000 USD 30,000

Undecided USD 27,000 USD 6,000

Undecided USD 36,500 USD 4,320

15 Beacon Skuld newsletter

Fill-in-that-form, and all th By Michael Thorp, Senior Adviser External Services, Skuld

If your company has an IT strategy which extends to the vessels under your management, then there is a good chance that your captains will find this an interesting article. “Just having a PC on board is not enough.” This was a statement made by the Managing Director of VTM Products (Vessel Traffic Management Products A/S). Skuld visited the company’s offices in order to follow up on an important aspect of safety that is attracting more and more attention. The safety aspect concerns the increasing burden of paper work on captains. The system we looked at to help overcome this problem is designed to enable the master of a ship to plan his voyages from port to port and to take care of the paper work for all port documents. A payroll system can also be supplied and integrated in a common database for ease of operation. One feature was very useful, for example, crew details, names dates of birth, signing on dates etc. only need to be entered once, the system subsequently duplicates this information on demand. In co-operation with the British Admiralty and Fairplay, VTM Products adds new ports to the VTM Guide and updates the navigation and port information from British Admiralty’s sailing di-

rections and Fairplay’s Port Guide Data Base. The navigation information is updated every 14 days based on the British Admiralty’s “Notices to Mariners.” The updated information is sent automatically to the ship by e-mail. However, to take advantage of the VTM Products system, the ship owner or manager needs to have an IT strategy. “It is no good just placing a computer on board,” said Ove Sivertsen-Strømsholm, the boss of VTM Products. “A company needs to think through its own Information Technology system and buy the hardware and the programmes that really fulfil the company’s requirements, particularly with regard to the master’s needs on board ship. “Having said that,” he continued, “the VTM Products system is very user-friendly. Simply start up the programme and click your way to the form you need to fill out.” The programme is initially supplied on a CD and delivered with simple instructions for installation on the PC. SKULD’S INTEREST

Skuld’s interest in such a system is part of the club’s ongoing commitment to the monitoring of developments at sea in the field of Loss Prevention. Skuld’s claims-handling executives say that they are often shocked to discover the pressures on a captain, particularly the burden of paperwork that seemingly prevents him from doing his job. It is quite possible that much of the burden of paper work diverts his attention from being the leader of the vessel, making sure the ship

runs well and safely. Skuld executives stress the importance of useful log book entries that accurately record events leading up to, or immediately after an accident. The Association also stresses the importance of securing evidence, and club executives often complain that a ship’s master does a poor job of providing the club with good enough documentation in order to put together a reasonable defence. But this is just another part of the documentation burden the master faces and he desperately needs some help. Now that the radio officer and the chief steward have gone, the captain no longer has assistants. CAPTAINS UNDER STRESS

Pursuing this point we quote from an article by Julian Parker, Secretary of the Nautical Institute in London, published in Fairplay, 24 June 1999, in which he expresses concern at the increasing pressure on captains. “The ISM Code has been introduced to improve safe operating practices. It demands extra administrative time, but this has not been provided for. MARPOL now includes garbage management procedures, which have to be documented. GMDSS aims to provide quick rescue in an emergency, but the radio officer has gone and the ship is exposed to more communications. There are the additional burdens of drug traffic, piracy and stowaways. STCW 1995 sets out to raise standards but (for the ship) the consequences are more on board training, more complicated certification and many unsolved administrative problems.”

16 VTM Guide update Time

Software

Hardware

IT Strategy

e others

User

System and workflow

The article continues, “Masters naturally feel they have to navigate safely in coastal and port approaches. Usually with no break after an allnight passage. They and their officers have to prepare for inspection audits, crew changes, stores, and – oh yes, I nearly forgot – cargo work, stability strength, bills of lading etc.” (We add, mates receipts, passage planning, customs declarations, port documents, vouchers for sick crew members, the list is not complete.) Mr Parker continues, “Can we really expect tired and hard-pressed crews to keep all their files, regulations, audit inspections, ship’s business and operating procedures fully up-to-date with fewer people on board. What suffers is care and attention to the crew, planning and monitoring and the exercise of effective command.” An active captain and pilot is also quoted in the article. He says, “During the ship’s port approach it is unbelievable the amount of business communications that masters have to deal with. Under these circumstances can they really keep their eye on the ball?” Mr Parker’s article ends with, “In the short term, however, please give the ship’s master a clerical officer.”

Port information from Fairplay 90% Admiralty 10%

= Update from “Notices to Mariners” every 14th day

“Just having a PC on board is not enough”, Ove Sivertsen-Strømsholm, Managing Director, VTM Products

ERIKA, AGAIN

We also quote from an article in Lloyd’s List 8 February 2000 concerning the master of the Erika, who, for the first time after the loss of the tanker, spoke out about the difficulties of modern-day seafarers. “Captain Mathur spoke about the weight of paperwork which had to be completed amid other duties during ever-shorter periods at sea between

ports.” Well, perhaps for masters, the VTM Products system could mean light at the end of the tunnel. At Skuld we have a duty to focus attention on systems and products that are innovative and also lead to enhancing safety on board.

For details and a free demonstration CD contact: VTM Products. Tel: +47 37 03 55 00 E-mail: [email protected]

17 Beacon Skuld newsletter

Watch out 1

By Johan Båth, Principal Surveyor, Skuld

Maintaining a proper safety level in accordance with applicable (SOLAS) requirements can in some situations mean that a new risk is introduced. This should not be interpreted as if we are of the opinion that the compulsory SOLAS regulations are in contradiction to “common

Courtesy of Fundia Profiler AS

Equipment containing pyro should be treated with utm

sense” and a proper level of maintenance work. On the contrary, this article aims to focus on the risk involved when anyone has to deal with any kind of equipment, for any reason installed on board, and that person does not fully understand how the equipment behaves in various situations.

On board a vessel (entered with SKULD) maintenance work on the boat deck railing was carried out. In order to complete the job properly the Man Over Board (MOB) buoy (required by SOLAS III/7.1.3) had to be temporarily removed. The MOB buoy was activated unintentionally and exploded, causing severe injuries to a crew member. He was treated in hospital, and has now recovered. MANY ACCIDENTS

The maritime administration of the flag state carried out a thorough investigation of the incident. The report has come to the attention of Skuld. To our knowledge, the unintended activation of the equipment was not an isolated occurrence, but has taken place a number of times, although rarely causing personnel injuries. We have found it right to highlight the risks involved when handling MOB signals. The conclusions are summarised below. In this case the MOB signal fell out from its rack accidentally. It fell to the deck and smoke was generated. The crewmember lifted it,

and after a few seconds it exploded. WRONG POSITION

Most probably the reason for the explosion was the fact that the MOB buoy, after being activated due to removal from its rack, was held in a position opposite to what the manufacturer had calculated as “normal” after activation, namely floating upside down. The principle behind the function of the smoke signal is that smoke is generated with a certain rate within the container and is simultaneously emitted through narrow holes with a very precisely calculated diameter. If the holes widen, the burning process will extinguish and no smoke will be generated. On the other hand, if the holes are too narrow to allow evacuation of the generated smoke, the process will continue and end up with an explosion caused by internal pressure building up. The investigators have suggested that the holes for evacuating the smoke in this incident were blocked by the ignition material, or possibly by ashes from the already burnt

material. The fact that the equipment was leaned at an angle to the vertical line which was not corresponding to the manufacturer’s (or anyone’s) idea of the behaviour of a released MOB signal, supports the theory that blocked smoke evacuation holes caused the explosion. MANUFACTURER’S VERSION

The manufacturer has a theory slightly different from this. The MOB buoy was partly released from its holding rack, initiating the ignition, but was still attached in its lower end to the rack, blocking the smoke evacuation holes which caused the pressure build up. Whatever technical explanations will be presented, the result of the accident will still be the same as the warnings to the personnel on board. In the flag state investigation report the following conclusions are drawn: • Before any work involving moving or replacing the apparatus, study carefully the manufacturer’s information on how the equipment works and on the precautions to be taken in advance.

New equipmen be fully aware before work com

18

Watch out 2

otechnical material most care!

Nigerian sports levy! Running up the costs – somebody has to pay!

nt has its risks. Crew must of any ‘dos’ and ‘don’ts’ mmences

• Avoid releasing the apparatus from its rack for other purposes than it is intended for. • When replacing the apparatus, tools should be used that enables the old apparatus to be removed together with its rack. • If the apparatus for some reason must be removed from its holding rack, it is very important to work with greatest caution and not forget to place the safety pin in its proper position. • Should, in spite of all safety precautions, the apparatus be activated, it is of the utmost importance to stay away from it or immediately throw it away to a safe distance. As a consequence of the accident the manufacturer has improved the warning labels posted on the

equipment. The revised version reads as follows: Caution Never detach the MOB signal from its bracket. According to IMO regulations the light check does not need to be performed. When installing the MOB unit for manual operation, leave the safety pin in place. It is removed manually when the signal is used. When replacing the signal, remove the signal and the bracket together as one unit. Of course we are aware of the fact that there are other makers of MOB signals, with different methods for attaching it to the vessel. However, the warnings mentioned above will, slightly modified, surely be applicable even for these.

From one of our contacts we have received a warning that the Federal Nigerian Government has introduced a levy of USD 200 per vessel calling Nigerian Ports as from 11 February. The levy will be imposed for a period of 3 months. The reason for the levy is promotion of the African Nations’ cup, the Sidney Olympic Games and the All African Games.

19 Beacon Skuld newsletter

Risk management – what’s in it for us

Skuld’s Vice President Risk Management explains the philosophy, policies, principl

By Tor Erik Andreassen, Vice President Risk Management, Skuld

Question: Can you in layman’s terms ex-

Question: So what means most, the

plain to our readers about Skuld’s risk

standard of the vessel or the “standards”

management programme?

of the manager and the owner?

At times I try to visualise these efforts by comparing the stereotypical images of any London gentlemen’s club – not that I have ever visited one – to that of the Skuld club. The main parallels are: we are very selective as to whom we accept and take in as members, but once inside, the whole Skuld organisation does its utmost to provide the best service.

Although the two tend to go hand in hand, I usually reply that we would much rather see a poor ship with a quality-focused manager, than a good vessel with a manager lacking this focus. For this latter case, it is only a question of time before vessel deterioration sets in. Now it may seem easy in theory, but trying to “measure” the quality level of a manager who may be new to Skuld is not so straight-forward. Even here, our on board surveys do play a role. Our surveyors spend on average two full days during the survey and gain a variety of impressions of how the on board management acts and functions – it should mirror fairly well the ambitions of the shore-based management company. How the system has recorded and dealt with discovered defects on board, is a good indicator of the “health level” of the ship and its manager. Furthermore, how the manager responds to Skuld on problem issues is another good indicator.

Tor Erik Andreassen is responsible for Skuld’s Risk Management efforts includ-

Question: Membership to gentlemen’s clubs is typically linked to letters of recommendation from other members – is

ing our Technical Services

that a Skuld criterion as well?

departments. We asked him

No, that is not a criterion, but the quality level and the safety consciousness of the potential member are important parameters in the selection process we generally refer to as a risk analysis. Since I come from a background of technical risk analysis and formal safety assessments, I am somewhat reluctant to use the term risk analysis, but it is nevertheless an evaluation of risk. The overall objective of this exercise is to establish whether the potential member matches the quality requirements of Skuld. When a P&I club mentions quality, people immediately think of on board surveys with focus on cargo worthiness, seaworthiness and safety. Such surveys are still a potential and important element of our risk evaluation process, but we are gradually turning our focus increasingly towards the merits of the owner and manager operating the vessel.

to enlighten our readers as to what he and his staff are up to.

Question: How do our members and potential members respond to the survey reports issued by the club?

Very differently: from the very professional response with own reports including photos, etc to verify the corrective work done; via stalling and tennis matches of written argumentation; to utter silence. It is, furthermore, no big secret that it may be straight-forward to explain the necessity of updating a certain safety device or other specific hard-

20

s? ware, but it is not so easy to try to convey a message of poor vessel management. This is at times seen as equivalent to saying “You are not doing your job properly,” which is not always well received. Looking back to go forward – analysis of historic claims is the cornerstone of good Loss Prevention

Question: Back to your gentlemen’s club picture – having been through the difficult selection process – once inside, what are you in for then?

Well, apart from the normal processes related to claims handling and maintenance of policies, cover and other underwriting issues, the risk management functions are often commonly referred to as Loss Prevention. In my mind, the cornerstone of good Loss Prevention is analysis of historic claims: look back and learn from what went wrong. If we at Skuld were able to learn something from every case we handled and were able to store and analyse this accumulated experience over time, we would have an excellent basis on which to tutor and coach our members. At any point in time, Skuld has some 12,000 live claims cases, of which some 4,000–5,000 are new every year, while a corresponding number of cases are closed each year. This is a vast amount of data and information that is of general interest for all vessel types and trades to a certain extent, whereas other information is specific to trade and vessel type. As an integrated part of Skuld’s IT investment programme, we are currently introducing a new set of coding tables for registration of claims – a project referred to internally as Codex. From the outside, claims

codes must sound terribly dry and boring. Look at it as any other archiving key – unless you know which folder, binder or bag something is stored in, you will never retrieve it when you need it. It’s not dry and boring, though, since it is a challenge to balance finding the right structure, covering necessary aspects with sufficient detail to give good resolution, but without going beyond statistical interest.

Having said that, a club’s Loss Prevention efforts should, in my mind, not be judged by the number of products and new releases, but rather on content. We could always buy products from third parties, put the Skuld logo on it and distribute this to our members, but this has not had high priority on my list. Question: You sound full of ambition, as if things will change a lot in the near future when it comes to Loss Prevention

Question: But even with the best codes

in Skuld?

and well organised claims data – how

Absolutely, and our first priority is to get the new claims codes tied together with the new IT system, so when this goes live we can start to build a vastly improved database of what goes wrong and why. When the costly experience of accidents and mishaps of one member can be of benefit to our other members and hopefully prevent recurrences, then we are really starting to harvest money spent on Loss Prevention. Spreading the word on what and why will be of benefit to all. There are exciting times ahead.

will that help Skuld’s members in relation to Loss Prevention?

Through trend analysis, cause/effect analysis and indepth review of special cases we will be able to draw lessons and conclusions from the historical material. The biggest challenge, actually, lies in communicating and presenting these findings to our members. The traditional means of presenting Loss Prevention material has been articles, reports, booklets, posters and videos. These channels will also play a part in the years to come, but it is more than likely that web and extranet solutions with elements of interactive training will rapidly increase in importance.

Photo: Knut Vadseth

es and practicalities

21 Beacon Skuld newsletter

SMitten in California Illegal “Chinese” immigration sparks tough regulations

By Gregory W. Poulos, Lillick & Charles, San Francsico

In some parts of the world a large pot of boiling water, some salt and melted butter mixed with garlic is all it would take to solve the problem of an edible crab infestation. In California, however,

recent Skuld circular, these regulations require that all vessels perform a mid-ocean exchange of ballast water before entering California ports after operating outside of the 200 mile Exclusive Economic Zone (“EEZ”). The ballast exchange must take place in water that is more than 200 nautical miles from land and more than 2,000 meters deep. Certain exceptions exist, such as if heavy seas make ballasting unsafe or if the vessel is equipped with a ballast water treatment system or retains the ballast water on board. Finally, California has now adopted a $600 per voyage fee which will be used to fund research into ballast water regulation. A reduction of this fee to $400 per voyage has been announced to become effective after the current emergency regulations expire on April 29, 2000.

the culinary potential of the

THE CHINESE CRAB CONNECTION

Chinese Mitten Crab has been

These regulations and taxes are the State’s response to the infestation of California waters by alien species. While the phenomena of foreign species traveling in ballast water is not new (the Chinese Mitten Crab was found in German waters in the early 1900’s for example, and the Zebra Mussels are causing untold problems in the Great Lakes and have been found in California waters as well), the introduction of the Chinese Mitten Crab and other non-native species into San Francisco Bay was the spark that ignited the current state of affairs in California. One study conducted in 1995 reported, for example, that since 1970 a new species has been

overlooked in favor of government regulation and taxation aimed at the near impossible task of ridding the State’s waters of this unwelcome import. The regulations have taken three forms. First, the California Code of Regulations now provides that it is “illegal to import, transport, or possess live Chinese Mitten Crabs.” Second, and more important to the maritime industry, are the emergency regulations regarding ballast water exchange. As discussed in a

introduced into the waters of San Francisco Bay or the Delta Region every 24 weeks. This includes new species of worms, clams, mussels, barnacles, snails, sponges, seasquirts and, of course, crabs. While the introduction of all of these species cannot unequivocally be related to ballast water, some of these introductions have come about as a result of ballast water exchange. ECOLOGICAL IMPACT

All of these species are having profound effects on the ecology of the bay and delta. The non-native species are successfully competing against natives for food and breeding sites and, in some cases, have contributed to the extinction of native species. None, however, seems to have captured the attention of the government and press quite as much as the Chinese Mitten Crab. The Chinese Mitten Crab is native to mainland China and the coastal areas along the Yellow Sea. It is considered a delicacy in China and, indeed, China has a commercial fishery for the species. The first Chinese Mitten Crab found in California was collected by a shrimp fisherman in South San Francisco Bay in 1993. The discovery raised alarms because the environmental conditions in San Francisco Bay (temperature, salinity, bank soil and vegetation) allow the crab to reproduce. The crab has now been found widely dispersed in South San Francisco Bay and into the San Joaquin Delta. EXCESSIVE REGULATION?

22

The Mitten Crab is causing a significant problem for California’s health authorities

Although the amount of regulation currently in place is unfortunate, it does appear that there is some justification for the concern expressed by the California Department of Fish & Game. The Mitten Crab in particular has the potential to wreak havoc on the state fisheries, other native crustaceans and the extremely important agricultural developments throughout the delta. Fisheries are affected because as the population grows more Mitten Crabs are turning up in fishing nets causing damage to the nets and to the remainder of the catch. The crab is also now competing with native crustaceans, primarily crayfish, for food. As for its effect on agriculture, the California Department of Fish & Game reports that the crab has been found to block the intakes on agricultural pumps, and it is also burrowing

into the levees used to reclaim land for agricultural uses in the delta. In short, it appears that the Mitten Crab has the potential to cause a tremendous amount of damage to the State. NO COMMERCIAL EXPLOITATION!

Regulation is one way of dealing with this invasion; eating or exporting crabs is another. The culinary potential of the species has not been lost on some entrepreneurial fishermen who have proposed that the State permit commercial fishing for Chinese Mitten Crabs either for sale in the United States or for export. The response to this seemingly reasonable suggestion was overwhelmingly negative. According to the Department of Fish & Game, establishing a commercial fishery at this point would encourage unscrupulous fishermen to intentional-

ly

spread the species beyond its current confines in hopes of generating greater profits. Others believe, however, that no amount of government regulation is going to slow the spread of the species which, by all accounts, is adapting quite well to its new surroundings. No matter which side of this debate you are on, the emergency regulations are in place and will likely become a permanent fixture in California’s ongoing efforts to control the spread of non-native species. Anyone interested in finding more information about the spread of non-indigenous species can visit the Sea Grant Nonindigenous Species web site at www.sgnis.org. Bon appétit.

23 Beacon Skuld newsletter

Bills of lading – the flip side By Charles Williams, Partner, Thomas Cooper & Stibbard, London

Of all the trade instruments known to English law, the bill of lading is one of the most fascinating. Its three functions are well-known – as a receipt for the goods shipped, as evidence of the contract of carriage and as a symbol of the goods described in the bill. It is the third of these which is the most interesting. At some stage in its history, the bill of lading acquired the attribute of negotiability, and became a document of title. This gave it a flexibility which accounts for its popularity, so much so that the seawaybill has made little headway against the traditional bill. This flexibility allows it to become not only the linchpin in respect of the shipping contract but also the sale contract, the letter of credit contract and in the financing of the sale/purchase transaction. The shipowner has little contact with the life of the bill of lading, once he has delivered it to the shipper, until it is surrendered to him, usually by some third party, against discharge of the goods. It is, however, vitally important to the cargo interests and those financing them. Knowledge of their requirements, in relation to a bill, will assist a shipowner to understand cargo interests’ motives in relation to a bill. Let us take a typical example of a Seller in one country selling goods to a Buyer in another country on a CIF basis. The sale contract requires the Seller to ship the goods and

transfer the bill to his Buyer. It will also contain a payment clause. Payment is to be by way of a letter of credit (often shortened to the word “credit”). BANK INSTRUCTIONS

The Buyer will instruct his bank to issue a credit in favour of the Seller. The Bank will notify the Seller of the issue of the credit. The effect of the credit is that if the Seller presents to the Bank the documents referred to in the credit, then the Bank will pay to the Seller a sum of money (in effect the purchase price). The documents required will usually include the original bills of lading, the commercial invoice and often certain certificates relating to the goods. By this procedure the Seller achieves some security in respect of payment once he has shipped the goods, in so far as the Bank has promised to pay pursuant to the credit. The letter of credit will invariably incorporate the Uniform Customs and Practice for Documentary Credits (1993 Revision) of the International Chamber of Commerce (often known as “UCP 500”), which sets out a code as to how credits should be handled. NO DISCREPANCY TOLERATED

The first key point is that the Bank is only allowed to pay against documents which conform precisely to the terms of the credit and the UCP. If there is any discrepancy, then the Bank is entitled to

refuse to pay and to return the documents to the Seller. The Bank can do this even in relation to the smallest of discrepancies. Hence the desire of Sellers/Shippers to ensure that the bills are produced in a form acceptable to them, even though that can sometimes be irritating for the shipowner. One of the perennial problems between a Master and the Shipper is the clausing on a bill where the condition of the cargo is subject to dispute, particularly in relation to cargos like steel. Here there may be a real conflict of interest between Master and Shipper. The Master needs to insist that the bill records the apparent condition of the cargo, whereas the Shipper may need a “clean” bill if he is to trigger the Banks payment undertaking under the credit. DIFFERENT FROM SALE CONTRACT

The second point is that the contract between the Bank and the Seller under the credit is entirely independent from the sale contract. If the correct documents are produced to the Bank then (in the absence of fraud) it must pay the Seller, irrespective of any squabbling between the Seller and the Buyer about the goods or the sale contract. Often the Bank’s payment under the letter of credit will be recorded in the Bank’s books as a loan to its

customer – the Buyer. Again, the function of the bill as a symbol of

24

The bill of lading is the linchpin in the shipping process

the goods comes to the fore. While the bill is held by the Bank, and providing it is so agreed by the Buyer, the Bank will be entitled to hold the bill as security for the advance made. It does not obtain ownership of the goods but obtains rights of possession of the goods. Thus where its customer has defaulted or become insolvent the

goods from the vessel at the port of destination. It is easy to see why from time to time there is friction as to the issue of the bill of lading and its presentation under a letter of credit. All of the surprises and uncertainties of a voyage are reduced into the rigid straitjacket of precise banking documentation.

Bank, as holder of the bill will be entitled to claim delivery of the

The shipping equivalent, perhaps, of trying to squeeze a knock-kneed

giraffe into a Volkswagen Polo. This article is a brief introduction to Letters of Credit and Pledges. The subject is explored in more detail in a booklet by Charles Williams called “Bills of Lading in Trade Finance” available free from Thomas Cooper & Stibbard (Tel: + 44 20 7481 8851/ Fax: +44 20 7480 6097)

25 Beacon Skuld newsletter

Legal notes Pumping warranties:

Different jurisdictions, diff By Anne Liversedge, Lawyer, Skuld

An FDD lawyer deals with many demurrage disputes. The permutations are endless – when laytime starts, the availability or otherwise of berths, disputes on weather, efficiency or otherwise of vessel’s gear to name but a few. With tanker voyage C/Ps disputes increasingly centre on a clause which, although not strictly concerned with laytime or demurrage, is becoming synonymous with laytime disputes – the pumping warranty. The clauses are in many, if not all tanker voyage C/Ps, varying in length and complexity (the oil major standard forms tending to be the most all encompassing). This article centres on the two aspects which tend to appear in all clauses regardless of their length or complexity. “Owners warrant that the vessel can discharge a full cargo within 24 hours or maintain 100 psi (7 kg/m2) back pressure at the ship’s manifold....” Charterers tend to regard this clause as entitling them to deduct any time over and above 24 hours spent discharging cargo from any demurrage claimed by Owners. This is wrong. The clause is not connected to the laytime or demurrage provisions and, most importantly, it does not operate as an exception to the running of laytime or demurrage. Although the language used is open to debate (i.e. does “can” automatically mean “will”?), the clause is seen as a warranty by Owners. In the event the warranty

is not met, Charterers are entitled to damages. The question of damages is discussed below. So what is the Owner warranting? Under English law Owners warrant that the vessel will either discharge the full cargo in 24 hours or will maintain the required back pressure at the ship’s manifold. The warranty is complied with if either of the two requirements are met. Unless there are any provisions to the contrary in the C/P (see e.g. BEEPEEVOY4) a full cargo is exactly that and any time spent stripping should also be included. The position under US law is different. There the warranty is that the cargo will be discharged within 24 hours. Failure to so discharge the cargo will result in a breach of the warranty. Owners will however be exempted from the consequences of their breach if the required back pressure is maintained. At first glance it seems there is no difference in the approaches – as long as one of the two conditions is met the Owner will have met the requirements of the clause. The different approaches have a big impact on the question of damages however (see below). There is a tendency in the US however to only apply the warranty to bulk discharge and to therefore exclude stripping time from the time requirement. The point of measurement is the ship’s manifold and not the terminal’s (which could be significantly lower). The clause does not deal with how accurate that reading may be (e.g. when was the

gauge last calibrated?) but it does mean that the vessel should keep a detailed pumping log with pressures checked and recorded every 1–2 hours. “...provided shore facilities permit” It is not unusual for terminals to give instructions or otherwise act in a manner which will impact upon the vessel’s approach or ability to discharge the cargo – i.e. by stipulating a maximum back pressure of less than 100 psi, restricting flow rates or providing only 1 hose when the vessel has 4 connections. Most pumping warranties therefore allow Owners to escape the warranty if such restrictions/interference originates from shore/cargo side. There is some debate on just what allowances should be given to Owners as a result of the vessel being provided with too few hoses or hoses of a smaller diameter than the vessel can connect. It is obvious that the vessel cannot discharge cargo as quickly through one hose as through 4. Conversely however, if all four pumps can be used to push cargo through 1 hose, the pressure should be greater. Also, it should be easier to maintain a higher back pressure if the cargo is being pushed through an 8” opening rather than a 16” one (albeit that other factors such as hose length and shore gradient could also effect the pressure). The writer’s own experience is that Arbitrators in England will disregard the above and will allow Owners to escape the warranty unless the vessel is supplied with the optimum hoses and is unfettered on flow and

26 A matter of dispute – the pumping warranty is far from simple

erent views back pressure. Whilst this may at first glance seem very easy on Owners, it is to be remembered that under English law the warranty is in two parts and so if an Owner is denied the opportunity to comply with one of those two parts, there has been an interference with his ability to comply with the clause. Again US law differs. The writer’s experience is that the fact that the apparent restriction could in fact assist the vessel meet the back pressure warranty will be taken into account. Given that meeting the back pressure is an exception to the main warranty it would be strange if an Owner could evade liability for breach of warranty even though the “restriction” should in fact make it easier to meet that requirement. So we now assume that the vessel has not discharged the cargo in 24 hours, has not met the required back pressure and has not been able to establish that the terminal was to blame. How is the Charterer to be compensated? The standard under English law is that the Charterer is to be put in the same position as if the warranty had been complied with. Well if the warranty had been complied with the cargo would be discharged within 24 hours, and if actual discharge takes 33 hours we can deduct 9 hours say Charterers gleefully! This is not the case. There is a further concept that where there are two ways to perform an obligation the defaulting party can choose to perform in the way that effects his position best/minimises

his liability in damages. With the warranty an Owner will choose to comply with the back pressure requirement and therefore the Charterer’s damages is the cost of time resulting from the failure to meet the psi. The writer has such a formula which was provided by George Lugg of Casebourne Leach for use in a London Arbitration. The formula was used by the Arbitrators to calculate the actual loss of time. A different formula has recently been adopted as the “industry standard” by some Arbitrators but both formulas have been criticised for over-simplifying the position. In the near future INTERTANKO will publish a booklet on the interpretation of pumping warranties and the factors necessary to properly calculate the loss of time arising from a breach of the warranty. A computer programme which takes those parameters and calculates the loss of time should also be available shortly. Further details can be obtained from the writer. In the US, the Charterer is entitled to discount all time over 24 hours from laytime. A Master/Chief Officer can take a number of simple actions which could protect his Owner’s right to collect demurrage and avoid damages for breach of warranty. As stated above, the vessel should keep a regular pumping log recording the back pressure at the ship’s manifold. The log should be signed on behalf of the ship and the terminal and if the terminal representative refuses to sign, a note

should be made of that refusal. A lot of useful information can also be recorded on that pumping log – the number and size of hoses provided by the shore, the number and size of hose connections available on the vessel. In addition, any instructions from the shore relating to discharge should also be added. Letters of Protest Letters of Protest are also useful if disputes arise. To this end Masters/Chief Officers should be encouraged to tender such letters whenever the terminal provides less than the optimum number and size of hoses or impose other requirements which could hamper the ability to comply with one or other of the warranties. Such letters are often available as standard forms requiring only a few blank spaces to be completed and, in conjunction with the pumping log, constitute the best evidence in Owner’s favour in any subsequent litigation. As a side issue it may well be that a new pumping log form with room for far more information than the present form will be published by the Working Group on the Fair Interpretation of Pumping Clauses. Increased details together with the computer programme mentioned above should hopefully lead to fewer disputes on the level of damages and the adoption of a true industry standard.

27 Beacon Skuld newsletter

Legal notes NYPE clause 8:

Charterer’s orders and safe Charterer’s orders The Hill Harmony [1999] 2 Lloyd’s Rep.

By Anne Liversedge, Lawyer, Skuld

These two cases involve essentially identical facts but with vastly different outcomes. Two vessels were time chartered on the NYPE form. Clause 8 of that form provides that the Master is under the orders and directions of the Charterer and that he will prosecute the voyage(s) with due despatch, and clause 11 gives Charterers the right to give the Master sailing orders and directions.

The Master of the HILL HARMONY was ordered to follow the Great Circle Route across the Pacific. The Master had previously encountered bad weather on this route (indeed weather that had damaged the vessel) and therefore decided to follow the southern route which was significantly longer. In the event the weather encountered on the southern route was more severe than that which would have been encountered had the Great Circle Route been followed. Charterers deducted hire for the extra time taken on the crossing and the additional bunkers consumed. The Court of Appeal held that whilst the Master was

indeed obligated to follow Charterer’s orders and to prosecute the voyages with due despatch, neither obligation displaced the responsibility of the Master to decide matters of navigation. Charterers were not entitled to give orders which would tie the Master’s hands on any navigational matters. It was also held that a conscious decision to follow a particular route, taken whilst the vessel was still in port (rather than whilst sailing and in response to events and weather en route) did constitute a question of navigation. A DIFFERENT STORY

The Tribunal in Houston reached a

28

e ports 209 The Trinity Square LMLN 517 (2.9.99) & Safe Ports: a new development?

different decision on virtually identical facts (although the C/P contained an additional clause allowing Charterers to deduct from hire in respect of deviation). The Master took a particular, longer route to avoid hurricanes (although no weather warnings were in effect at the time the decision was taken). Again the weather encountered on the voyage was more severe than that which would have been encountered had the normal route been followed. The Tribunal allowed Charterers to deduct from hire in respect of the hire and bunkers, holding that the decision to take the longer route constituted a deviation which the Owners could not, in this case, prove was reasonable. Interestingly in this case Owners sought to argue that Charterers should have given specific instructions as to the route to follow (and argued clause 11 gave Charterers that right). The Tribunal found however (and this is in accord with the decision by the English Court of Appeal) that questions of navigation are squarely within the Master’s realm of responsibility; however that alone was not enough to justify the Master taking a longer route than that which was usual for the time of the crossing. These two cases demonstrate the importance of choice of law clauses in C/Ps. Under English law the Master has, to all intents and purposes, a free hand in deciding questions of navigation (and indeed, even if the decision was taken wrongly, if the C/P contained a Clause Paramount, the Master

would probably be protected by the errors of navigation defence). A different result will seemingly result in the US. It seems likely that if the Master cannot show that his decision was taken reasonably, a decision to take a longer route will constitute deviation or a failure to prosecute the voyage with due despatch. SAFE PORTS/BERTHS: CHARTERER’S LIABILITY FOR DAMAGE TO THE VESSEL

We are grateful to Sinclair Roche & Temperley for bringing the following, as yet unreported arbitration, decision to our attention. The decision is an interesting development in the area of Charterer’s liability for unsafe ports and berths. The vessel in question grounded whilst loading at a scrap steel berth in the US. Although the bottom was soft the vessel struck an object on the sea bed and was damaged. Owners claimed the repair costs from Charterers arguing that the they were in breach of their obligation to only trade the vessel via safe places. Charterers had informed the Master that the depth at the berth was 39ft and that that information was verified by Charterer’s representative at the port. The port guides and charts however indicated a depth somewhat lower, and it had been highlighted that the port suffered from negative tidal effects on draft. The vessel grounded and subsequent soundings showed the draft as being close to the figures in the port guides and charts. Owners maintained that the Master was entitled to rely on the information

provided to him by Charterers and the fact that the information was wrong, placed Charterers in breach of their safe port/berth obligations. VERDICT

The Arbitrators found in favour of Charterers stating that the Master, had he read the port entry guides and up to date charts, would have seen a greatly reduced draft than that told him by Charterers. That should have alerted a competent Master to a possible problem. A reasonable Master would have taken soundings immediately and realised that the draft was less than Charterers thought. The Tribunal also held that, given the vessel had been ordered to load at a scrap steel berth, it was likely that there were obstructions on the sea bed which could also reduce the available draft. The outcome of this arbitration highlights that it is important for a Master to carry out such checks as would be reasonably expected from a competent Master to ensure the safety of the vessel, independently of any information provided by Charterers or their agents. Any failure to do so could result in that failure being held to be the cause of damage and therefore breaking any chain of action against Charterers for safe port. Charterers should be aware that groundings in port will not automatically place them in breach of their safe port/berth obligations since there are residual obligations on the Master which could break the chain of causation.

29 Beacon Skuld newsletter

Legal notes Damage to tugs by striking –

P&I or H/M cover? The tug Boa Tor, owned and operated by Taubåtkompaniet AS in Trondheim, Norway and currently operating in the Mexican Gulf. (Neither tug nor company has any relation to the events and issues outlined in the article.)

By Lars Dueled, Lawyer, Skuld

One of Skuld’s owner members is currently facing a claim from the owners of a tug which struck a pier and eventually sank while assisting one of the member’s vessels during her berthing operation in the Persian Gulf.

Is the member’s possible liability for damage to the tug covered under the member’s Norwegian Hull and Machinery (H/M) or P&I policy? The answer to this question has recently been given by an arbitration tribunal consisting of three law professors from the Scandinavian Institute of Maritime Law, University of Oslo. Under the Norwegian Insurance Plan of 1964 (1964 Plan) the shipowner’s liability for damage to a tug by the tug’s striking or collision with a third party was not covered by the H/M underwriters. Consequently, the shipowner’s liability was covered by the P&I Club. However, with the introduction of the Norwegian Marine Insurance Plan of 1996 (1996 Plan), this division of cover was considered unnecessarialy complicated. Thus, guidelines in favour of H/M cover

only were introduced in the Commentary to the 1996 Plan. Unfortunately, the actual wording of the subject Article 13-1 of the 1996 Plan was identical with the similar provisions of the 1964 Plan. Nevertheless, the above arbitration between Skuld and the member’s Norwegian H/M underwriters has now established that the shipowner’s liability for damage to a tug caused by collision or striking shall be covered by the shipowner’s H/M underwriters only provided of course that the H/M policy is governed by the 1996 Plan. It is anticipated that the subject provisons of the 1996 Plan will be clarified in accordance with the recommendations given by the above arbitration tribunal.

30

New face in Skuld

Oslo, CLAIMS: Flavia Pompa Mellilo, 29, started as a Claims Executive in our Personal Injury Department 7 February. She replaces J. Patrick Geraghty. Flavia is from Brazil, and is educated as a Brazilian Lawyer. She graduated in Dec. 1994. She has experience with consumer rights, personal injury claims, and international corporate law. She has worked as a corporate lawyer as well as a legal advisor for General Motors of Brazil and Marcondes Advogados Associados. She has lived in Norway since 1997, and for the last two years worked as a consultant in Addendum where she was responsible for handling the firm’s international contracts (Brazil and Portugal) among other tasks. She speaks fluent Portuguese and English, and has a good command of Norwegian and Spanish.

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