Capt Mangouras in 2002

Shipping organisations have reacted in dismay at last week's decision of the Grand Chamber of the European Court of Human Rights to the effect that there was no violation of human rights in 2002 when bail was set at Euro 3m for the release of Apostolos Mangouras, the master of the tanker Prestige following the oil pollution caused by the break-up of the ship off the coast of Spain.

The International Chamber of Shipping (ICS) and the International Shipping Federation (ISF) said: “The judgement is disappointing but not really surprising in that it confirms that even the Supreme Court of the European Court of Human Rights views this case as being about environmental disasters, rather providing a proper analysis of whether there has been an unlawful violation of the master’s human rights.”

Tanker owners group Intertanko commented in stronger terms, saying it was “horrified at the outrageous majority finding that it is legitimate to set bail at a ‘pirate’s ransom’ for a responsible ship’s master involved in accidental pollution”. It added: “The potential for politically motivated decisions empowered by the level of public outcry is obvious, as are the fearful implications for every seafarer, who by this decision, loses his right to natural justice.”

ICS and ISF added: “Seafarers deserve the security of uniformity and certainty as to how their conduct and actions will be determined by local courts, based on internationally agreed standards. Sadly, however, it seems that a change in the current political climate will be required, which will be a long term process. A major problem the industry faces in the immediate aftermath of a serious pollution incident is that the factors at play locally are often political rather than legal. There is a perception amongst the public that the ‘polluter’ should be punished and foreign seafarers, by definition, have no local political constituency. However, the industry will continue to explain that pollution will be cleaned up, and that the costs of any damage are covered, regardless of fault, by very efficient international liability regimes.”

ICS and ISF pledged to continue to lead efforts, in co-operation with other industry organisations, to press for change where national laws permit unjustified criminalisation. The twin bodies said that governments must be urged to recognise the supremacy of UNCLOS and MARPOL and bring national and regional laws into line with these internationally agreed standards. Maritime administrations should also be encouraged to adopt the IMO Casualty Investigation Code into their national law and procedures.

The court decided by a 10/7 majority that there had been no violation of Article 5 § 3 (right to liberty and security) of the European Convention on Human Rights in setting bail at eEuros3m for the release of the captain of a ship which caused pollution. The court's judgement asserted: “New realities had to be taken into consideration in interpreting the requirements of Article 5 § 3, namely the growing and legitimate concern both in Europe and internationally in relation to environmental offences and the tendency to use criminal law as a means of enforcing the environmental obligations imposed by European and international law.”

This drew the response from Intertanko that: “This is a terrifying conclusion for the maritime industry, suggesting that basic issues of liberty will be overridden by concerns over pollution.”

Intertanko's managing director Peter Swift said: ““It is simply unacceptable that ships’ officers, having committed no fault, be treated as common criminals because of the consequences of their actions, when the actions themselves are above reproach and in addition it is also completely unacceptable that they should now face being held to ransom as scapegoats for the environmental lobby. Had the P & I Club insurers not acted with compassion, Capt Mangouras, now 75, would likely still be in jail in Spain awaiting trial. Eight years on, can that be fair or just?”

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Leading marine insurance broker and Maritime London member JLT estimates that the ongoing Somali piracy problem has cost the insurance industry around $300m in ransoms and related costs in the past 24 months. In its annual review, the company says that this class of business is dominated by the London market and by domestic War pools in some of the world’s leading maritime nations.

JLT notes that in the past 12 months the exposure to this market has changed dramatically with most owners moving the peril of Piracy (where applicable) from the Hull clauses to the War placing. This provides clarity of coverage for owners and avoids the application of a deductible in the event of a hijacking and protects owners’ Hull records against a ransom claim. Whilst this has led to the application of additional premiums on charterers/owners, JLT reports that it has also seen a significant number of ransom payments made. The company also reports that the number of companies underwriting marine has grown in the past 12 months.

The company writes:

“In recent years we have seen additional capacity for international business evolving from a number of markets including London, Holland, France and Russia. Some of these are new operations but there are a number of underwriters who were previously not writing International marine business who now have a remit to provide capacity in that arena. In the Middle East and Singapore we now have access to a number of operations which previously had a solely domestic focus. By the same token a number of European operations have continued to pursue and bolster regional office strategies in order to become better aligned with the local industries. For example there are now a number of household names established in the Middle East and Singapore including AxA, RSA, Watkins, Catlin, Groupama and Chaucer all with marine capability. This in itself does not mean that capacity has increased rather it has been redistributed and become more visible in those regions. It does however mean that there is more focused competition in those now mature markets.”

The company also notes that the following capacity has joined or is about to join the marine market:

Montpelier Re
Lloyd’s WR Berkley
Oslo Barbican
Lloyd’s Laveretus – Power Barge specific
WR Berkley – Soon to write marine from Lloyd’s
DMI – Dutch Marine Insurance

JLT notes: “With the number of new Marine insurers continuing to enter the market the combination of increasing supply of capacity against relatively static demand will put rating levels under constant pressure over the next 12 months. This year has, so far, not produced the headline marine losses we have seen in the past. Investment returns for underwriters have also increased considerably compared with last year. This trend will assist in containing rating and deductible levels which if maintained we expect to be borne out in the December reinsurance renewals.”

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Study based on calculation of UK share of trade, not UK bunker sales

A new report based on research by the UK’s University of Manchester claims that carbon dioxide emissions produced by “UK shipping” could be up to six times higher than currently calculated. According to the university’s Tyndall Centre for Climate Change Research, the global shipping industry, despite being traditionally viewed as one of the most energy efficient means of transport, releases increasing amounts of harmful emissions into the atmosphere every year.

However David Balston, the Chamber of Shipping's director safety and environment cautions that attempting to estimate a particular country's shipping emissions was “very, very difficult”.

Based on its findings a statement by the Centre asserts: “As the shipping industry’s emissions are predicted to continue to grow in the future, the UK will fail to meet its commitment to avoid dangerous climate change if additional cuts are not made to other sectors.”

Capt Balston stresses that the Chamber is committed to reducing UK shipping's carbon footprint. But he adds that action to curb greenhouse gas emissions must be taken globally and not unilaterally. This new report refocuses attention from the global efforts to reduce shipping emissions down to a national scale, and questions if the UK has a role in influencing its share of the CO2 emissions produced.

The Centre argues: “To have a reasonable chance of avoiding dangerous climate change, global emissions must fall steeply out to 2050. Indeed, the report suggests that the UK should, in advance of EU or global action, consider a unilateral adjustment to its carbon budgets to reflect its share of international shipping emissions.”

The dramatic change in the estimate of CO2 from UK shipping is based on the fact that, up until now, the UK’s emissions are calculated using international bunker fuel sales – that is fuel purchased at UK ports. But, according to the report, this is a misleading statistic as the majority of vessels refuel at nearby ports, such as Rotterdam in Holland, where prices are more competitive.

The Manchester researchers claim that the level of CO2 emissions released by commercial ships involved with UK trade provides a fairer representation of UK shipping emissions than fuel sold. If this method of calculation were to be adopted, the UK’s CO2 emissions allocated to shipping would increase significantly – and possibly to a higher level than the amount of CO2 released by UK aviation, the Centre claims. Greenhouse gas emissions from international shipping activity currently account for around 3% of total global emissions. On the basis of its international bunker fuel sales, UK international shipping emissions for 2006 were around seven megatonnes of carbon dioxide (7 MtCO2).

However, the new report calculates UK emissions on the basis of shipped goods exported from or imported into the UK. On this basis, UK emissions rise considerably to 31 or 42 MtCO2 respectively.

Dr Paul Gilbert, lecturer in climate change at the Tyndall Centre for Climate Change Research, said: “Tackling climate change requires urgent emission reductions across all sectors. Unfortunately up until now, global efforts to reduce shipping emissions have been slow, and are not keeping up with the pace of growth of the sector. This report explores the potential for the UK to take national measures to reduce its share of shipping emissions to complement any future global or EU action.”

John Aitken, secretary general of Shipping Emissions Abatement and Trading, is quoted by the Centre as saying: “This timely and thought-provoking report highlights many of the difficulties faced by those interested in reducing GHG emissions from shipping.” However he adds: “It is clear a global approach is most preferable. If the further research mentioned in the report identifies an apportionment methodology for "countries" which can be agreed upon by many nation states, it would greatly assist the development of a global strategy."

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How often their ships are inspected by Port State Control is up to owners, according to Paris MOU general secretary Richard Schiferli. By this, he explained, he meant that owners have to make decisions which mean their vessels are regarded as high risk, standard risk or low risk. Speaking at last week's ISF Manning and Training Conference, held at the IET London, he described how the MOU's new inspection system would work. He said that the previous regime that required 25% of ships calling to be visited meant that across the MOU states “practically every ship” was being inspected.

The MOU had, he said taken account of complaints that ships were being over inspected. The new system abandons the 25% target and also is no longer based on ship type or age. The MOU now regards all ship types equally because, Mr Schiferli said, it was apparent that the worst detention records were for general cargo ships and not the types previously targeted.

In addition the new regime takes note of the PSC performance of particular companies. The new system determines how often a vessel will be visited by PSC. A high ship will be inspected every five to six months, a standard risk ship every 10 to 12 months and a low risk ship every 24 to 36 months. A ship can be assessed as low risk if: its flag state is on the IMO “white list” and has been subject to an IMO-Audit (VIMSAS); its recognised organisation (class society) is recognised and judged to be of high performance, the shipping company itself is high performance and also if, over a 36 month period there have been no more than five deficiencies during inspections and no detentions.

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Albert Engelsman managing director of Wagenborg Shipping and chairman of the North P&I club has denounced the European Commission competition directorate’s investigation into the International Group of P&I Clubs as potentially ‘irresponsible’.

Meanwhile Joe Hughes, chairman and chief executive of American Club manager Shipowners Claims Bureau Inc, has insisted the current system will be “robust enough to withstand a series of looming economic and regulatory challenges across the globe.”

Mr Engelsman said, ‘It is unclear to the shipowner members of P&I clubs, who are also the consumers, why an investigation is being carried out into a tried-and-tested system that delivers cost benefits to consumers and also to third parties. The pooling agreement between the 13 members of the International Group enables shipowners to trade and comply with the increasingly complex and regulated world of international maritime conventions - it would therefore be irresponsible for the European Commission to jeopardise what is an invaluable global system.’

He said it was all too easy for regulators and industry commentators to focus on the “light competitive restraint” of the International Group agreement and to ignore the fact that most maritime liability conventions are underpinned by the insurance provided by International Group clubs.

“Too often the clubs are given insufficient credit for the invaluable role they play enabling global trade - quite simply, the majority of the world’s shipowners and operators depend and rely upon the unparalleled liability insurance provided by the clubs. In my view we must do everything we can to ensure that this wonderfully unique system continues to serve the best interests of the shipping industry and society,” he said.

Mr Hughes was speaking at the annual Houston Marine Insurance Seminar today, on the theme ‘The P&I World in Transition’. He said that the P&I mutual system had proven an enduring business model, especially over the last 30 years of geopolitical, economic and P&I change. It continued to operate successfully despite a fragile global economy and a patchy freight market. Indeed, at present P&I claims were down, club financial results had become healthier, and underwriting appeared to be achieving a better balance.

However, he cautioned, there were challenges ahead. The global economy might retreat into a double-dip recession, protectionism may gain ground, asset values could slump, a renewed shipping crisis might erode the industry base, claims costs could rise in an unanticipated way, and pricing power weaken as deflation set in. Shipowner liabilities were burgeoning and regulatory and political intervention was increasing.

Mr Hughes took issue with those who persisted in the description of the International Group as a “cartel”. This betrayed a fundamental misunderstanding of its nature.

He said: “A cartel is a group of for-profit suppliers of goods or services who combine to create a malignly dominant market position in order to inhibit competition and to impose high prices on the consumers of those goods or services with the aim of achieving exceptional profitability for themselves at the expense of those consumers with no benefit, direct or indirect, to the wider community. By contrast, the International Group is an association of not-for-profit shipowner-consumer co-operatives, a combination that gives it a benignly dominant position in the best interests of the shipowner-consumers themselves. Its purpose is to provide the lowest prices and the broadest cover in the insurance of marine liability risks for those shipowner-consumers.”

He concluded: “The International Group does not exist to produce profitability for anyone. Indeed, the mutual P&I product is chronically under- rather than over-priced! And it creates benefit for the wider community by way of reduced shipping costs and providing the highest possible levels of compensation to victims of maritime accidents. In short, to describe the International Group as a cartel is totally misguided.”

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Brokers advised to review their email systems

International Transport Intermediaries Club (ITIC) warns that shipbrokers run the risk of exposure to substantial liabilities as a result of inadequate monitoring of their email communications.

In the latest issue of its Claims Review, ITIC cites the case of a shipbroker acting for a shipowner which had a demurrage claim against charterers.

The charter party included a 60 day notification period and a 90 day time-bar for documented claims. The owner passed the full documented claim to the shipbroker, which sent it to the charterer via email on the same day, to the email address specified by the charterer. The shipbroker did not receive any email failure notice or rejection and, on this basis, believed that it had been sent successfully. But the charterer’s instructions stated that the sender would receive an automated confirmation of receipt within 48 hours and this was not received by the shipbroker. The broker, not having heard from the charterer, re-sent the claim to the same email address, after the sixty-day notification period but before the ninety-day period had expired. Again, no notice of any systems failure or rejection was generated and, again, no automated response was received from the charterer.

The owner continued to chase for payment, but the charterer argued that it had never received the claim and that it was therefore time-barred. The charterer was not prepared to negotiate further.

ITIC, acting for the shipbroker, obtained counsel’s opinion that the charterer was likely to succeed in its claim. When the shipbroker did not receive the automated response from the charterer, this should have alerted it to the fact it was not received. However, as the broker had sent the email in time, it did not seem fair that the charterer should be able to avoid liability completely. The owner started arbitration proceedings against the charterer, but insisted that it would issue litigation against the broker if the arbitration was unsuccessful.

Following ITIC’s intervention, however, the charterer agreed to contribute towards the costs of the claim and the owner agreed to forgo its entitlement to the legal costs which it had already incurred. The claim against the shipbroker was paid by ITIC, which says it has issued several circulars and guidelines on demurrage time bars, and emphasises that it is important that all brokers review their systems to ensure that no mistakes can occur.

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Charity news:

Thomas Miller says that the funds raised for the renovation of the medical ship Chauncy Maples have exceeded GBP1m, halfway to the project’s GBP2m target. The charity has just raised GBP6,000 from an auction of five sale items including a cruise donated by Royal Caribbean Cruise Lines.

Chauncy Maples

Thomas Miller is the sponsor of the Chauncy Maples Malawi Trust, a UK charity which is renovating the 19th century ship as a clinic to provide essential medical services to the lakeside people of Malawi. The Malawi Ministry of Health, the owner of Chauncy Maples, has committed more than GBP250,000 to the project, actively planning the renovation work in conjunction with the contractor.

Hugo Wynn-Williams, chairman of Thomas Miller, said: "Reaching the halfway stage in only three months since the project launched in June is a truly magnificent effort by our community. I have been genuinely surprised by the very positive response not just to fund-raising but also the desire to participate in all sorts of ways. Since the outset we have wanted to celebrate our anniversary with something better than a party - this has exceeded our wildest dreams".

Mark Holford of Thomas Miller explained how the funds raised thus far were already being put to good use: “In the past two weeks, work has commenced in Malawi in stripping out the ship in preparation for major hull work in a dry dock in October. Our next step is to persuade the world's maritime manufacturers to donate the GBP800,000 worth of parts necessary for the renovation work.” 85 per cent of the GBP1 million raised so far has come from Thomas Miller, which donated GBP250,000, and its business community. Sixteen donors have given at least £25,000 each to become Founders of the project, including five of Thomas Miller's transport clubs: UK P&I Club, UK Defence Club, TT Club, Hellenic War Risks and ITIC. Three UK law firms have also become Founders: Ince, Holman Fenwick Willan and Reed Smith. American law firms have also been significant donors, led by New York law firm Blank Rome. Another Founder, the broker Miller Insurance Services, is taking a ‘charity’ slip around Lloyd's and other London underwriters which has produced GBP65,000 so far. .

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