UK P&I Club - Issue 25 - December 1999

UK Club reserves have continued to grow, the cost of P&I insurance to Members has been cut once again and the European Commission shadow which threatened the International Group's claim sharing and reinsurance arrangements has receded. However, the Club is continuing to develop a strategy to ensure that the essential features of the P&I system are maintained.

Writing in the UK Club's 1998-99 annual report, Chairman Nils-Gustaf Palmgren said the mutual club system "remains the best option and one which must be preserved."

'At cost' cover and shipowner control were the twin pillars upon which the club system was firmly based. With reserve funds remaining under the control of a shipowner board, attention could be focused on reducing cost rather than satisfying third party investors through payments of dividends. The P&I clubs' spectacular success in the past few years had been due to substantial investment income on reserves being used to cut the premiums charged to Members.

Over the past five years, the cost of P&I for UK Club Members had fallen by a third, because of investment income, reduced reinsurance costs and stable claims. The latter indicated the success of loss prevention measures across the P&I Clubs.

Mr. Palmgren said that although the Club was stronger financially than ever before, the Directors were determined to enhance this strength still further to virtually remove the only weakness of the mutual system, i.e. the possibility of unplanned supplementary or overspill calls.

It was also vital to take ongoing account of the commercial insurance market, particularly the fixed premium alternatives.

On the 17th November the UK P&I Club found itself in distinguished company at the Maritime Asia Awards dinner at the Grand Hyatt Hotel in Hong Kong. Over 400 luminaries of the maritime industry attended the gala dinner to see the prize-giving.

The UK P&I Club was awarded the title "Best P&I Club" by the judges and the award was collected by Herry Lawford, the Asia Pacific chairman of Thomas Miller.

The title of maritime industry's personality of the year was presented to Mr. Frank Tsao Wen-king, chairman of IMC Holdings.

Other shipowner winners were Maersk Line who were named best mainline operator and Wan Hai Lines judged best intra-Asian operator. Hyundai Mipo dockyard won the award for best ship repair yard and Mitsubishi Heavy Industries the award for best shipbuilder.

The Port of Singapore was named best container terminal and China's Dalian Container Terminal as the best emerging container terminal. The best classification society prize was awarded to ABS. An independent panel of judges decided the award winners from a shortlist of 32 individuals and companies nominated by Maritime Asia and Lloyd's List readers.

The October Annual General Meeting and Club Board meeting were held on the 25th of October in Hong Kong. As always the venue gave the Directors an opportunity to meet with the members in the region, and also those who support the Club in its work.

At the Annual General Meeting Messrs. Andre (Suisse Atlantique, Lausanne), Caroussis (Chios Navigation, London), Hughes (P & O Cruises (UK), London), and Manthos (Admanthos Shipping Agency, Stamford) were re-elected to the Board of Directors. In addition three new Directors were elected: Mr. Jorge Kamkoff of PDV S.A., Caracas; Mr. Heinrich von Rantzau of DAL Deutsche Afrika Linien, Hamburg; and Mr. Kensatu Saito of Petrobras, Rio de Janeiro. The A.G.M. also marked the retirement from the Board of Mr. T. Yamaguchi, in addition to Messrs. Bandura, Grassi, Viney and Cdte. Ronaldo Machado who left the Board during the year. The Chairman thanked all of these gentlemen for their valuable contribution to the affairs of the Association.

The Board approved in principle a new reinsurance contract with the Swiss Re designed to underpin the Association's defences against any unplanned supplementary or overspill call.

Investment return had climbed back to US$32 million since the July meeting. This would produce an annualised return of between 5 and 6 per cent,in line with the budget of a total investment return for the year of US$60 million.

The Directors decided to order no general increase for the 2000 policy year. However, they directed the Managers to take a strong line on renewals to prevent further erosion of the general premium level. The Directors decided to order a 30 per cent supplementary call in respect of the 1998 policy year, instead of the originally planned 40 per cent. This was the fifth year out of the past six that the supplementary call had been reduced below the planned level.

The Board decided that mutual premiums for the 2000 policy year would reflect the old advance call plus a planned 40 per cent supplementary call, but that only 75 per cent of the mutual premiums would be debited during the policy year. Three 25 per cent instalments will be due for payment in four 25 per cent instalments to be paid not later than 20th March, 1st June, and 1st September 2000, and the fourth 25 per cent will be due for payment not later than 1st December 2001. This final instalment would be subject to a mutual dividend should it be decided in October 2001 that the full instalment was not required. The supplementary premium for the 2000 policy year would be estimated at zero.

The Managers reported that reinsurance negotiations for the 2000 policy year were unlikely to be completed before December. The Board confirmed it wished the oil pollution cover limit to be increased to $1 billion for 2000.

The Managers had included within their report a summary of the claims paid since the previous meeting, a commentary on a number of important cases and news of developments in recent cases. The Managers gave a verbal report of the current status of the English court proceedings in the "DUBAI VALOUR".

In their annual review of Member quality the Board decided that renewal terms should not be offered to two fleets currently entered in the Club.

The Directors noted the Managers' report on steps which had been taken to assist Members in relation to compliance with the new California contingency plan regulations. In relation to the COFR regulations, the Managers confirmed that these had not yet been finalised, but that the California Office of Spill Prevention and Response were issuing 'interim' COFRs, to be substituted by real COFRs as and when the regulations took effect.

The Directors were advised that the Association's application to the Insurance Authority of Hong Kong for a licence had been successful. The Club's Hong Kong office can now become a fully fledged branch office.

Since the last Board meeting, the new hull facility had launched and announced it would be trading under the name of Dex. Though the Club is not directly involved in Dex, the Board continues to take an interest in developments.

The Managers reported on the latest stage of their Year 2000 continuity planning and the steps that would be taken to make sure that all Members and Correspondents were aware of the contact arrangements for the UK Club over the Millennium holiday. The Managers also reported on the level of support for "Safety Protocol". They expressed disappointment that the Safety Protocol had not been supported by the charterers and asked the Directors to use their influence to try and encourage charterers to sign up. They said that they would be contacting the oil majors in particular to see whether they could be persuaded to give their support.

It was reported that the Chairman had approved contributions of US$15,000 each to earthquake relief funds set up by shipowner associations in Greece and Turkey.

The Insurance Authority of Hong Kong's grant of a licence to the UK P&I Club has opened the way to expand the Club's regional office into a fully-fledged branch office with the necessary executive authority to respond quickly and effectively to a wide range of member needs.

The Club can offer the region's ship operators a distinct advantage over other P&I providers. It can now optimise the service to Members in the Greater China market. There is no longer a requirement to seek decisions from the London office as the responsibilities afforded to local executives will enable Members to deal face-to-face with the ultimate decision makers.

Only the UK P&I Club has branch offices in Tokyo (established 1989) and Singapore (established 1998). The Club also has offices in Shanghai, Beijing, Taipei and Sydney. Together, they provide full service coverage across the region.

Only one other P&I club has been granted a licence in Hong Kong. Chairman Nils-Gustaf Palmgren, describes the Club's establishment as a licensed insurer as, 'a further stage in the commitment of staff and resources to serving our Members in the region that has been developing over the past four years. The establishment of a branch office has widespread support within maritime and insurance communities, including the Hong Kong Shipowners Association, the China Ocean Shipping Company and the Hong Kong Maritime and Port Development Board.'

'This initiative adds a very major component indeed to our network of offices, services and skills in the wider Asia Pacific region. No other P&I club will be able to match what we offer.'

Three new Directors were welcomed to the UK P&I Club Board at the recent Hong Kong Directors Meeting namely Mr Jorge Kamkoff of PDV S.A, Mr Heinrich von Rantzau of Deutsche Afrika Linien and Mr. Kensatu Saito of Petroleo Brasiliero S.A.

PDV S.A. is the Venezuelan State oil company. The company operates crude carriers, chemical tankers, and asphalt carriers. They have been entered with the U.K. P & I Club since nationalisation of the Venezuelan oil industry in 1976. Mr. Kamkoff is Vice-President of PDV's Gas Division.

Mr Kamkoff and Mr Salto

Petrobras is the state oil company of Brazil and was founded in the early 1950s and its membership of the UK Club dates from that time. Frota Nacional de Petroleiros (Fronape) is the tanker division. Petrobras Transportes SA., of which Mr Saito is a director, is a recently formed subsidiary for management of part of the owned Fronape fleet. The Rantzau Group comprises a number of famous names. John T Essberger, founded in 1924, specialises in the transport of all forms of bulk liquids. Deutsche Afrika-Linien (DAL), a liner shipping company handling a wide variety of unitised cargoes to Africa; Transocean Shipmanagement GmbH providing management to these companies as well as external clients. Mr. Heinrich von Rantzau is the Managing Director of the Rantzau Group. He is also part owner with his brother Dr Eberhard von Rantzau.

The relationship between John T Essberger and the UK Club dates back to the First World War when the company's founder and Dawson Miller of Thomas Miller found themselves on opposing ships in a naval engagement at Dogger Bank. The British destroyer gave a nasty surprise to its opponent as it was fitted with an experimental six inch gun, but quickly it retired in the face of superior forces.Thinking that the episode was an attempt to lure them into a trap, the German ships retired also and thankfully no-one was hurt as a result of the skirmish. The two men met after the war and John Essberger was able to tell the Club manager how unsporting it was for a destroyer to have been carrying such an unusual armament. The enduring relationship since that time has happily not relied on any further gunnery exchanges.

Although the Board delegates the underwriting process to the Managers and does not itself make detailed underwriting decisions, it does, nonetheless, have a duty to monitor the performance of the Managers against the underwriting policy that was set by the Board in October 1993 and published to the membership in January 1994. Specifically the Board seeks to ensure that large fleets are not subsidising or being subsidised by smaller fleets, that there is movement in the actual loss ratios from one side of the Acceptable Loss Ratio to the other, and that net loss ratios of various ship types are in line with the Acceptable Loss Ratios for those trade types taken as a whole.

In accordance with this practice the Board received their regular Annual Report on the underwriting position of the Club. Although the results of the tests contained in the report were satisfactory, there were signs that the underwriting results were on the point of turning for the worse. At the beginning of the eight year period under review (from 1990 onwards) total premiums were at an all time high. The early 1990s had also seen a fall in the claims, as a result underwriting surpluses had gradually built up. The picture today was very different. There had not been a pure underwriting surplus for three years and premiums had declined over the eight year period, partly as a result of market conditions and partly as a result of the decisions taken by the Board to limit the growth of the free reserves by reducing supplementary calls. Although the gap created by the fall in income had been more than covered over the intervening years by the investment return, the pure underwriting deficit had gradually increased.

On the individual tests themselves the Managers were pleased to report that the mutuality tests still held up in that there was no cross-subsidy between the large and small fleets and little evidence that there was subsidy by one ship type over another. The Directors were also pleased to note that the fixed premium Time Chartered results also continued to run satisfactorily.

Global growth stemmed primarily from continued strong US activity and improved conditions in Japan and Asia. After recent bond price weakness, US and European bonds appeared to offer good value. The Managers' strategy was to overweight bonds in those markets while underweighting Japanese bonds, and to remain underweight in Japanese yen and overweight in dollars. The equity strategy involved overweighting the European region compared with America, while remaining relatively neutrally weighted in Asia. Recent market action had resulted in equities being moderately overweighted relative to fixed income securities. The Managers aimed to maintain that position. In the three months to 14th May, there was a two per cent return on the Total Fund, equal to investment income of US$18.3 million.

In the first five months of 1999, there had been a small rise in the number of ships (244) visited by the Club's inspectors and a fall in those incurring adverse reports (4 per cent), despite over half being more than 15 years old. Some 151 ships had undergone condition surveys, mostly as a pre or post entry requirement for new vessels. About one third (54) of these ships were subject to formal repair recommendations. The Directors noted the potential importance of digital photo records and urged that each inspector be equipped with a suitable camera.

Following discussions between Group boards and managers, the UK Club had accepted that the method of allocating overspill calls between clubs should remain unchanged for the time being, although it was suggested that the contribution by tankers fitted with segregated ballast tanks be reduced to recognise their inflated tonnage. However, the Club's policy remained the elimination or reduction as far as possible of overspill call exposure through reinsurance or other financial instruments.

The Board confirmed their view that the limit of P&I club cover for oil pollution should be increased to at least US$700 million, and possibly to $1 billion. The matter being reviewed by all the clubs in the Group in time for the 2000 policy year.

At the request of the Board, the Managers presented the latest draft of their own Business Continuity Plan for the Year 2000. This item had been prompted by the Board's Audit Committee's review of the measures taken by the Managers to achieve Year 2000 compliance of their systems. The continuity plan had identified three main issues: preservation of data; the Year 2000 weekend testing programme; and the strategic options for continuance of the business. The Managers explained that they were continuing to develop the plan. They would be concentrating over the next few months on the arrangements for the claims and underwriting functions and the advice that would be given to Members on how they should communicate with the Association in the event that they encountered problems over the Millennium. The second part of the report by the Managers concerned work undertaken since the previous meeting to assist the Members in their own Year 2000 contingency planning. The Managers also reported on the International Group's effort to launch the Year 2000 Safety Protocol.

The Chairman reported on the meeting held in June with the partner responsible for the audit of the Association's accounts, to discuss matters concerned with the supervision and control of the Managers, and the audit of the accounts for the year ended 20th February, 1999. The Directors had before them the full minute of the Audit Committee meeting which confirmed that no matters of real concern had been identified. The Chairman commented that there had been a clear improvement in standards during the 4 years that the Audit Committee had carried out their annual review.

The Managers reported on the background and structure of a hull facility, which had been announced on 15th June prior to the Board meeting. The new facility brought together 3 partners; Swiss Re, one of the world's largest reinsurers; Chartwell Re (owners of Chartwell Managing Agents Ltd.) and Thomas Miller & Co Ltd. The Managers undertook to make a presentation on the product as soon as the design phase was complete. The new facility was expected to launch in November in time for the 1st January hull renewals.

The Board received a report on the current position of negotiations within the IMO Legal Committee on measures to introduce a Protocol to the Athens Convention dealing with claims for death and injury claims to passengers. This report is due to be considered by all the International Group clubs.

The Directors agreed the UK Club should support the signing by the International Group of the Maritime Industry Charter on Quality.

The Charter, promoted by the European Commission's Transport Directorate, defines quality standards in respect of safety and protection of marine environment and crew. The standards, which are advisory rather than obligatory, are similar to those already imposed under Club rules. Some 15 organisations have already signed the Charter, including BIMCO, Intertanko, the International Parcel Tankers Association, the European Community Shipowners' Association and IACS.

The Managers had also met with a representative of the self-styled 'International Commission on Sub-Standard Shipping,' announced by the International Trade Federation. While sympathising with the Commission's broad objective of promoting quality among sub-standard shipping, the Managers questioned whether it was better placed to make progress on this issue than the established bodies already involved.

After 33 years as the UK Club's correspondent in Helsinki, Lars Lindfors retired at the end of September. After an early sea-going career Lars came ashore in 1966 when he joined Sjoassuransforenigen, which later merged with Suomen Meri/Finska Sjo, now part of the Industrial Insurance Company. Club Members and Managers alike have benefited over the years from Lars' efficient and friendly professionalism.

The Board's recent review of options open to the Association in the future came to the firm conclusion that the mutual system is in the best interest of the Members, and should be strengthened and preserved. On virtually any comparison with a fixed premium system of underwriting the mutual system comes out on top - shipowner control, no profit insurance, dedicated service and an unrivalled history of commitment to the shipping industry are just a few of the advantages.

Hand in hand with this new underpinning of the Association's financial strength is a change of vocabulary for the Club's calling mechanism. Instead of 'advance call' and 'supplementary call' there will now be a 'mutual premium' and a 'mutual premium discount'.

Although most Members fully understood that the old planned supplementary call was merely a deferred instalment of the planned annual premium, there is no doubt that for some the terminology 'supplementary call' denoted some kind of an additional penalty payment that the Club required to balance its books. The change of vocabulary is largely cosmetic. But, it emphasises that the Club has no intention of overrunning its call requirement, and that it has strengthened its financial defences to ensure that does not happen.

Furthermore, unlike the fixed premium system, the Member assureds of the Club stand to receive a reduction in the final instalment of their premium (through the 'mutual premium discount') should the financial results permit.

Had the new terminology applied in past years, then instead of the reduced supplementary call that has been ordered by the Directors for six out of the past seven policy years, there would have been a mutual premium discount in those six policy years.

'Mutual premium' will be debited in four 25 per cent instalments, three of them during the currency of the policy year itself and the fourth some ten months after the end of the policy year. This will reflect closely the cash flow requirements of the old advance call/supplementary call system.

Under the old system, with its 100 per cent advance call and 40 per cent planned supplementary call, 71 per cent (100/140ths) of the total planned premium was paid during the policy year, and 29 per cent (40/140ths) ten months after the end of the year. By comparison 75 per cent of mutual premium will be paid during the policy year, and 25 per cent ten months after the end of the year. At the time that the fourth instalment falls due to be paid, the Board will also declare a mutual premium discount, if appropriate, so that Members will pay the net result of the fourth instalment less the mutual premium discount.

The terminology 'supplementary premium' will continue to exist. However, thanks to the strong reserves and the new reinsurance arrangements with Swiss Re the likelihood of the Club ever having to charge a 'supplementary premium' - which would indeed be an overrun in the planned premium requirement - is remote indeed.

The concept of 'overspill call' continues to exist, but again, with the Association's strong financial position, its existing special Catastrophe reserve and Catastrophe reinsurance, and the new Swiss Re protection.

Members of the U.K. Club therefore have the benefit of virtual certainty of maximum cost, but with the possibility of a reduction in cost - one of the prime advantages of the mutual system over the fixed premium system.

The traditional call system of levying an advanced call and making an estimate for the supplementary call provided five instalments for the total policy year's call. For example, let us assume a Premium Rate of US$ 1.00 (payable in 4 instalments on or before 20th March, 20th May, 20th August, 20th October) and an Estimated Supplementary Call at the start of that policy year = 40%. The Estimated Total Cost would calculate as US$1.00 + 40%, that is US$1.40. The advance call is paid on the usual instalment dates and in the subsequent year the planned supplementary call is reviewed in the light of the claims performance. If the Supplementary Call were to be reduced to 25%, then the total cost would calculate as US$ 1.00 + 25%, that is US$ 1.25. This equates to a reduction of 10.72% from original Estimated Total Cost of US$ 1.40. This revised supplementary call would be payable in December as the fifth and final instalment of the policy year call.

The new mutual premium system instituted by the change on the rules for the 2000 policy year simplifies the forecast cost by setting a Mutual Premium of US$1.40. This premium is payable in 4 instalments each of US$0.35. These are payable on or before the 20th March, 1st June and 1st September of the current year and 1st December of the following year. Thus the total payments made in the current year are the first three instalments of US$0.35 which total US$1.05.

When compared to the traditional call system, there is a small increase in the payments made during the course of the current year i.e. Mutual Premium instalments totalling US$1.05 instead of Advance Call instalments totalling US$1.00. The split between call payable in the current year and that payable in the subsequent year after review of the claims position has shifted from 71:29 in the traditional call system to 75:25 in the new Mutual Premium system.

Using the same calls performance as shown in the traditional call example above would provide the same saving from the estimated total cost. However, since there is no outstanding supplementary call, to arrive at the same result the Directors would apply a Mutual Premium Discount of 10.72% to the Mutual Premium. Total call would then = US$1.40 - 10.72% = US$1.25

By making the 4th instalment payable on the 1st December of the subsequent year, the discount of 10.72% can be applied as a credit of US$0.15 against that final outstanding instalment reducing it from US$0.35 to US$0.20.

The figures quoted in these examples are purely for ease of explanation and should not be taken to imply future rates or an indication of the Club's future finances.

Mutual Premium Case Study The following case study shows the premium adjustment for a ship of 16,500 gross tons.
Traditional Call System
Advance Call Calculation Premium Rate (payable in 4 instalments through the year)	$1.00 x 16,500 gt	=$16,500
Supplementary Call calculation
Estimated at 40%	$16,500 x 40%	=$6,600
ETC at start of year	$16,500 + $6,600	=$23,100
If adjusted to 25% upon review	$16,500 x 25%	=$4,125
Total Call	$16,500 + $4,125	=$20,625
New Mutual Premium System
Mutual Premium Calculation
Mutual Premium (payable in 4 equal instalments of $5,775 three payable in 2000 and last payable in December 2001)	$1.40 x 16,500	=$23,100
Proportion payable in 2000	3 x $5,775	=$17,325
Proportion payable in 2001	1 x $5,775	=$5,775
Mutual Premium Discount Calculation
If Discount = 10.72%,	$23,100 x 10.72%	=$2,476
Total Call	$23,100 - $2,476	=$20,624

A fall in estimated and forecast liabilities and strong investment returns meant that the free reserves of the UK P&I Club for the year ended 20th February 1999 were 20% greater than the previous year's record level. As a result, the Board had decided in October 1998 to restrict further growth in the funds by reducing the supplementary call for the 1997 policy year from 40 to 25 per cent. It was the fifth time in six years that strong finances had produced a reduction in the planned call for supplementary premiums from Club Members. The Board now expects to close this policy year without making any further call.

Total funds, excluding any allowance for future supplementary calls, were US$1,138 million (US $1,134 million in 1997/98). Outstanding claims stood at US$792 million, compared with US$844 million for 1997/1998. Free reserves were, therefore, US $346 million.

Investment

There was a return of 9 per cent on invested funds, compared with 9.6 per cent in the previous year. The UK Club point out that, unlike some of the other clubs in the International Group, it does not attribute the investment income in the current year to the most recent open policy year. The majority of investment income is allocated to the contingency account (which in turn funds deficits arising on closure of policy years). Only a small amount of investment income appears against each open policy year, reflecting the income which will be generated on that policy year's funds.

The year saw a reduction of some 20 per cent in the cost of existing reinsurance arrangements, purchased through the International Group of P&I Clubs. This followed the 40 per cent cut achieved in 1997/1998 and the 15 per cent reduction in the previous year. In addition to the Group reinsurances, the Club has also bought an additional USD 1 billion of overspill protection cover which, together with protection from the UK Club's catastrophe reserve, raises the threshold for a catastrophe call to USD 3.3 billion.

Claims on the 1998 policy year continued to follow the pattern of earlier years, with reinsurance premiums showing a further downward trend. The supplementary call, planned at 40 per cent, was finalised by the Board in October 1999 at 30 per cent. The Board had imposed a general increase of five per cent in premium ratings for 1999 to maintain the Club's financial strength. The impact was partly offset by the fourth successive reduction in the cost of the International Group's reinsurance programme. The planned supplementary call for the 1999 policy year remained at 40 per cent.

John Joslin
As the longest serving member of the Thomas Miller staff, John Joslin has built an unrivalled list of friendships and links across the UK Club and its members. John joined the firm in 1957 after completing his national service. The length of his experience made John an invaluable reference on precedent and history quoting examples dating back to times before the enquiring member, broker or underwriter was born. During that time he collated an extensive library of reference books, not just for the UK Club but sourced from all the International Group clubs. In recent years he was best known for his role in administering much of the essential documentation of the members' P&I entries such as CLC Blue Cards, US pollution certificates and FMC passenger guarantees.

John's core duties of member administration are to be taken on by John McPhail. John is known to a good number of members already in his role as manager of the Club secretariat for Directors meetings and prior to that as a claims handler in Syndicate 4.

Tony Murphy
Tony Murphy distinguished himself to the UK Club and the P&I community in general as the chairman of the International Group Occupational Disease subcommittee. Asbestos has always maintained the highest profile in this area of claims with one American lawyer alone submitting suit on behalf of 38,500 individual claimants. However, industrial deafness and other ailments such as 'vibration white finger' make this a broad and complex area of claims handling. The long term degenerative effect of these illnesses makes estimation of liability and consequent reserving extremely difficult.

However Tony was no narrow specialist. His experience as a 'people' claims handler for the UK Club and previously for the Steamship Mutual and a major US reinsurer was a valuable resource for Club members. He also took a leading role in the development of the Club's cover and service for the cruise and ferry industry.

The UK Club's representation on the occupational diseases subcommittee is now supplied by Martin Turner. Martin and Tony had worked together in the personal injury field before their respective arrivals at the UK Club. Martin's first challenge is the evolution of the occupational disease claims cases from paper into computer-based files. The focus of these cases on the long term career of afflicted individuals rather than incidents falling on single vessels makes this a challenging task.

George Mason
George joined in 1984 as a senior claims adjuster from another liability underwriter and soon became a syndicate manager with Syndicate 2 which dealt primarily with Greek, Turkish and Levantine members. He built up strong friendships and relationships with members in Turkey and Syria. But his unshakeable faith in the role of the claims handler as the defender of the members' interests garnered respect from all who dealt with him.

Admiralty cases, particularly collisions and general average were one of his specialities. George was always able to spot the essential commercial issues in a case rather than simply defining legal arguments and come quickly to a practical decision on how to proceed with a case. An essential ability when trying to disentangle the complex strands of major general average cases. It was this talent which led to his appointment to the specialist PICT claims team in 1992. George's work for the UK P&I Club over the last fifteen years has built a valuable library of documented experience which can continue to serve his colleagues and the membership in the future.

George, in his alternative role as bon viveur and restaurant critic, could always be relied on to guide his colleagues on the best cuisine developing his own rating system to rival the Michelin guide. Whilst many of his claims colleagues knew their onions, George knew his oysters as well.

George's farewell party in characteristically discrete style was a who's who of the shipping and insurance industries in London and beyond. He plans to devote his time in future to the simple retirement pleasures of grandchildren, exotic plants and fast cars.

The Levant connection endures with the appointment of Tony Kennedy to the claims specialist team. Tony previously worked with George in Syndicate 2 before moving on himself to take charge of Area Group L2.

Joe Pascucci
Joe is another claims manager who has served the Club and its members faithfully for many years. He joined the San Francisco office in 1986 having previously been a claims manager for a number of steamship agencies. Joe is known for his extremely strong work ethic, vast knowledge of the West Coast maritime scene and his excellent grasp of a wide range of P & I claims issues. He is renowned as a tough negotiator, one whom you would appreciate being beside you in the proverbial foxhole. At the same time, Joe enjoys gourmet food and is a voracious reader. His solid work in managing the UK Club's first P&I office on the West Coast has won him widespread praise.

Joe has endeared himself to many of his British colleagues by being an enthusiastic fan of soccer. He would often take the opportunity to attend games in his visits to the London office. He also coached local teams in San Francisco.

The arrival of the 12,000-ton Maltese-flagged Dubai Valour at Tenerife in May, with the master and three officers, marked the end of an extraordinary chapter of events, involving violence, the threat of violence, harassment, unsupported claims against owner Gulf Azov Shipping and widespread disregard of legal rulings.

The ship had been detained illegally at the Nigerian river port of Sapele since August 1997. This action heralded 21 months of legal initiatives and negotiations by the Club and the owners to obtain the release of both the ship and its Ukrainian crew.

While 23 seamen were released in July 1998 after nearly a year in captivity, the master and his three senior officers had been forced to remain on board the Dubai Valour for a further ten months. They were de facto hostages in support of a routine cargo claim made by Chief Humphrey Irikefe Idisi and his company Lonestar Drilling Nigeria Ltd.

The four men's release was eventually secured by an agreement to pay US $3 million into an escrow account. However, as soon as the vessel and crew were free and safe, and before the money could be drawn down, it was frozen by an order of the English High Court.

The saga began with a claim by Lonestar, who chartered the Dubai Valour to carry oil rig drilling parts from Kandla, India to Port Harcourt or Sapele in July 1997. Part of the deck cargo was lost in heavy weather in the Indian Ocean. The ship reached Nigeria later that month and the cargo was discharged early in August.

Lonestar Drilling Nigeria Ltd arrested the ship, claiming US $17 million for the loss of drilling machinery and the consequential damages which would allegedly result. An independent expert advised owners and the Club that the true value of the lost parts was probably closer to US$200,000. The bill of lading had, however, been claused to reflect that the deck cargo was carried at the Indian shipper's risk. The owners, therefore, had a defence to claim and potentially no liability.

Initially, Chief Idisi and Lonestar accepted a US $1 million letter of undertaking from the Club to secure the release of the ship. They sought to renege upon this agreement but the Federal High Court in Lagos ordered the lifting of the arrest. However, the ship was unable to sail as the local agents appointed by Lonestar refused to cooperate.

In September 1997, representatives of the claimants accompanied by military personnel and backed by a local court order, boarded the ship, assaulted the crew and tried forcibly to move her further upstream to an unsafe location. After legal proceedings against the Nigerian Port Authority and Lonestar, the Federal High Court in Benin Province confirmed that the ship could sail and the NPA signed an order giving this immediate effect.

Despite the activity of Lonestar tugs which tried to prevent Dubai Valour from leaving the berth, she managed to sail but was fired upon downriver by armed men in boats and the master was forced to stop the vessel in the interests of the safety of those on board.

A pilot, backed by 20 to 30 armed personnel, boarded the ship and the master was forced at gunpoint to return the vessel upstream to an unsuitable berth adjacent to Lonestar's offices in Sapele. The court order releasing the ship was stayed and the Dubai Valour remained at this berth until the beginning of May 1999.

The owner's and the Club's lawyers tried continually to secure the release of ship and crew. Chief Idisi and Lonestar claimed in the Benin courts that the crew faced 'criminal' charges over the loss of Lonestar's cargo. The Federal courts in Lagos, however, found consistently in favour of Gulf Azov and the Club. Enforcing these decisions, however proved impossible, with various local organisations appearing to accede to Chief Idisi's opposition to Dubai Valour's release.

Lawyers attempting to visit the crew in May 1998 were confronted by about 15 threatening men with clubs and knives. Chief Idisi personally assaulted one of the lawyers. When Russian Embassy officials and lawyers, acting at the request of the Government of the Ukraine, attempted to serve the High Court's release order the following month they also were assaulted. Following further legal manoeuvres and diplomatic initiatives, however, 23 crew were successfully released in July 1998, leaving the four officers on board. At one point, Lonestar indicated they would accept the cost of replacing all lost parts, plus US $3.5 million as an out of court cash payment to cover alleged consequential losses. As Lonestar failed to provide any documentary evidence to substantiate their claim, the owner declined to settle at this grossly inflated level.

Problems for the crew over the 21 months included poor health, in particular malaria, and low food and water supplies. At one time, fresh water stocks, bunkers and diesel oil ran out, the air conditioning had to be turned off and the refrigeration unit failed. The master was refused permission to go to hospital when suffering from enteric fever. Later, he became seriously ill with a high fever and liver pains. The vessel continued to be surrounded by Lonestar employees who would not allow the crew to leave.

In a human rights action, the Chief and Lonestar were held to have "grossly breached the fundamental rights of the crew"and to have subjected them to "torture, inhuman and degrading treatment".

Earlier this year, there were a series of court applications, including contempt proceedings against Chief Idisi and Lonestar. However, the owners and the Club were faced with interminable delays, with the Nigerian courts' and authorities' inability to enforce decisions and, more importantly, the continued and unjustified detention of the four officers in unacceptable conditions. They decided, therefore, that the only way to procure the release of the men and the vessel would be to give in to the Chief's demands and, under duress, sign a 'settlement agreement,' pursuant to which he would receive US $3 million. These monies were frozen in an escrow account in a London bank pending final decisions by the English High Court.

From captivity to freedom

Container Matters, the latest loss prevention video commissioned by the UK Club, is being filmed at various sets. Container Matters will urge shippers to order the right containers for the job, ensure they are in good condition, plan the packing to achieve correct and immovable stow, seal and secure the containers, and attend to their carriage to the docks.

A separate shipboard version will concentrate on the integrated process: loading and stowing, securing and lashing, and handling during the voyage.

Thomas Miller executives, working for the UK P&I and other mutual clubs, are used to carrying out their underwriting and claims handling roles in various political, legal and economic contexts. In few parts of the world are those contexts as volatile and unpredictable as in West Africa.

The region encompasses 19 countries, which use four European languages and a range of national and tribal languages and dialects. The coastline from Senegal's border with Mauritania to Angola's border with Namibia runs for about 4,000 miles.

These countries tend towards bureaucratic and formalised systems but a lack of resources to carry through policies leads to irregular, inconsistent and even bizarre practices. Legal systems cannot cater effectively for maritime cases. It follows that P&I practitioners find problems in a number of areas, particularly:

The UK Club, however, has dedicated and experienced executives who have built up specialist knowledge of the area over many years. As part of Area Group L3, they deal with a wide range of local expertise in claims cases, advise on local port conditions and provide recommendations for actions and precautions for particular ports and cargoes. They travel frequently to the region to liaise with agencies, governments and other organisations, to improve senior level relationships and to monitor lawyers, surveyors and other experts. For example, ministerial discussions have helped to reduce levels of customs fines in the Benin Republic while contact with harbourmasters has facilitated the handling of dock damage claims.

Members seeking guidance on any West African matters should contact Andrew Jones tel +44 171 204 2503 as Area Director for L3 Group fax +44 171 204 2103, or Jeremy Barrett tel +44 191 516 0937

The UK Club is making a donation to the international childrens' charity UNICEF rather than sending Club Christmas cards to members, brokers and other friends. This support goes towards helping children in areas hit by natural disasters and other catastrophes. Bulletins on their work can be obtained on their website www.supportunicef.org.

Staff and managers of the UK Club and Thomas Miller wish our members and friends in the P&I world a happy Christmas and a prosperous New Year.

...................................................................................

UK CLUB NEWS is published by
Thomas Miller & Co. Ltd.

International House
26 Creechurch Lane
London EC3A 5BA

Tel +44 20 7283 4646
Fax +44 20 7283 5614

Editor: Nick Whitear

Tel +44 20 7204 2334
Fax +44 20 7621 9761
e-mail: nick.whitear@thomasmiller.com

For and on behalf of the Managers of

The United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Limited

Issue 25 - December 1999

Mutual remains best option

UK voted Best P&I Club

Hong Kong Directors' Meeting

Go ahead for Hong Kong branch

UK Board welcomes new Directors

Stockholm Report

Club backing for maritime industry charter

Lars Lindfors retires after 33 years

Mutual Premium - Better than Fixed Premium

Mutual Premium Examples

Mutual Premium Case Study

UK Club Report & Accounts: free reserves at record level

Farewells

Nigerian ordeal comes to an end for Ukrainian seamen

From captivity to freedom

Malicious and violent acts alleged in writ

Containers: getting it right

Doing business in West Africa

Supporting UNICEF at Christmas


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