O THE MEMBERS

Dear Sirs,

CONTRACTS OF CARRIAGE

Following the coming into force this year of the United States Shipping Reform Act, a number of United States shippers have sought to negotiate contracts of carriage which do not incorporate the Hague Rules, the Hague/Visby Rules, or similar rights, immunities and limitations in favour of the carrier.

Club cover in respect of the carriage of goods by sea is based upon the Hague Rules and Hague/Visby Rules, because they constitute the uniform regime of rights and obligations of both carriers and cargo owners which is most widely accepted both by national legislation and through contract terms voluntarily agreed by carriers and cargo owners themselves. The International Group Clubs recognise that such regimes of rights and obligations need to be reviewed and modified from time to time to keep pace with changes and developments in international trade, but they, along with many other industry organisations, believe that change is best achieved through the process of international conventions rather than by other means.

Accordingly, subject to the exercise of the Directors' discretion in accordance with Club Rules, International Group Clubs do not cover liabilities, costs and expenses arising from contracts of carriage by sea which do not incorporate the Hague Rules, the Hague/Visby Rules or similar rights and immunities in favour of the carrier.

A number of the contracts currently proposed by shippers which may not affect Club cover do nevertheless exclude rights and immunities in favour of both the carrier and the cargo owner which have become widely accepted and successfully implemented by carriers and cargo interests alike. Elimination of these terms from the contracts of carriage may create uncertainty and increase the risk of disputes or litigation.

Members who are concerned about the terms of such contracts are invited to contact the Managers for further advice and assistance.

Yours faithfully

THOMAS MILLER (BERMUDA) LTD