Unless the Directors in their discretion otherwise decide, it is a condition precedent of an Owner’s right to recover from the funds of the Association in respect of any liabilities, costs or expenses that the Owner shall first have discharged or paid the same out of funds belonging to it unconditionally and not by way of loan or otherwise.

i. General
Subject to these Rules and to any special terms and conditions upon which a ship may be entered, the Association insures the liability of the Owner in respect of an entered ship as this liability may be determined and fixed by law including any laws pertaining to limitation of liability. The Association shall in no circumstances be liable for any sum in excess of such legal liability. If less than the full tonnage of a ship is entered in the Association, the Owner shall, unless the entry of the ship has been accepted on special terms which otherwise provide, be entitled only to recover such proportion of its claim as the entered tonnage bears to the full tonnage. Such proportion shall, if the Owner’s claim is subject to any other limits under these Rules, be applied after the application of such limits.

ii. Oil Pollution
For the purpose of this sub-paragraph and the provisos thereto, and without prejudice to anything elsewhere contained in these Rules, a “claim in respect of oil pollution” shall mean a liability, cost, loss or expense, howsoever incurred, in respect of or relating to an escape or discharge of oil or any threat or consequence of such escape or discharge, but excluding liability for loss of or damage to such oil.

Unless otherwise limited to a lesser sum, the Association’s liability for any and all claims in respect of oil pollution shall be limited to such sum or sums as the Directors may from time to time determine.

Such limit shall, unless the Directors otherwise decide, apply in respect of any one entered ship each event and shall apply irrespective of whether the event involves the escape or threatened escape of oil from one or more than one ship and to all claims in respect of oil pollution whether under one Section or more than one Section of Rule 2. If the aggregate of such claims exceeds that limit, the liability of the Association for each claim shall be limited to such proportion of that limit as such claim bears to the aggregate of all such claims.

PROVIDED ALWAYS that:

a) Where the entered ship provides salvage or other assistance to another ship following a casualty, a claim by the Owner of the entered ship in respect of oil pollution arising out of the salvage, the assistance or the casualty shall be aggregated with any liabilities or costs incurred in respect of oil pollution by any other ship similarly engaged in connection with the same casualty when such other ships are insured for oil pollution risks by the Association or by any other insurer which participates in the Pooling Agreement. In these circumstances the limit of the Association’s liability shall be such proportion of the limit determined by the Directors pursuant to sub-paragraph (ii) of this Rule 5(B) as the claim of the Owner bears to the aggregate of the said claims.
b) Where a ship entered in the Association by or on behalf of any person (except a charterer other than a demise or bareboat charterer) is also separately insured in the name of or on behalf of the same or any other such person by the Association or by any other insurer which is a party to the Pooling Agreement for claims in respect of oil pollution, the aggregate recovery in respect of all such claims arising out of any one event shall not exceed the limit determined by the Directors pursuant to sub-paragraph (ii) of this Rule 5(B) and the liability of the Association to each such person insured by the Association shall be limited to such proportion of that limit as the maximum claim otherwise recoverable by such person from the Association bears to the aggregate of all such claims otherwise recoverable from the Association and from all such insurers.
c) If and to the extent that the Owner has, in relation to any claim in respect of oil pollution, other insurance not being solely in excess of the limit determined by the Directors pursuant to this sub-paragraph (ii) of Rule 5(B) or being a quota share arrangement agreed in advance with the Association in writing, then

1) the amount of the said limit shall, as applied to such claim, be reduced by the amount of the stated limit of such other insurance and
2) the Association shall not pay such claim to the extent that it does not exceed the stated limit of such other insurance.

Note: For the 2021 policy year, the Directors have determined that the sums to which the Association’s aggregate liability for any and all claims in respect of oil pollution shall be limited to are: US$1,000 million each event in respect of each ship entered by or on behalf of an Owner not being a charterer other than a demise or bareboat charterer.

iii. Passenger/Seafarer
For the purpose of this sub-paragraph and the provisos thereto, and without prejudice to anything elsewhere contained in the Rules, a “Passenger” shall mean a person carried onboard a ship under a contract of carriage or who, with the consent of the carrier, is accompanying a vehicle or live animals covered by a contract for the carriage of goods and a “Seafarer” shall mean any other person onboard a ship who is not a Passenger.

Unless otherwise limited to a lesser sum, the Association’s aggregate liability for any and all claims arising out of any one event shall not exceed 

1) in respect of liability to Passengers US$2,000 million; and
2) in respect of liability to Passengers and Seafarers US$3,000 million, for each ship entered by or on behalf of an Owner not being a charterer other than a demise or bareboat charterer.

PROVIDED ALWAYS that:
Where a ship entered in the Association by or on behalf of any person (except a charterer other than a demise or bareboat charterer) is also separately insured in the name of or on behalf of the same or any other such person by the Association or by any other insurer which is a party to the Pooling Agreement

a) the aggregate of claims in respect of liability to Passengers recoverable from the Association and/or such other insurers shall not exceed US$2,000 million any one event and the liability of the Association shall be limited to such proportion of that sum as the claims recoverable by such persons from the Association bears to the aggregate of all such claims otherwise recoverable from the Association and all such insurers;
b) the aggregate of all claims in respect of liability to Passengers and Seafarers recoverable from the Association and/or such other insurers shall not exceed US$3,000 million any one event and the liability of the Association shall be limited:

i. where claims in respect of liability to Passengers have been limited to US$2,000 million in accordance with proviso (a) to such proportion of the balance of US$1,000 million as the claims recoverable by such persons in respect of liability to Seafarers bear to the aggregate of all such claims otherwise recoverable from the Association and all such insurers; and
ii. in all other cases, to such proportion of US$3,000 million as the claims recoverable by such persons in respect of liability to Passengers and Seafarers bear to the aggregate of all such claims otherwise recoverable from the Association and all such insurers.

iv. Charterers Co-assureds
The aggregate amount recoverable from the Association by any and all affiliated or associated charterer(s) named as co-assured(s) under Rule 10B(a) in respect of all claims arising out of any one event, or (for cargo claims) any one cargo voyage, is limited to a maximum of US$350 million,
PROVIDED ALWAYS that:

a) for any and all claims in respect of oil pollution, the aggregate amount recoverable by any and all affiliated or associated charterer(s) under Rule 10B(a) and the Owner shall in no event exceed US$1,000 million any one event, and shall be subject to terms of Rule 5(B)(ii).
b) for any and all claims (i) in respect of liability to Passengers, the aggregate amount recoverable by any and all affiliated or associated charterer(s) under Rule 10B(a) and the Owner shall in no event exceed US$2,000 million any one event and shall be subject to terms of Rule 5(B)(iii) and (ii) in respect of liability to Passengers and Seafarers, the aggregate amount recoverable by any and all charterers named as co-assured under Rule 10B(a) and by the Owner shall in no event exceed US$3,000 million any one event and shall be subject to terms of Rule 5(B)(iii). 

Without prejudice to anything elsewhere contained in these Rules the Association shall be entitled to set off any amount due from an Owner against any amount due to such Owner from the Association.

Unless and to the extent that the Members’ Committee in its discretion otherwise decides, or the Managers agree in writing as a term of entry, the Association shall not indemnify the Owner of an entered ship against any liabilities, costs or expenses against which that Owner would have been insured if at the time of the incident giving rise to those liabilities, costs or expenses the ship had been fully insured for its proper value under Hull Policies on terms equivalent to those of the Lloyd’s Marine Policy MAR form 1/1/82 with the Institute Time Clauses Hulls 1/10/83 attached. For the purposes of these Rules “proper value’’ shall mean the market value of the ship, without commitment, at the date of the incident referred to above.

Note: When considering the proper value for which an entered ship should be insured or deemed to be insured for the purposes of claims under Rule 2 Sections 10 and 20, the Members’ Committee will require to be satisfied that the hull and/ or excess liability policies of the Owner concerned have been the subject of periodic review as market conditions may require, so that the total amount of liability coverage contained in those policies is maintained at levels approximating to the market value of the ship without commitment. Owners are recommended to consult their brokers and/ or shipvaluers to assess periodically in the light of the above, the proper amount for which insurances should be effected to cover against collision and general average or salvage liabilities. Provided the necessary insurances are placed on the basis of the advice received, the Members’ Committee will give every consideration to a claim if, as may transpire, the values and amounts upon which the insurances have been placed are lower than the values which may have been assessed by a Court or Tribunal for general average or salvage purposes. 

The Association shall not indemnify an Owner against any liabilities, costs or expenses (irrespective of whether a contributory cause of the same being incurred was any neglect on the part of the Owner or on the part of the Owner’s servants or agents) when the loss or damage, injury, illness or death or other accident in respect of which such liability arises or cost or expense is incurred, was caused by:

i. War, civil war, revolution, rebellion, insurrection or civil strife arising therefrom, or any hostile act by or against a belligerent power, or any act of terrorism.
ii. Capture, seizure, arrest, restraint or detainment (barratry and piracy excepted) and the consequences thereof or any attempt thereat;
iii. Mines, torpedoes, bombs, rockets, shells, explosives or other similar weapons of war (save for those liabilities, costs or expenses which arise solely by reason of the transport of any such weapons whether on board the entered ship or not), provided always that this exclusion shall not apply to the use of such weapons either as a result of government order or with the written agreement of the Directors or the Managers where the reason for such use is the avoidance or mitigation of liabilities, costs or expenses which would otherwise fall within the cover given by the Association.

PROVIDED ALWAYS that:

a) In the event of any dispute as to whether or not an act constitutes an act of terrorism, the decision of the Directors shall be final.
b) Ransom shall not be recoverable unless and to the extent that the Members’ Committee in its discretion shall otherwise decide. Note: when deciding whether to exercise its discretion, the Committee will consider the merits of each case individually including but not limited to whether the Owner had taken such precautions as appear to the Committee to be reasonable to avoid the event that gave rise to the ransom.
c) The Directors may resolve that special cover be provided to the Owner against any or all of the risks set out in Rule 2 notwithstanding that those liabilities, costs or expenses would otherwise be excluded by this paragraph (E) and that such special cover should be limited to such sum or sums and be subject to such terms and conditions as the Directors may from time to time determine.

The Association shall not indemnify an Owner against any liabilities, costs or expenses (irrespective of whether a contributory cause of the same being incurred was any neglect on the part of the Owner or on the part of the Owner’s servants or agents) when the loss or damage, injury, illness or death or other accident in respect of which such liability arises or cost or expense is incurred, was directly or indirectly caused by or arises from:

i. ionising radiations from or contamination by radioactivity from any nuclear fuel or from any nuclear waste or from the combustion of nuclear fuel
ii. the radioactive, toxic, explosive or other hazardous or contaminating properties of any nuclear installation, reactor or other nuclear assembly or nuclear component thereof
iii. any weapon or device employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter
iv. the radioactive, toxic, explosive or other hazardous or contaminating properties of any radioactive matter

PROVIDED ALWAYS that:

a) this exclusion shall not apply to liabilities, losses, costs or expenses arising out of the carriage of “excepted matter” as cargo on an entered ship. For this purpose “excepted matter” consists of certain radio isotopes, used in or intended to be used for any industrial, commercial, agricultural, medical or scientific purpose and such further exceptions as the Directors may approve within the scope of the definition of “excepted matter” contained in the Nuclear Installations Act 1965 of the United Kingdom and any regulations made thereunder.
b) The Directors may resolve that special cover be provided to the Owner against any or all of the risks set out in Rule 2 notwithstanding that those liabilities, losses, costs, or expenses would otherwise be excluded by this paragraph (F) and that such special cover should be limited to such sum or sums and be subject to such terms and conditions as the Directors may determine.

Subject to paragraph (G) of Section 22 and to Section 24 of Rule 2, the Association shall not, except as otherwise provided in this paragraph, pay for:

i. Loss of or damage to the entered ship or any part thereof;
ii. Loss of or damage to any equipment on board the entered ship or to any containers, lashings, stores or fuel thereon, to the extent that the same are owned or leased by the Owner or by any company associated with or under the same management as the Owner;
iii. The cost of repairs to the entered ship or any charges or expenses in connection therewith;
iv. Claims by or against the Owner relating to loss of freight or hire of an entered ship or any proportion thereof unless such loss of freight or hire forms part of a claim recoverable from the Owner for liabilities in respect of cargo or is, with the consent of the Managers, included in the settlement of such a claim;
v. Salvage or services in the nature of salvage and any costs and expenses in connection therewith;
vi. Loss arising out of cancellation of a charter or other engagement of an entered ship;
vii. Loss arising out of irrecoverable debts or out of the insolvency of any person, including insolvency of agents;
viii.Claims by or against the Owner relating to demurrage on, detention of or delay to an entered ship unless such demurrage, detention or delay forms part of a claim recoverable from the Owner for liabilities in respect of cargo within the scope of these Rules or is, with the consent of the Managers, included in the settlement of such a claim.

PROVIDED ALWAYS that:

The foregoing exceptions shall not apply to claims under the following Sections of Rule 2:

Section 9 Life Salvage,
Section 19 Unrecoverable general average contributions, 
Section 20 Ship’s proportion of general average,
Section 21 Special compensation to Salvors,
Section 25 Sue and labour and legal costs,
Section 26 Expenses incurred by direction of the Association.

Unless and to the extent that special cover shall have been agreed between the Owner and the Managers in accordance with the provisions of Rules 3 or 4, the Association shall not be liable for any claim relating to liabilities, costs and expenses incurred by the Owner of:

i. An entered ship which is a salvage tug or firefighting ship or other ship used or intended to be used for salvage or firefighting operations, when the claim arises out of any salvage or firefighting service or attempted salvage or firefighting service (including for the purpose of this paragraph, wreck removal) other than

(a) liabilities, costs and expenses arising out of salvage or firefighting service or attempted salvage or firefighting service conducted by an entered ship for the purpose of saving or attempting to save life at sea; and
(b) liabilities, costs and expenses incurred by the Owner (being a professional salvor) which are covered by a special agreement between the Owner and the Association and which arise out of the operation of, and in respect of that Owner’s interest in an entered ship.

ii. An entered ship which is used to carry out drilling operations in connection with oil or gas exploration or production when the claim arises out of or during those operations.

PROVIDED ALWAYS that for the purposes of paragraph ii above:

a) the entered ship shall be deemed to be carrying out production operations if (inter alia) it is a storage tanker or other ship engaged in the storage of oil, and either:

(i) the oil is transferred directly from a producing well to the storage ship; or
(ii) the storage ship has oil and gas separation equipment on board and gas is being separated from oil whilst on board the storage ship other than by natural venting; and

b) in respect of any entered ship employed to carry out production operations in connection with oil or gas production, the exclusion shall apply from the time that a connection, whether directly or indirectly, has been established between the entered ship and the well pursuant to a contract under which the entered ship is employed, until such time that the entered ship is finally disconnected from the well in accordance with that contract.

iii. An entered ship which is used for operations of dredging, blasting, pile-driving, well-intervention, cable or pipe laying, construction, installation, maintenance work, core sampling, depositing of spoil, power generation, decommissioning or such other operations as the Managers may determine from time to time, when the claim arises as a consequence of:

(a) claims brought by any party for whose benefit the work has been performed, or by any third party (whether connected with any party for whose benefit the work has been performed or not), in respect of the specialist nature of the operations; or
(b)the failure to perform such specialist operations by the Owner or the fitness for purpose or quality of the Owner’s work, products or services; or
(c) any loss of or damage to the contract work.

PROVIDED ALWAYS that this exclusion shall not apply to liabilities, costs and expenses incurred by an Owner in respect of:

(i) loss of life, injury or illness of crew and other personnel on board the entered ship; or
(ii) the wreck removal of the entered ship; or
(iii) oil pollution emanating from the entered ship or the threat thereof, but only to the extent that such liabilities, costs and expenses are covered by the Rules.

iv. An entered ship which is used for waste disposal or incineration operations, when the claim arises out of those operations:

v. An entered ship which is used for or in connection with the operations of submarines, mini-submarines, diving bells or remotely operated vehicles or equipment or an entered ship which is used for or in connection with professional or commercial diving operations, when the claim arises out of those operations, except a claim

(a) arising out of salvage operations being conducted by an entered ship provided that (i) the divers, fully licenced or otherwise certified, form part of the crew of that entered ship (or of diving bells or other similar equipment or craft operating from the entered ship); (ii) the Owner of that entered ship (except a charterer other than a demise or bareboat charterer) is responsible for the activities of such divers; (iii) the Owner at all times ensures compliance with any legislation, regulations, rules and other requirements regarding the employment of such divers; and
(b)incidental diving operations carried out in relation to the inspection, repair or maintenance of the entered ship or in relation to damage caused by the entered ship; and
(c) recreational diving activities.

vi. An entered ship which is moored (otherwise than on a temporary basis) and is open to the public as a hotel, restaurant, bar or other place of entertainment, when the claim is in respect of hotel or restaurant guests or other visitors or catering crew of such ship.

vii. An entered ship which is used as an accommodation vessel, when the claim is in respect of personnel (other than marine crew) on board such ship employed otherwise than by the Owner, where either:

a) Such vessel is providing accommodation to such personnel in relation to their employment on or about an oil or gas production or exploration facility; or 
b) there has been a contractual allocation of risk on terms less favourable to the Owner than Knock for Knock as between the Owner and the employer of the personnel which has been approved by the Managers.

PROVIDED ALWAYS that:
This exclusion is subject to and shall not override or supersede the exclusion in paragraph ii above.

viii.An entered ship which is a semi-submersible heavy lift vessel or which is designed exclusively for the carriage of heavy lift cargo, when the claim is in respect of loss of or damage to or wreck removal of cargo, save where the cargo is carried under a contract on HeavyCon terms or any other terms approved in writing by the Managers. 

The Association shall not, unless and to the extent that the Members’ Committee in its discretion otherwise decides, be liable for any liabilities, costs or expenses recoverable under any other insurance or which would have been so recoverable:

i. apart from any terms in such other insurance excluding or limiting liability on the ground of double insurance; and
ii. if the ship had not been entered in the Association with cover against the risks set out in these Rules.

No claim shall be recoverable from the Association if it arises out of or is consequent upon an entered ship carrying contraband, blockade running or being employed in an unlawful trade or if the Members’ Committee, having regard to all the circumstances, shall be of the opinion that the carriage, trade or voyage was imprudent, unsafe, unduly hazardous or improper.

Unless otherwise agreed in writing between the Owner and the Managers, the following conditions are terms of the insurance of every entered ship:

i. The ship must be and remain throughout the period of entry classed with a Classification Society approved by the Managers, and
ii. Any incident or condition in respect of which that Classification Society might make recommendations as to repairs or other action to be taken by the Owner must be promptly reported to that Classification Society.
iii. The Owner must comply with all the Rules, recommendations and requirements of the Classification Society relating to the entered ship within the time or times specified by the Society.
iv. The Owner authorises the Managers to inspect any information, relating to the maintenance of class of the entered ship, in the possession of any Classification Society with which that ship is or at any time has been classed, and will where necessary authorise such Classification Society or Societies to disclose and make available that information to the Managers upon request by the Managers and for whatsoever purposes the Managers may consider necessary.
v. The Owner must immediately inform the Managers if, at any time during the period of entry, the Classification Society with which the ship is classed is changed and advise the Managers of all outstanding recommendations, requirements or restrictions specified by any Classification Society relating to that ship as at the date of such change.
vi. The Owner must comply with all statutory requirements of the state of the ship’s flag relating to the construction, adaptation, condition, fitment, equipment and manning of the entered ship and must at all times maintain the validity of such statutory certificates as are issued by or on behalf of the state of the ship’s flag in relation to such requirements and in relation to the International Safety Management (ISM) Code and the International Ship and Port Facility Security (ISPS) Code.

Unless and to the extent that the Members’ Committee otherwise decides, an Owner shall not be entitled to any recovery from the Association in respect of any claim arising during a period when that Owner is not fulfilling or has not fulfilled those conditions.

i.These Rules and all contracts of insurance made by the Association shall be subject to and incorporate the provisions of the Marine Insurance Act, 1906 and, upon its entry into force, the Insurance Act 2015 of the United Kingdom and any statutory modifications thereof except insofar as such Acts or modifications may have been excluded by these Rules or by any term of such contracts.

ii. The following provisions of the Insurance Act 2015 (“the Act”) are excluded from the Rules and any contract of insurance as follows:

a) Section 8 of the Act is excluded. As a result any breach of the duty of fair presentation shall entitle the Association to avoid the policy, regardless of whether the breach of the duty of fair presentation is innocent, deliberate or reckless.
b) Section 10 of the Act is excluded. As a result all warranties in these Rules or any contract of insurance must be strictly complied with and if the Owner fails to comply with any warranty the Association shall be discharged from liability from the date of the breach, regardless of whether the breach is subsequently remedied.
c) Section 11 of the Act is excluded. As a result the Rules and all terms of the contract of insurance between the Association and the Owner, including terms which tend to reduce the risk of loss of a particular kind, loss at a particular location and/or loss at a particular time, must be strictly complied with and if the Owner fails to comply with any such term, the Association’s liability may be excluded, limited or discharged in accordance with these Rules notwithstanding that the breach could not have increased the risk of the loss which actually occurred in the circumstances in which it occurred.
d) Section 13 of the Act is excluded. As a result the Association shall be entitled to exercise its right to terminate the contract of insurance in respect of the Owner and all insureds in the event that a fraudulent claim is submitted by or on behalf of the Owner and/or any Group Affiliate.
e) Section 13A of the Act is excluded: As a result the Rules and all terms of the contract of insurance between the Association and the Owner shall not be subject to or shall the Association be in breach of any implied term that it will pay any sums due in respect of a claim within a reasonable time save where the breach is deliberate or reckless and Section 13A of the Act is excluded to this extent.
f) Section 14 of the Act is excluded. As a result, the contract of insurance between the Association and the Owner shall be deemed to be a contract of the utmost good faith, and any breach of the duty of the utmost good faith shall entitle the Association to avoid the contract of insurance.

Upon the occurrence of any casualty, event or matter liable to give rise to a claim by an Owner upon the Association, it shall be the duty of the Owner and its agents to take and to continue to take all such steps as may be reasonable for the purpose of averting or minimizing any expense or liability in respect whereof it may be insured by the Association. In the event that an Owner commits any breach of this obligation, the Members’ Committee may in its discretion reject any claim by the Owner against the Association arising out of the casualty, event or matter, or reduce the sum payable by the Association in respect thereof by such amount as it may determine.

i. An Owner must promptly notify the Managers of every casualty, event or claim upon it which is liable to give rise to a claim upon the Association, and of every event or matter which is liable to cause the Owner to incur liabilities, costs or expenses for which it may be insured by the Association.

ii. An Owner must promptly notify the Managers of every survey or opportunity for survey in connection with a matter referred to under (i).

iii. An Owner must at all times promptly notify the Managers of any information, documents or reports in its or its agents’ possession, power or knowledge relevant to such casualty, event or matter as is referred to under (i) and shall further, whenever so requested by the Managers, promptly produce to the Association and/or allow the Association or its agents to inspect, copy or photograph, all relevant documents of whatsoever nature in its or its agents’ possession or power and shall further permit the Association or its agents to interview any servant, agent or other person who may have been employed by the Owner at the material time or at any time thereafter or whom the Association may consider likely to have any direct or indirect knowledge of the matter or who may have been under a duty at any time to report to the Owner in connection therewith.

iv. An Owner shall not settle or admit liability for any claim for which it may be insured by the Association without prior written consent of the Managers.

In the event that an Owner commits any breach of its obligations referred to in (i) to (iv) above, the Members’ Committee may in its discretion reject any claim by the Owner against the Association arising out of the casualty, event or matter, or reduce the sum payable by the Association in respect thereof by such amount as they may determine.

In the event that:

i. an Owner fails to notify the Managers of any casualty, event or claim referred to in paragraph (N) (i) of this Rule within one year after it has knowledge thereof; or
ii. an Owner fails to submit a claim to the Managers for reimbursement of any liabilities, costs or expenses within one year after discharging or settling the same;

the Owner’s claim against the Association shall be discharged and the Association shall be under no further liability in respect thereof unless the Members’ Committee in its discretion shall otherwise determine.

i. Unless otherwise agreed in writing by the Managers, where the Association has paid a claim to or on behalf of an Owner the whole of any recovery from a third party in respect of that claim shall be credited and paid to the Association up to an amount corresponding with the sum paid by the Association together with any interest element on that sum comprised in the recovery, provided however that where, because of a deductible in its terms of entry, the Owner has contributed to settlement of the claim, any such interest element shall be apportioned between the Owner and the Association taking into account the payments made by each and the dates on which those payments were made.

ii. Unless otherwise agreed in writing by the Managers, where the Owner, as a result of an event for which it is covered by the Association, has obtained extra revenue or saved costs or expenses which would otherwise have been incurred and which would not have been covered by the Association, the Association may deduct from the sum otherwise payable to the Owner an amount corresponding to the benefit obtained.

iii. Unless otherwise agreed in writing by the Managers, where the Association has paid a claim to or on behalf of an Owner, the Association shall be subrogated to the rights of the Owner in respect of the claim to the extent of that payment, including the right to any interest accruing on that amount prior to its recovery and the right to recover any costs incurred in relation to the exercise of such rights.

The Managers at any time in their discretion may appoint a surveyor or such other person as they may think fit to inspect an entered ship on behalf of the Association. The Owner

1. shall afford such facilities as may be required for such inspection, and
2. shall comply with such recommendations as the Managers may make
   following such inspection.

Unless and to the extent that the Members’ Committee in its discretion otherwise decides, an Owner who commits any breach of its obligations referred to in (i) to (ii) above shall not be entitled, in relation to any
casualty, event or matter occurring during the period of the breach, to any recovery from the Association in respect of any claim arising out of such casualty, event or matter.

Notwithstanding the above and in addition thereto, the Members’ Committee may, in the light of such inspection or in the event of any breach of the obligations referred to in (i) to (ii) above, terminate the Owner’s entry forthwith where-upon the Owner shall cease to be insured in respect of the entered ship.

1. If an entered ship has been laid-up for a period of six months or more, whether the ship has been entered in the Association for all or part of the period of lay-up and whether or not laid-up returns have been claimed or paid in accordance with Rule 27, the Owner shall give the Managers notice that the ship is to be recommissioned not less than seven days before the ship leaves the place of lay-up.
2. Upon receipt of such notice the Managers in their discretion may appoint a surveyor or such other person as they may think fit to inspect the ship on behalf of the Association and the Owner shall afford such facilities as may be required for such inspection, and
3. The Owner shall comply with such recommendations as the Managers may make following such inspection.

Unless and to the extent that the Members’ Committee in its discretion otherwise decides, an Owner who commits any breach of its obligations referred to in (i) to (iii) above shall not be entitled, in relation to any
casualty, event or matter occurring during the period of the breach, to any recovery from the Association in respect of any claim arising out of such casualty, event or matter.

A breach of the obligation in (i) above shall be deemed to have started when the ship leaves the place of lay-up and to have ended at such time as the Owner has complied with its obligations referred to in (ii) and (iii) above, as determined by the Managers in their discretion.

Notwithstanding the above and in addition thereto, the Members’ Committee may, in the light of such inspection or in the event of any breach of the obligations referred to in (ii) to (iii) above, terminate the Owner’s entry forthwith where-upon the Owner shall cease to be insured in respect of the entered ship.

The Association’s logs and records of any electronic communication sent or received by the Association shall, in the absence of manifest error, be conclusive evidence of such communication and of its despatch or receipt.

In no case shall interest be paid upon sums due from the Association.

Unless and to the extent that the Directors otherwise decide, the Association shall discharge on behalf of the Owner liabilities, costs, expenses arising under a demand made pursuant to the issue by the Association on behalf of the Owner of

a) a guarantee or other undertaking given by the Association to the Federal Maritime Commission under Section 2 of US Public Law 89-777, or
b) a certificate issued by the Association in compliance with Article VII of the International Conventions on Civil Liability for Oil Pollution Damage 1969 or 1992 or any amendments thereof, or
c) an undertaking given by the Association to the International Oil Compensation Fund 1992 in connection with the Small Tanker Oil Pollution Indemnification Agreement (STOPIA), or except where such liabilities, costs or expenses arise from or are caused by an act of terrorism, the Tanker Oil Pollution Indemnification Agreement (TOPIA), or
d) a certificate issued by the Association in compliance with Article 7 of the International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001
e) a non-war certificate issued by the Association in compliance with either Article IV bis of the Athens Convention relating to Carriage of Passengers and their Luggage by Sea, 2002 and Guidelines for its implementation or Regulation (EC) No 392/2009 of the European Parliament and of the Council which gives effect thereto.
f) a certificate issued by the Association in compliance with Article 12 of Nairobi International Convention on the Removal of Wrecks, 2007.
g) Subject always to the MLC Extension Clause 2016, certificates issued by the Association in compliance with Regulation 4.2, Standard A4.2, paragraph 1(b) and Regulation 2.5.2, Standard A2.5.2 of the Maritime Labour Convention 2006, as amended (MLC 2006).

Note: the terms of the MLC Extension Clause 2016 are to be found in Appendix I to the Rule book.

PROVIDED ALWAYS THAT:

i. The Owner shall indemnify the Association to the extent that any payment under any such guarantee, undertaking or certificate in discharge of the said liabilities, costs and expenses is or would have been recoverable in whole or in part under a standard P&I war risk policy had the Owner entered into such policy and complied with the terms and conditions thereof, and
ii. The Owner agrees that:

a) any payment by the Association under any such guarantee, undertaking or certificate in discharge of the said liabilities, costs and expenses shall, to the extent of any amount recovered under any policy of insurance or extension to the cover provided by the Association, be by way of loan; and
b) there shall be assigned to the Association to the extent and on the terms that it determines in its discretion to be practicable all the rights of the Insured Owner under any other insurance and against any third party.

For the purpose of this Rule 5(U), the Members’ Committee shall have the sole discretion to determine what constitutes a standard war risk policy.

1. The Association shall not indemnify an Owner against any liabilities, costs or expenses where the provision of cover, the payment of any claim or the provision of any benefit in respect of those liabilities, costs or expenses may expose the Association to the risk of any sanction, prohibition, restriction or adverse action by any competent authority or government.
2. The Owner shall in no circumstances be entitled to recover from the Association that part of any liabilities, costs or expenses which is not recovered by the Association from any party to the Pooling Agreement and/or from any reinsurer because of a shortfall in recovery from such party or reinsurer by reason of any sanction, prohibition or adverse action by a competent authority or government or the risk thereof if payment were to be made by such party or reinsurer. For the purposes of this paragraph, “shortfall” includes, but is not limited to, any failure or delay in recovery by the Association by reason of the said party or reinsurer delaying payment or making payment into a designated account in compliance with the requirements of any competent authority or government.
3. Notwithstanding, and without prejudice to, any other provisions of these Rules, the Directors may terminate the insurance of an Owner in respect of any and all ships entered by it where, in the opinion of the Directors, the Owner has exposed or will expose the Association to a material risk of being or becoming subject to a sanction, prohibition, restriction or other adverse action by a competent authority or government, which may materially affect the Association.

There shall be no recovery from the Association in respect of liabilities, losses, costs and expenses arising from the use of any electronic trading system, other than an electronic trading system approved by the Association in writing, to the extent that such liabilities, losses, costs and expenses would not (save insofar as the Association in its sole discretion otherwise determines) have arisen under a paper trading system. For the purpose of this Rule 5(W),

a) an electronic trading system is any system which replaces or is intended to replace paper documents used for the sale of goods and/or their carriage by sea or partly by sea and other means of transport and which:

i. are documents of title; or
ii. entitle the holder to delivery or possession of the goods referred to in such documents; or
iii. evidence a contract of carriage under which the rights and obligations of either of the contracting parties may be transferred to a third party.

b) a ‘document’ shall mean anything in which information of any description is recorded including, but not limited to, computer or other electronically-generated information.