CAPT.

KRISHNA CHITTIPEDHI
ASSOCIATE PROFESSOR
NAUTICAL SCIENCE DEPARTMENT
MARITIME MANAGEMENT
UNIT 1
CARGO DOCUMENTATION
BILL OF EXCHANGE:
• It is a mode of payment for Goods and freight in vogue historically.
• Buyer of Goods is the Drawer of Bill of Exchange
• The person/Bank on whom the bill is drawn is the Drawee of B.O.E.
• Seller of Goods is the payee to whom the amount of B.O.E. is made
payable.
• When Drawee/Bank accepts the BOE, becomes the ‘Acceptor’.
• Seller/person who indorses the BOE in favour of other person/Money
lender becomes ‘indorser’.
• Other person/Money lender to whom BOE is indorsed becomes
‘indorsee’.
• Bill Of Exchange can be ‘Inland Bill’ or ‘Foreign Bill’.
• In case of Foreign BOE few days of Grace period is fixed in the bill.
• Discounting a Bill of Exchange means a Banker/Money lender can
immediately lend money to the shipper at a discount and collect full
amount of bill on/about scheduled date from the drawee, provided all
the parties to the BOE are persons of good repute and integrity.
Export Credit Guarantee (L/C)
• The buyer, through his bank of repute and acceptable to the seller, will draw up
a irrevocable L/C in favour of the seller/shipper undertaking to pay through the seller’s
bank a maximum amount towards the value of goods when appropriate pre-conditions
have been met within the time allotted, these pre-conditions being clearly specified in
the L/C, and usually being scrupulously adhered to both by the banks and the
shipper/consignee involved.

• These pre-conditions invariably include presentation of Clean B/L and other

following documents related to goods shipped;
i) Insurance papers as per Sale terms;
ii) Invoices covering the relevant goods;
iii) Certificate of Origin of goods and any other document required under the
Custom’s law of the country of Importer;
iv) Pre-shipment inspection or survey report in respect of goods; and,
v) Packing list of the goods covered.
•Bill of Exchange can be used as vehicle of payment under a documentary L/C
or as Documentary credit itself.

Types of Documentary Credits:

• Revocable credit
• Irrevocable credit
• Transferable credit
• Back to back credit
• Revolving credit
• Red clause credit
• Green clause credit
• Sight payment credit
• Deferred payment credit
• Acceptance credit
• Negotiation credit, and
• Documentary credit in transit trade.
___________
Documentary Credits. An exporter's method of obtaining payment for the goods he
has sent abroad will depend, in the first place, on the form of contract of sale he has
made with his customer overseas. There are various methods available to the seller to
obtain payment from the buyer, but here it will suffice to mention, only, the method
known as the "documentary credit" system, a system commonly used.

Under this system the importer at the request of the exporter makes an application to his
banker to open a documentary credit through the bank's Correspondents (i.e., another
bank or a branch of the same bank in the exporting country), in favour of the exporter
for a sum representing the value of the shipment, such credit to be available by drafts
(bills of exchange) at sight, or at a fixed number of days after sight. Any such draft must
be accompanied by certain specified documents, usually some or all of the following: –
Invoices (in duplicate or more),

Marine and war risk insurance policy or certificate covering 10 per cent. above the c.i.f.
value of the goods (and possibly including Institute Cargo Clauses),
A full set of "clean" on board steamship company's bills of lading through to the port of
destination,
Consular invoice (in duplicate),
Certificate of quality,
Certificate of origin.
The above must be strictly correct and, with the Bill of Exchange drawn on the bank,
must be presented not later than the expiry date of the credit.

The bank issues a letter of credit (revocable or irrevocable, preferably the latter)
authorising the exporter to draw on the correspondent bank for the account of the
importer, a bill or bills of exchange for the amount authorised in the letter. The
documentary B/E is deposited by the beneficiary (i.e., the exporter) with the correspondent
bank for examination and, later, assuming the documents to be in order, a banker's draft is
issued to him for the amount of the bill.

When the documents arrive in the country of destination, the issuing bank will release them
to the importer on the latter's payment to the bank of the price of the goods.
Armed with these documents, the importer is then in a position to obtain a delivery order
from the shipowner's agents and take delivery of the goods from the ship or warehouse.
(N.B.– Of the two negotiating banks, the one from whom the credit originates is the
"issuing bank; the one which advances money to the exporter against the credit is the
"correspondent" bank).
Under a somewhat similar arrangement, a documentary bill may be drawn
on the importer himself, in which case the exporter sends the documents
through his bank to be delivered to the importer against the latter's
payment or acceptance of the accompanying
bill of exchange.
If this is drawn to be payable "at sight" the documents will not be
handed to the drawee except against payment of the bill. Meanwhile, the
goods will not be released by the shipowner or warehouseman until a
"Bank Release" in proper form has been lodged.
Where the consignee's credit is known to be good, the issuing bank
may have issued the credit on the basis of "documents against
acceptance". In that case,as soon as the consignee has "accepted" the
bill by writing his name across the face of the bill, he will be entitled to have
the documents delivered to him. The bill may have been drawn, say, at 30
days' sight, and in that case it becomes due for payment 30 days after the
drawee has accepted it (plus the usual 3 days of grace, if any).
BILL OF LADING
A BILL OF LADING IS A RECEIPT FOR GOODS SHIPPED ON
BOARD A VESSEL SIGNED BY THE PERSON (OR HIS AGENT)
WHO CONTRACTS TO CARRY THEM AND STATING THE
CONDITIONS IN WHICH THE GOODS WERE DELIVERED TO
THE SHIP.
IT IS NOT THE ACTUAL CONTRACT BUT IT IS AN EXCELLENT
EVIDENCE OF THE TERMS OF THE CONTRACT.
IT IS A DOCUMENT OF TITLE TO THE GOODS WHICH IS THE
SUBJECT OF THE CONTRACT BETWEEN THE BUYER AND
SELLER.
Functions of a B/L. In respect of goods shipped in a general ship a bill of lading
fulfils three separate functions, as follows: –

l. It is a receipt signed by the master or the agent on behalf of the shipowner, for
goods received on board or elsewhere into the shipowner's custody.

2. It is evidence of a contract between a shipper and a carrier for the carriage of

goods by sea, In itself it is not a contract in the sense of being a document signed
and witnessed by or on behalf of both parties. It is signed only by the shipowner's
representative whose signature is not customarily witnessed. The original
contract may be made by word of mouth or in some other way, but the fact that a
B/ L has been issued provides evidence that a contract does exist. It may
evidence the whole contract or only part thereof.

3. It is a document of title to the goods described in it. That is, in the absence of
proof of fraud, or in the absence of an intention that the B/L holder should not
acquire ownership of goods, the holder of a B/L for the time being is regarded as
the rightful owner of the property described in the bill.
Rights of the Buyer:
1. To have delivery of the goods as per contract.
2. To reject the goods when they are not of the description, quality or quantity as specified in the
contract .
3. To repudiate the contract when goods are delivered in installments without any agreement to that
effects
4. To be informed by the seller, when the goods are to be sent by sea route, so that he may arrange
for their insurance
5. To have a reasonable opportunity to examine the goods for ascertaining whether they are in
conformity with the contract.
6. To sue the seller for recovery of the price, if already paid, when the seller fails to deliver the goods.
7. To sue the seller for damages if the seller wrongfully neglects or refuses to deliver the goods to the
buyer
8. To sue the seller for specific performance
9. To sue the seller for damages for breach of a warranty or for breach of a condition treated as
breach of a warranty.
10. To sue the seller the damages for anticipatory breach of contract
11. To sue the seller for interest where there is a breach of contract on the part of the seller and price
has to be refunded to the buyer
Duties of the Buyer:
1. To accept the delivery of goods, when the seller is willing to make the delivery as per the contract

2. To pay the price in exchange for possession of the goods

3. To apply for delivery of the goods.

4. To demand delivery of the goods at a reasonable hour

5. To accept delivery of the goods in installments and pay for them, in accordance with the contract.
6. To bear the risk of deterioration in the course of transit, when the goods are to be delivered at a
place other than where they are sold

7. To inform the seller in case the buyer refuses to accept or rejects the goods

8. To take the delivery of the goods within a reasonable time after the seller tenders the delivery

9. To pay the price, where the property in the goods are passed to the buyer, in accordance with the
terms of the contract

10. To pay damages for non-acceptance of goods

Rights of the Seller:

1. To reserve the right of disposal of the goods until certain conditions are fulfilled.
2. To assume that the buyer has accepted the goods , where the buyer
3. To deliver the goods only when applied for by the buyer
A) Conveys his acceptance;
B) Does an act adopting the sale; or
C) Retains the goods without giving a notice of rejection, beyond specified date (or
reasonable time), in a sale on approval.
4. To make delivery of the goods in installments, when so agreed
5. To exercise lien and retain possession of the goods, until payment of the price
6. To stop the goods in transit and resume possession of the goods, until payment of the
price
7. To resell the goods under certain circumstances
8. To withhold delivery of the goods when the property in the goods has not passed to the
buyer
9. To sue the buyer for price when the property in the goods has passed to the buyer or
when the price is payment on a certain day, in terms of the contract, and the buyer fails to
make the payment (Sec 55)
Duties of the Seller:

1. To make the arrangement for transfer of property in the goods to the buyer.
2. To ascertain and appropriate the goods to the contract of sale
3. To pass an absolute and effective title to the goods, to the buyer.
4. To deliver the goods in accordance with the terms of the contract
5. To ensure that the goods supplied conform to the implied / express conditions and warranties.
6. To put the goods in a deliverable state and to deliver the goods as and when applied for by the
buyer
7. To deliver the goods within the time specified in the contract or within a reasonable time and a
reasonable hour.
8. To bear all expenses of and incidental to making a delivery ( i.e. up to the stage of putting the
goods into a deliverable state
9. To deliver the goods in the agreed quantity.
10. To deliver the goods in installments only when so desired by the buyer.
11. To arrange for insurance of the goods while they are in transmission or custody of the carrier.
12. To arrange for insurance of the goods while they are in transmission or custody of the carrier.
MATE’S RECEIPT
A Mate’s Receipt is a temporary receipt issued and signed by the officer of a
vessel, to acknowledge the goods ready to be loaded on a ship. This acts as
evidence that goods were loaded in the vessel but it does not have the same
validity as for instance, the bill of lading.
Mate’s receipt is a document originally issued by the first mate of the ship.
He is the officer responsible for cargo. The document would be issued by
him after the cargo was tallied into the ship by tally clerks. The shipper or
his representative would then take the mate’s receipt to the master or the
agent to exchange it for a bill of lading, which would incorporate any
conditions inserted into the mate’s receipt. It has no legal authority
regarding processing financial settlements of international consignments.
 TYPES OF BILLS OF LADING

a negotiable bill of lading instructs the carrier to deliver goods to anyone in

possession of the original endorsed negotiable bill, which itself represents title to
and control of the goods.
a non-negotiable bill of lading sets out a specific consignee to whom the goods are to
be shipped, and does not itself represent ownership of the goods. because of this, a
negotiable bill of lading must be used for a documentary sale.
please note do not confuse the negotiable and non-negotiable types of bill of ladings
WITH THE “NEGOTIABLE” AND “NON-NEGOTIABLE” COPIES OF SIGNED BILL OF LADINGS

Clean B/L. A B/L is said to be "clean" when it bears no superimposed clauses

expressly declaring a defective condition of the goods or packaging.
Foul B/L. A B/L which is not clean in the above sense is described as "foul", dirty",
"unclean", or "claused".
Received for Shipment B/L. This is a B/ L issued to a shipper when he delivers
goods into the custody of the shipowner or the latter's agent (e.g., a wharfinger or
dock authority) before the carrying ship has arrived or is ready to receive the goods.
It is sometimes called a "custody bill of lading". The rules appended to the Carriage
of Goods by Sea Act require that, after receiving the goods into his charge the
carrier shall, on demand of the shipper, issue a B/L showing the marks, numbers( or
weight) and apparent order and condition of the goods.

Shipped B/L. A B/L issued after the goods have actually been loaded into the ship
is described as a "shipped bill". The rules just referred to require that after the goods
are loaded, the B/ L, if demanded, is to be a Shipped B/ L. If a Received for
Shipment B/L has previously been given, however, it must be surrendered in
exchange for, or converted into, a Shipped B/ L by endorsing upon it the name of
the ship into which the goods are loaded and the date of shipment.
Order B/L. The vast majority of B's/L are of this type and are negotiable
documents. One part of the set must be surrendered, duly indorsed, in exchange
for the goods or a delivery order. Indorsement may be effected in either of two
ways, viz., (1) by "blank indorsement" where the person to whose order the
goods are made deliverable simply writes his name on the back of the bill,
converting it in effect from an "order" bill into a "bearer" bill, so that any further
transfer may be effected by mere delivery; (2) by "special indorsement" which is
an indorsement to some named person or persons, thus converting it in effect
into what has been described above as a "straight" bill.
Through B/L or Multi Modal B/L. A B/L used for multi-transport which provides evidence of a
contract of carriage from one place to another in separate stages of which at least one stage
is sea transit and by which the issuing sea carrier accepts responsibility for the sea carriage
and acts as agent for the shipper in arranging carriage from the place of acceptance to the
final place of delivery. It should be noted that more than one carrier is used, hence the
term multi-transport, and that the issuer only accepts responsibility for his own segment
of the carriage which would be limited to that contained in the Hague or Hague-Visby
Rules. He then casts himself in the role of agent as between the shipper and other
carriers if the loss or damage was caused while in their hands. It is usual for the issuer of
the B/L to agree that if it cannot be proved where the goods were when the loss or
damage occurred, it shall be deemed to have occurred at sea and the carrier shall be
liable to the extent prescribed by the Hague or Hague-Visby Rules. Sea carriers
frequently undertake the responsibility of arranging through transit.
Liner B/L. This is a B/L issued by the owner or charterer of a general ship and, so far
as the shipper and consignee are concerned, is in no way related to any charter-party.
CLAUSES IN B/L’S:
The detailed contents of such bills vary widely according to the nature of the trade in which
the company's ships are engaged, but the following may be considered more or
less common features: –
1. The name of the ship and the names of the ports of loading and destination of the goods.
2. A description of the goods with their weight and/or measurement, and the marks and
numbers of the packages.
3. The name of the consignee or, more frequently, "consigned to order", or "consigned to
.................. or order".
4. The freight payable, based on weight or measurement as the case may be, except in special
cases, and the discount allowed (if any).
5. The remark "freight paid" will be added at the time when the freight has in fact been paid.
6. An instruction to the ship owner's agents at the port of destination of the goods to notify the
fact of the ship's arrival to the consignee but without any liability.
7. A "deviation clause" reserving liberty to deviate for various purposes. This clause is often
very elaborate and, in almost all cases, will include liberty to tow and be towed, assist vessels
in all situations, save life and property, bunker, adjust compasses, drydock with or without
cargo on board, and comply with orders given by Government and other authorities. Liberty is
also reserved to sail with or without pilots, to call at any port or ports in any order (even in the
contrary order to the advertised route) for the purpose of taking in or setting down cargo, mails
or passengers, and there is usually added "to deviate for any purpose whatsoever whether
connected with the contract voyage or otherwise". (Such wide clauses are not of much value
unless it can be shown that the deviation was reasonable. To deviate purely for the carrier's
convenience is not reasonable.
8. The general "exceptions clause" wherein the carrier disclaims liability for loss or damage
arising from Act of God, Enemies, Restraint, Barratry, Capture, Riots, Strikes, etc. (Similar to
the list of exceptions in a voyage C/P).
9. A clause whereby the carrier disclaims liability for loss or damage arising from rust, sweat,
chemical or climatic action, rain, spray, etc., and insufficient marking, inadeqate packing, and
so forth. (This is of no avail unless the ship is proved to have exercised all reasonable care to
prevent loss or damage. )
10. A "negligence clause" ruling out liability for loss or damage arising from
the negligence of the carrier's servants (master, officers, pilots and crew).
11. A "general average" clause to the effect that, either with or without
reservations, G/A is to be settled according to Y-A Rules, 1974.

12. A clause whereby the carrier disclaims responsibility for overcarriage or short
landing. (The carrier is, of course, fully responsible for eventual delivery, and short
landed or over carried goods must be forwarded to their proper destination at the
carrier's expense. Liner Conference members usually have an arrangement for
carrying each other's over carried and short landed goods freight free).

13. Special clauses as required by the particular nature of the goods, e.g., for
refrigerated cargo "Carrier not responsible for breakdown of refrigerating machinery".
(Here, also, to be protected by the clause the carrier would have to show that first-class
machinery and spares were installed, and that properly qualified maintenance personel
were engaged).
14. The "Paramount clause" if required by statute or if agreed to by the parties when
not required by law. This clause renders the exceptions and negligence clauses
redundant, and they may therefore be omitted.

15. Both to blame collision clause and New Jason clause

PRECAUTIONS TO BE TAKEN BY MASTER PRIOR SIGNING B/L

1. That the B/L is in proper form, i.e., usually the ship owner's own form, or
the form prescribed by the C/P.
2. That it is correctly dated with the date of shipment.
3. That mate's receipts showing
(a) that the goods are actually on board, and
(b) (b) the apparent order and condition of the goods and details of any
shortage, have been surrendered.
4. That marginal clauses as required, but only those really necessary and
lawful, have been duly inserted to show the apparent order and condition,
and quantity.
5. That freight, if pre-payable, has been paid.
6. That, if the ship is under charter, that the owners' rights under the C/P are
preserved.
letters of indemnity.(loi)

In the interests of honest trade it is essential that a B/L should never contain a false
description of the condition or quantity of the goods. A person who buys goods he has never
seen on the strength of their B/L description is entitled to a square deal, and if he fails to get
one, has a remedy in prosecution for fraud.

Cases do arise where a shipper, to avoid difficulties over the financing of a shipment (and
sometimes for even less worthy reasons), offers the master or agent of the ship owner a
"letter of indemnity" or "back letter" in return for clean bills of lading in circumstances where
a qualified bill would appear to be justified.

In such letter the shipper gives an undertaking to indemnify the ship owner in respect of any
loss or liability the latter may be faced with as a result of issuing clean bills. No master
should ever lend himself to this practice, which could possibly result in his being found guilty
of conniving at fraud.
A Letter of Indemnity is an agreement wherein one party (the issuer) requests
another party (the recipient) to do something which they are otherwise not
obliged to do. In exchange, the issuer promises that they will keep harmless and indemnify
the recipient of the LOI in the event of any losses suffered as a result of complying with
that request. However, one should be aware that this agreement is not without risks. The
reason is that an LOI will inevitably lead to a future breach of an underlying contract (e.g. a
Bill of Lading or a Charter Party) and sometimes it may not be enforceable.

Examples of such a risky course of action may include delivery of goods without
presenting the original Bill of Lading; deviation from the contractual voyage; carriage of
goods on deck; issuance of ad valorem Bills of Lading; carriage of jewellery and bank
notes; the issuance of ante- or post-dated Bills of Lading, and the issuance of Bills of
Lading with an incorrect description. On some occasions it is not unusual that the charter
party itself will allow the issuance of LOIs.
A typical example is a situation wherein the vessel has arrived in the
port of discharge prior to the receipt of the Bill of Lading. Awaiting the
Bill of Lading to arrive could result in delays of up to a few days or even more.
For this reason in some trades, such as the dry bulk and liquid sectors, it is common
practice to insert a rider clause covering the issuing of an LOI in exchange for delivery of the
goods without presenting the Bill of Lading. Even though the option of issuing an LOI is
contractually set in the charter party, this does not alter the fact that this is a dubious
practice for which an insurance cover may not be available. Therefore, proceeding on that
basis remains entirely a commercial decision.

After accepting an LOI, pay attention to the following points:

1. Make sure that performance is carried out in full compliance with the request under the
LOI. For example, if the cargo is not delivered to the party named in the LOI, the recipient of
the LOI may not be entitled to an indemnity.
2. Where possible, secure evidence that the request was fulfilled in accordance with the LOI
(for example, proof showing who the cargo was eventually released to).
3. If a claim arises, take a quick action to enforce the terms of the LOI against the issuer,
bearing in mind the applicable time bar especially when a chain of LOIs has been issued
In any case a letter of indemnity has no legal standing whatever.
It is binding in honour only, and cannot be sued upon should the shipper who
issues it go back on his word. In certain trades, however, it appears that some ship owners
and their agents are prepared to issue clean B's/L in exchange for letters of indemnity but,
it should be said in all fairness, only in special circumstances in accordance with a
resolution adopted by the International Chamber of Commerce.

The safeguards required while taking Letter of Indemnity

(1) that the acceptance of letters of indemnity should be communicated to the

ship owners or their agents at the port of discharge, and

(2) that the ship owners should, on application by the underwriters concerned,
disclose to them the existence of such letters of indemnity should a claim arise
LIEN

LIEN means claim / legal rights on the property for the unpaid debts

OWNERS LIEN ON CARGO

In common law, owners may exercise a Possessory Lien on any part of the Cargo in respect
of which Freight is owing at destination or on which money has been spent in protecting
the Cargo.(As In G.A. Act)

‘Common Law ‘ lien is allowed on unpaid freight , but not on “dead freight” or “demurrage”.
However owners often insist on insertion in contract of carriage a clause giving them
contractual lien on the Cargo for “dead freight” and “demurrage” and damages for detention.
A Lien for any thing other than freight must be expressed clearly in the contract Terms.

Owner’s Lien is exercised by the master as an Agent of the ship Owner; it is not Master’s Lien.
Once the delivery of the goods is made , lien is lost. For this reason most dry cargo C/P
forms require freight paid on or at some time before delivery.
To exercise Lien, owners retain actual or constructive possession of the Goods
on which freight is Due.

The Cargo on which Lien is exercised should therefore be discharged into a

warehouse under the exclusive control of owner’s agent. Agent should be
instructed to release Goods after surrender of Original B/L and Payment of Freight.
If freight is not paid, local laws may allow Goods to be sold to pay freight &
Storage, Customs.

“London Clause” which gives master right to discharge such cargo immediately on
arrival without giving notice to the receiver.
LIENS

Right to retain possession of Property for performance of an

obligation or to secure satisfaction of a Claim .
May be general—Property held as security against all outstanding debt.
May be particular-----Claims of possessor in respect of property held .
lien arises and not dependent on contract.
lien may be lost when the said lien property is delivered to another
party.
If a Purchaser of property is given notice of a lien, it binds him.
Two classes of lien of concern to Ship Master.

1) Possessory lien
2) Maritime lien
Possessory lien

A carrier by sea in Common Law has Possessory Lien on three cases

1. To recover unpaid freight (not dead freight, demurrage or damage for detention)

2. To recover expenses incurred in protecting cargo. (Master acts as Agent of necessity

for the benefit of cargo owner)

3. ( A General Average Bond Or Guarantee if given, cargo is released

G.A Contribution due Possession of Goods may be actual i. e goods on board or
constructive i.e. in a ware house under carrier’s control.

Common Law right to exercise possessory lien exists Independently of contract. It is an

implied lien.
A contractual Lien is one incorporated by a term into a Contract.
C/P has a lien clause
Maritime lien

1 It Is a claim on a ship, her cargo or both as well as on the freight

she will earn in respect of service done to or injury caused by
them (i.e. Ship or her cargo)
2 A Maritime Lien is enforceable by proceeding “in rem”i.e
against Property involved ( which is termed ‘res’. Not against any
person who has the possession or ownership.
3 Can be enforced by arrest & sale of property .
4 The lien travels with the ship or cargo whenever its possession
changes. It attaches to the property like a leach!
5 It is good even against a bonafide purchaser without Notice.
6 It is not dependent on possession.
Maritime liens are of two classes: a)contractual liens b) damage liens

Contractual liens are those in respect of payment due under a contract.

Examples are bottomry, respondentia, salvage, seaman’s wages, master’s wages, master’s
claim for wrongful dismissal, and master’s claim for disbursement.
There is no lien for either for pilotage or towage unless the service merged with salvage
service. Nor is there a lien on a ship for port dues.

Damage liens arise principally from collision damage and the damage must be done by the ship
and not individually caused by the crew of a ship.(for e.g crew of ship cut cables of another ship
will not give rise to a lien on his ship)

Although the damage must be caused by the ship, the lien does not arise unless there is also
proof of a wrongful act or neglect of the owner or his servants.

Time bar the lien must be exercised with in two years of the date of the damage suffered
unless the court extends the time period.
Examples of Maritime lien
CONTRACTUAL
1 Lien on a Salver on a ship / or cargo.
2 Lien of Seamen on a Ship for wages.
3 Lien Of Master on a Ship for wages & Disbursements.
4. Lien of a Ship repairer in respect of work done on a ship.
DAMAGE LIEN
Lien on a ship at fault in collision in which property has been damaged
Ranking of liens
Contractual liens:
salvage comes first because the successful salvage service has preserved the vessel which
is now providing the fund. If there are several salvage liens at the same time, the latest ranks
first and the earliest ranks ranks last.
seaman’s wages
wages of master and his other claims
Bottomry (Bottomry, a maritime contract (now almost obsolete) by which the owner of a ship
borrows money for equipping or repairing the vessel and, for a definite term, pledges the ship
as security—it being stipulated that if the ship be lost in the specified voyage or period, by
any of the perils enumerated, the lender shall lose his money. A similar contract creating a
security interest in the cargo is called a respondentia.)
Damage liens
Damage liens, even though they arise on different occasions, they are all treated as being of
equal rank, and if the assets are insufficient to satisfy all claims in full the court will distribute
them on a rateable manner.
Ranking between contractual and damage liens
No fixed rule exists to decide between the two if both claim arises. However, the court may be
influenced by the following principles:
liens arising out of tort ( with innocent third party) should rank prior to those which previously
arose from contract. Master and crew, volunteer salvors and bottomry bond holders are all
persons who have concerned themselves of their own free will, and their claims should be
postponed to that of the owner of ship damaged in a collision which occurred after the
contractual lean accrued.
If the collision damage occurs first , subsequent liens should take precedence on the ground
that the subsequent contractual services for reward have preserved the fund for the benefit of
the collision creditors if there is also Mortgage claim along with maritime lien , then maritime
lien takes priority as mortgage is a voluntary commercial transaction

Maritime lien and bills of sale

Since a maritime lien travels with the vessel, it is important that the bill of sale should indicate
whether the ship is free from such an encumbrance. If a ship with encumbrance is sold, the
new owner will have to settle the outstanding claim or risk seizure of the vessel which may be
resold by order of court.
 CESSAR AND LIEN CLAUSE
1. In cases where the Charterers are merely Agents for loading another
party’s cargo & themselves , they are anxious to ensure that their
liability for the cargo ends once it is loaded. This is usually expressed
in a cessar clause stating “ charterer’s liability ceases as the freight,
demurrage and dead freight has been paid”
2 Ship owners will not like to find themselves without a remedy for
breach of contract or damage done to their vessel after Charterer’s
liability has ceased. So owners would want legal remedy against
somebody else, Normally the receiver of Goods.
3 Therefore if a“ Cessar Clause” is incorporated, a Lien Clause will also
be included in C/P.
4 This Lien Clause gives owners the right to detain possession of goods
at discharge port ,until outstanding debts are paid.
5 The relief given to the Charterer from their obligations only operates to the extent
that outstanding sums can be recovered at discharge Port
6 The ship owner must proceed against receiver first; But charterer will still
be liable for sums, which cannot be recovered from receivers.
CLAUSE PARAMOUNT:

Inserted in C/P under which B/L is required to be issued. The contract of

carriage H/VR or Hamburg Rule is inserted under this clause has effect of
incorporating into contract of carriage one of the three international conventions
setting out minimum terms and conditions within which the carrier must contract
(Hague , Hague/visby, Hamburg.

Most maritime countries have incorporated one or other of these in to their national
law, and these rules of relevant convention are automatically applied to contracts
made in that country.

When sea carriage is between countries where none of these apply, still parties to
contract agree to be bound by (voluntarily) one of these Rules to obviate disputes.
In this case the contract should have a clause paramount.
FORCE MAJEURE is a French term that translates to “superior force”. It is a
clause found in many logistics contracts. Also called “chance occurrence”, or “Act of
God”. It is invoked when the parties are not able to fulfill their obligations due to
unforeseen and unavoidable circumstances. Such as war, strike, natural disasters
(floods, hurricane, earthquake), riots, acts of government, plagues, epidemics, etc.

The situation calls for a Force Majeure clause only if the events are:
External (beyond the control of parties)
Unforeseeable (cannot be predicted or foretold)
Irresistible (its consequences cannot be avoided)

However, a Force Majeure clause does not act as an excuse for everything. It
doesn’t cover when the company fails to perform its duties due to negligence on
their part, or costlier alternatives. Also, it cannot be evoked under normal conditions
which can be predicted. Such as a storm or an area that is prone to floods.
That being said, Force Majeure is a contractual concept, defined by
terms and conditions mentioned between the parties. But, as a
precautionary measure, companies do include this clause while
signing their agreements.

It removes any liability from the companies during catastrophes that

are beyond their control.

Force Majeure can be a veto power clause that can cover the
impossibility of fulfillment of a contract.
ICE CLAUSES

This clause is introduced when there is possibility of V/L being sent to ice-bound areas to protect owner’s
interest.

The ‘ ice clause’ must contain the following:

are owners obliged to let vessel break ice or follow an ice breaker.

What possibilities have the owners to refuse a certain port or leave a port when there is risk of freezing.

Are owners entitled to full or only reduced freight when vessel leaves with part cargo

Who shall decide what to do with cargo when it is impossible to reach original disport?

who shall pay for delay as a result of ice?

Who shall pay for extra insurance on vessel and damage caused to ship by ice?
The safe port clause

An important provision in all C/P

Safe port requirements. Safe access to port (ice etc temporary obstructions).
Neap tide cannot make the port unsafe.
v/L can safely lie afloat in all conditions of tide unless it is customary and
safe to load/ discharge aground
Safe landing of goods and proper Wharf’s
Politically safe, free from war/ embargo
must be able to leave after discharge without lowering /cutting masts
If the vessel has to lighten as a requirement to enter the port, then that
port is unsafe, even if it is customary for all vessels to lighten to enter that
port unless the charter party specifically allow the vessel to lighten
Safe ports
A safe port is defined in the classic case of ‘ The eastern city’ .
In this particular case the judge defined the safe port as :
“ a port will not be safe unless, in the relevant period of time, the particular ship can
reach it, use it and return from it with out, in the absence of some abnormal occurrence,
being exposed to danger which can not be avoided by good navigation or seamanship”
A port can be considered unsafe for three broad general reasons:
a) physical feature( e.g. an under water obstruction to navigation; insufficient
manoeuvring room)
b) political happening( e.g. a riot causing the throwing of bombs)
c) the system of the port itself, as contrasted to negligent acts or omissions of individuals
with in the port administration( e.g. no system exists in port for giving weather forecast/
warnings to vessels in port).
Safe berth
Must be safe in same respects as for safe ports.
Master’s duty to ensure berth is safe and to refuse to go to an unsafe berth even if ordered
to go damage to ship/ quay at an unsafe berth is usually ship owner’s
responsibility/liability
NAABSA is an abbreviation for the term:
‘Not always afloat but safely aground’
It refers to the practice whereby ships visiting a particular port lie
safely aground at low water, rather than remaining afloat with under-keel clearance
throughout their visit.
Whilst NAABSA is a common occurrence for some ships, there are still risks
associated with the operation.
For example, damage can happen when the quality of the seabed is right for
NAABSA (flat, soft consistency), but there is debris on the seabed.

•The right for charterers to request the ship to lie safely aground for the purposes of
loading/discharging operations, subject to the owner’s approval
• a qualification addressing the scope of the owner’s approval, in the form of an
obligation for charterers to confirm in writing that ships using a particular berth can do
so safely, ie without suffering damage
• the requirement for charterers to indemnify owners for any loss, damage, costs or
expenses, etc that may result from the ship lying aground.
War risk clause in a voyage charter party
Sets out rights of owners in war zones. The actual outbreak
of war or a substantial Increase of war risks after the fixing of the voyage
charter can affect the performance in various ways.
If the vessel’s flag State is involved performance could prove impossible.
This would arise if the charterers become enemies, thus making performance
illegal. Frustration of the contract might occur if ports which are essential to
its performance became blocked. There is further risk of requisition for hire
by the flag State, or just possibly by another State .

All the above clauses deal with situations where war risks are likely to affect
the performance of the contract. The war risks clause attempts to protect
every one concerned with navigation and management . It also seeks to cover
any acts which can reasonably be considered to expose ship and crew to
danger.
Also all the above factors will have to be addressed according to
whether or not the ship has commenced loading. If have not
commenced loading the owners have a limited right of
cancellation after giving the charterer 48 hours notice to revise
their orders so as to avoid war risks. Once the loading of the
vessel has commenced , this cancelling right is replaced by a right
to call for revised orders. If the revised orders are not given with
in 48 hours the owners have wide liberties, of course subject to
their acting reasonably.
In short in the war risks clause owners are compensated for
anything they reasonably do. In other words the risk falls on the
charterer. The same is true in relation to any war risks zone
which the vessel would normally transit on the loaded voyage. It
almost boils to stating that anything done because of war risk will
not constitute a deviation.
War risk clauses in a time charter party
The problems of war affect period charter differently from voyage charters. In period
chartering there are often general restrictions of trade caused by the war. And also upheavals
in freight rates and frequently a steep increase in expenses. The time charterer should not
bind the ship to perform voyage involving was risks. ( some USA oil companies require the
vessel to accept orders to war risk ports on the basis that insurance cover is available”
through a government programme”) . Any ordinary time charter is made on the basis that
the vessel shall trade within essentially peaceful areas of the world, and not enter any war
zone unless the charter party was made specifically for such purpose.

Some older form of time charter parties excluded the possibility of off-hire when time was
lost owing to war risks, even if lost by war damage, including time taken for repairs. Current
time charter parties are making no specific reference to this off-hire during war risks. AS a
result of this , repair time will be off hire, but owner will usually have a right of recovery
under the indemnity principle. Loss of time because of war risks ( like awaiting orders) will
be on hire.
War Insurance:
If the vessel becomes exposed to war risks, this clause entitles
the owner to insure the ship against war risks, for the charterer’s account. In this clause
value to be insured, period of insurance and reimbursement of the premium by the
charterer are considered while negotiating this clause. The general law and other charter
terms( such as safe ports) implies that payment of the premium by the charterer will not
relieve of his responsibility/liability for damage by hostile action.
War cancellation clause:
If the Vessel’s flag State or of the charterer’s State becomes involved directly in war, will
automatically terminate the charter on the grounds of illegality( trading with the enemy).
Apart from this principle, the charter will continue to be performable unless a cancelling
clause can be invoked. Usually this clause provide for automatic option of cancellation to
both the parties in case of war breaks out between any two of a list of countries. Some
times this clause is made operable even if one of the listed countries gets involved in a war.
As a variation at times this clause provides that if war breaks out involving any one of the
listed countries so as to make the continued service under the charter difficult for one party,
the charter may be suspended or terminated.
BOTH TO BLAME COLLISION CLAUSE
Under Hague or Hague/visby Rules” collision” as a peril of the sea, is an
excepted peril. Therefore collision allows carrier to avoid cargo loss claims.
As a result the cargo owner has to make good his loss by claiming from his insurance policy.
Under US Law and countries not ratified collision convention 1910, when cargo was
damaged by collision, cargo owner may claim full amount of loss from owners of non-
carrying ship and thereby circumvent H/V Rules.
The non-carrying ship may then claim and recover from owners of carrying ship proportion of
claim equal to the proportion of blame attached to the ship for collision.
in short the in collision cases where US Law is applied defence of ‘ excepted peril’ due to
collision is lost.
In both to blame collision clauses carrier is able to preserve the collision defence. Under this
clause, cargo owner indemnifies the carrier against any liability to non-carrying ship in the
event of collision.
US Court has ruled in one of the cases that such clause is not valid. However , vessels
continue to insert this clause in the hope that in future they may get a favourable ruling.
This clause is introduced in the time charter party making it mandatory for the charterer to
include this clause in all bills of lading .
New Jason clause
Required to protect owners against US Law suits
Under US Law owners cannot claim General Average contribution from cargo
owners, where there has been faulty navigation/ management of ship. Owners
therefore were inserting clauses requiring cargo owners to contribute to GA
even when there has been faulty navigation.
US Harter Act 1983 however made it illegal to make any such clauses in the
contract., which exonerate the ship from faulty navigation and mismanagement
of ship.
Even then a clause had always been inserted in the contract to protect the
owners in case of faulty navigation etc. and their right to claim contribution from
cargo owners for GA contribution
Validity of this clause was tested in 1904 in an US court case concerning SS
Jason. In 1911 after a lengthy litigation, the validity of this clause was upheld.
It has since been extended to include salvage also and is now inserted as” New
Jason Clause”
In the event of accident, danger, damage or disaster before or after the
commencement of the voyage, resulting from any cause whatsoever, whether
due to negligence or not, for which, or for the consequence of which, the carrier is
not responsible by statute, contract or otherwise, the cargo, shippers, consignees
or owners of the cargo shall contribute with the carrier in general average to the
payment of any sacrifices, losses or expenses of a general average nature that
may be made or incurred and shall pay salvage special charges incurred in
respect of the cargo. If a salving ship is owned or operated by the carrier, salvage
shall be paid for as fully as if the said salving ship or ships belonged to strangers.
Such deposit as the carrier or his agents may deem sufficient to the estimated
contribution of the cargo and any salvage and special charges thereon shall, if
required, be made by the cargo, shippers, consignees or owners of the cargo to
the carrier before delivery. All bills of lading issued under this Charter shall
contain this New Jason Clause.
UNIT 2
CLAIMS AND SALVAGE
MARITIME MANAGEMENT
UNIT 2
CLAIMS AND SALVAGE
INSURANCE CLAIMS:
Risk covered by a Marine Insurance Policy- The main risks covered by the Standard
form of Lloyd’s policy, both for the Hull & Machinery and cargo insurances are as
follows:
a) Perils of the seas, all fortuitous accidents and casualties of the seas;
b) Fire;
c) Enemies, Pirates, Robbers, Thieves;
d) Jettison: throwing overboard goods or ship’s gear/equipment in times of peril;
e) Arrests, restraints and detainment of Kings, Princes and people;
f) Barratry of the Master and crew, every wrongful act wilfully committed by the
master or crew to the prejudice of the owner or charterer;
g) All other perils of a similar nature to the above.
Manner of Execution of Marine Insurance Policies:

Cover slips- When the terms and conditions and the premium rates have been
agreed between a ship owner/cargo owner and a Underwriter, a ‘cover slip’ is
endorsed by the Underwriter. This slip records the material facts and is initiated
by each company and the Underwriter of the Lloyd’s Syndicate (any of the
Insurance company) taking any part of the risk. Subsequently policies are issued
for the Companies and one for all the Lloyd’s syndicate. In the formal policy the
appropriate Institute and other clauses are attached. Cover slips or cover notes
have no individual legal status but may, however be used as evidence in
conjunction with a duly stamped policy.
Process of settlement of claims-
Whenever a loss or damage occurs to insured property which results in a claim,
the assured will request a broker to proceed with the mechanics of the
settlement. For complicated cargo claims and for most hull claims, the broker submits
the claim to an Average Adjuster who calculates or adjusts the claim according to his
professional expertise and in an impartial manner. The claim will then be submitted to
the Claims Adjuster of the insurer, who has the responsibility of determining whether
the insurer has a liability under the policy to pay the claim. If he finds so, he will adjust
the claim himself if it has not already been adjusted. If it has already been adjusted he
will review the adjustment to see if everything is in order.

Upon payment of an indemnity in respects of the claim to the assured under the policy,
any claims the assured may have against the third party who may have caused the
damage are subrogated to the insurer. Subrogation means that an insurer having settled
the claim is entitled to all the rights and remedies in respect of the loss/damage which
are enjoyable by the assured. Thus the insurer may recover from the third parties amount
not more than the indemnity paid by him to offset his indemnity.
MARITIME FRAUD
Maritime Frauds have co-existed with Maritime Trade and can be traced back to 215 B.C.

What is a Maritime fraud?

Single party or many parties acting in collusion to defraud another by misrepresenting facts in an
unethical manner.
There is no firmly accepted definition of a maritime fraud. However, the term is usually used to
indicate any act in connection with sea-transportation, by and large; it covers documentary fraud,
charter party fraud, marine insurance fraud and some general miscellaneous fraud. Such
miscellaneous frauds are under the broad definition of fraud of a custom and also theft within the
port area.
Generally all kinds of maritime frauds either there is direct claim against the carrier or they are
indirectly involved as party to be claimed / legal proceedings.
From time immemorial society has been plagued by fraud and the shipping industry is no
exception. Fraud has always been known to exist in shipping services. Crime in maritime world is
not a new phenomenon, but it has grown in a rapid pace over the past 30 years. The aspiring
maritime fraudsters have no jurisdictional binding in its activities. Such activity is to a considerable
extent influenced by the economic condition prevailing at a given time in a given
geographical area. E.g. Somalia.
ln the past it was generally, the under writer (Insurance) who was the
target of fraud. The intention being the collection of insurance on Ships
and Cargo. ln some ·cases the ship was scuttled (in pieces) and in others
insurance was affected after the ship was lost .

ln recent frauds, ·however the victim can be anybody connected with the
transaction, usually tie importer and particular/y the state trading organization of
developing countries. The banks and underwriters are in general also indirectly
involved.
During the last decade, maritime fraud has reached such a proportion as to cause
serious concern at both national and international level resulting in a series of
international conferences, seminars and formation of International Chamber
Commerce (ICC) and International maritirne bureau (IMB)

The IMB estimated that the loses due to maritime fraud are about 13 billion dollar
per annum. There have been several polls for improvement and changes in the
existing practices and the need for systematic examination of international trade
Types of Maritime frauds:

1) Sinking of an over-valued ship flying F.O.C. flag carrying a highly valued non-existent
cargo during periods of economic and political upheavals and depression in shipping
business. (Insurance fraud)

2) Ship owners /Charterers fearing heavy losses due to serious port congestion
(W. African & Middle East ports in 1970’s and 1980’s) discharging cargo elsewhere,
selling it and getting ships released for further trading. (Contract fraud)

3) 1 or 2 ships owner continue operating old ships de spite mounting debts

(Mortgages, loans and liens etc.) until arrested by court order and then owner
declaring insolvency. (Insolvency fraud by ‘fly by night’ operators)

4) Forging by the seller of export documents, required by the buyer of goods under
documentary credit system, when goods either did not exist or of inferior quality.
(Documentary frauds common in Greece, Cyprus, Lebanon & Nigeria)

5) Issuance of false certificates/ documents by corrupt Customs/Port/Bank officials &

Surveyors etc. acting in collusion with the cargo owners. (Fraud by corrupt practice)
□ Common features of Maritime fraud cases:

- Ships of over 15 years of age involved.

- Single ship owner or common management company involved.

- Ships on single voyage charter flying flag of Greece,

Panama/Liberia/other FOC states, Cyprus, Spain, India, S’pore, S. Korea
and Sharjah (U.A.E.) involved.

- Ships had frequent and/or recent change of ownership/name etc.

Recommended Precautionary measures to be taken by buyer/seller of goods:

-Ship goods only by well established shipping companies/lines.

-Issuing bank of Letter of Credit and Advising bank negotiating shipping documents must be mutually
acceptable by buyer & seller so that they enjoy absolute mutual trust.

-Custom House Agent deployed must be duly licensed and member of National Association and must
know how to protect seller/buyer interests.

-Shipper must confirm whether carrier vessel is chartered, who the owners are and whether ship is
duly approved by reputed Insurance Authority.
RECOMMENDED PRECAUTIONARY MEASURES TO BE TAKEN BY
BANKS/MORTGAGOR:
Basically there are two types of frauds:

1) Presentation of genuine documents but subsequent fraudulent action by a 3rd party in

respect of goods/ship.
2) Presentation of fraudulent documents in respect of inferior or non-existent goods or ship.
-L/C (opened by buyer) must clearly specify all the documents to be presented to the bank before
payment is made to the seller of the goods or ship.
-Careful choice of Shipping Line and reputed freight forwarder (CHA) & transporter helps greatly
in reducing risk of fraud.
-Careful scrutiny of ship’s register in Registrar’s office, where all mortgages and Liens are
required to be registered by the Banks/Salvors/Master & crew to learn of all the encumbrances
attached to ship, before advancing any funds to owner in respect of the ship or continuing on the
voyage.
Recommended measures to be taken by the Ship owners & Charterers:
- Ship owner should check on the reputation and financial status of the charterer, using reputed
ship broker, before fixing a charter and insist upon Bank guarantee from the charterer covering
estimated charter hire. Institutions like BIMCO, Baltic Exchange and NYPE can often assist with
enquiries about charterer etc.

- Avoid giving the Time charterer authority to sign Bs/L on behalf of Master. As far as practicable
Master should himself sign the Bs/L after verification with the Mate’s Receipt otherwise give letter
of Authority to the chart agent to sign Bs/L strictly in accordance with the Ms/R.

- Similarly Charterer should know the reputation of the ship owner/disponent owner before entering
into a Charter party contract.

- Cargo must be delivered only against the original duly discharged Bs/L or against adequate
bank guarantee acceptable to the carrier and his P & I club.
Recommended Precautions to be taken by the Insurance Companies:

- In case of Hull Insurance, Insurer must exercise every care in checking the
background details of both the ownership as well as it’s management and their
trading record.

- Requirement of Standard Classification, retention of class by regular

surveys/inspection & maintenance of ship is a standard practice but strict
compliance is essential.

- Cargo Insurers must insist upon Institute Classification clause (ensuring that ship is
properly classed) and approval by Regulatory Authority (G.I.C. in India) will ensure
proper maintenance by the owner/carrier.
Some of the area where we give, special attention to eliminate
possibility of maritime fraud are:-
l. Fortification of manifest, Document of title, delivery of documents etc.,
2. Mis-description of goods
3. Process of wrong marks or no marks on packages
4. Re-bundeling / dis-bundeling of packages and pallets .
5. Discharging of other ports Cargo.
6. Opening, resealing and substitution of loaded containers.
7. Adjustment of un manifested Cargo.
8. Delivery of left behind Cargo
9. Issuance of loading condition certificates .
Generally in all terms maritime fraud either there is a direct claim against the carrier
or they are indirectly involved as a party to the claim and legal proceedings.
Documentation is an extremely important matter in shipping requiring thorough
knowledge and accurate preparation of the contents of the B/L.
VARIOUS TYPES OF FRAUD
1. DEVIATION FRAUD
2. ILLEGAL SALE OF CARGO
3. FRUSTRATION OF CHARTER PARTY
4. UNEXPECTED/EXCESSIVE DELAY AT THE DISHCARGE PORT
5. PRE-MEDIATED DEVIATION/SALE OF CARGO
6. CHARTER PARTY FRAUD
7. CHAARTERER DEFRAUDS THE SHIPS OWNER
8. THE SHIP OWNER DEFRAUDS THE CARGO OWNER/CHARTERERS
9. TARIFF’S MANIPULATION AND CUBE CUTTING
10. MARINE INSURANCE FRAUD
11. SCUTTLING FRAUD
12. DOCUMENTARY MARITIME FRAUD
VARIOUS ELEMENT OF FRAUD:

1. Offering goods in stringent demand and not readily available

2. Offering goods unduly low prices especially from a country or a seller who is not
a normal source of supply.
3. Calling for payment conditions out of line with those customers normally except.
4. Requiring advance payment through an intermediary offering the goods without disclosing
name of supplier’s.
5. involving use of names that resemble but are those of well known houses
6. Pressurizing for fast acceptances of offer and speedy issuance of documentary credit
7. Requiring payment by documentary credit issued in favour of party
other than named
8. Requiring Charter Party Bills of Lading to be accepted where contrary to nature of transaction
of type of goods
9. Offering for sale and insurance of non-existent cargo e.g. one container said to contain a
Buddha idol from the Far East valued at $30 millions - the idol was non-existent.
10. lssuance of Bills of Lading without actual loading of cargo
11. Exportation of rubbish by consignors - e.g. empty groundnut shells in place of actual groundnuts.
12. Illegal manipulation of valves oil terminal
13. 0il used as bunker.
SHIP’S FLAG
Various Types of Flags:
1. National flags
2. Flags of convenience
3. Second register flags
4. Bareboat Charter or dual register flags

1. National flags (closed register flags):

National flags are flown on traditional (UK Register; Indian Register) where there
is a genuine link between the flag State and the owner or operator as required by
UNCLOS.
2. Flags of convenience (FOC):
o These are also called open register flags and free flags.
o Flag of Convenience (FOC) are deemed by ITF to exist where beneficial
ownership and control of vessel is found to be elsewhere than the country of
the flag the vessel is flying.
o These are designated by ITF Fair Practices Committee. The criteria for entry in
the list are the’ Rochdale Criteria’, which were laid down by British Committee
of enquiry in 1970.
o The criteria include:
• Whether the country allows non-citizens to own and control vessels.
• Whether access to and transfer from registry is easy.
• Whether taxes on shipping income are low or non-existent.
• Whether country of registration does not need the shipping tonnage for its own
purposes but is keen to earn the tonnage fees.
• Whether manning by non-nationals is freely permitted
• Whether the countries lack the power or willingness to impose national or
international regulations on the ship owners, flying its flag.
3. Second register flags (offshore register flags and
international register flags):
o They are in some cases established under a separate legislation as a second
register in the ‘parent’ state e.g. NIS established in Norway to run alongside
the Norwegian first register. In some cases established in an off-shore
territory with legal links to the State e.g. Kerguelen (linked to France);
Isle of Man (linked to U.K)
o These are different from FOC in that while manning, taxation and other laws
may be relaxed under the second register, ship owners must still have a
genuine link with the flag state and are subjected to supervision and
jurisdiction of the Flag State.
o The ships have their status determined by ITF.
4. Bareboat Charter or dual register flags:

o Some countries have relaxed their registration laws to allow for the bareboat
chartering of ships into and out of the national flags. In UK the bareboat
registry is allowed only for five years.

o These ships which are allowed to fly the flag of these countries are to abide
by the laws of these countries as regard to name approval, carving and
marking etc and are to abide by the national legislation of these countries
whose flag they are flying.
Our study of the elements of shipping would not be complete without
a look at the main political aspects of the subject: FLAG DISCRIMINATION,
FLAGS OF CONVENIENCE AND SUBSIDIES
Flag discrimination comprises the wide variety of acts and pressures exerted by
governments to direct cargoes to ships of their own flag, regardless of the
commercial considerations which normally govern the routeing of cargoes. It also
applies to directing their port authorities to offer more favourable rates and bunker
charges to the national flag vessels.
Powers against flag discrimination in its various forms are now incorporated in the
Merchant Shipping Act 1974 — Part III of which enables the UK government to take
counter-action against foreign governments where UK shipping or trade interests
are affected, or where they are required to meet Britain’s international obligations.
Orders can be made to obtain information, to regulate the carriage of goods, to levy
charges on ships, to refuse admittance of ships to UK ports, and to approve or
disapprove agreements. The Merchant Shipping Act 1988 provided the government
with further powers of retaliation against unfair trading practices from overseas
competitors.
Basically, flag discrimination dislocates the competitive nature of the
shipping industry, be it often diverts trade to the less efficient carrier
and obscures the real The more important methods by
which it may be exercised are as follows

(a)IMPORT LICENCES : A number of countries, including Chile, Brazil,

Gabon, Malaysia, Peru, Sudan and India, have used the granting of import
licences to ensure carriage of cargo in ships of their own national flag.

(b) DISCRIMINATORY CUSTOMS AND OTHER DUES : Preferential rates of

customs and other dues are used to influence cargoes into ships of the
national flag. Discriminatory charges in harbor, lighthouse pilotage and
tonnage dues, consular fees and taxes on freight revenue are other means
of favouring national flag.
Political aspects

(c) Administrative pressures : Although in many countries there may be

no Statutory provisions reserving cargoes to ships of the national flag, the same
result is achieved by administrative pressures of one form or another.

(d) Direct legislative control : This is the most damaging form of flag discrimination.
In the early 1990s countries such as Argentina, Brazil, Chile, Ecuador, Peru, Turkey,
Uruguay, Venezuela and Egypt resorted to direct legislative control in varying
degrees.

(e) Exchange control : The manipulation of ‘exchange control’ offers endless

means of making shipment in national vessels either obligatory, or so commercially
attractive that it has the-same effect.

(f) Bilateral trade treaties: In all, over thirty countries have entered into bilateral trade
treaties, which include shipping clauses reserving either the whole of the trade
between the two countries, or as much of it as possible, to the ships of the two flags.
Many South American and developing countries who build fleets for
Prestige purposes and to reduce the drain on foreign exchange
practise flag discrimination. They are usually subsidized in several ways as follows:

(a) Up to 50% of all goods passing through their ports must be carried in their own
ships.
(b) A small concession in customs charges to. reduce transport costs when
charging full conference rates.
(c) A customs surcharge on. goods carried by foreign ships.

Additionally other countries practise flag discrimination as follows:

(a) All chartered tonnage is reserved for the national flag.
(b) All coastal services are reserved for the national flag,
(c) A freight allocation agency is set up favouring the national flag and fixing rates
(d) Unfavourable pilotage regulations are passed and there are higher bunker
charges for foreign tonnage.
There is no doubt that flag discrimination is one of the most serious
problems facing the industry today but because it takes so many forms,
and is inspired by diverse motives., there is no simple remedy . Compromise and
expediency will offer no long term solution. What is required is determined and
concerted action by governments throughout the world.

The WTO and EU both continue to strive to reduce the practice of flag
discrimination.

FLAGS OF CONVENIENCE

Important to the ship-owner. This problem is, of course, common to all industry,
but for the shipping industry it is aggravated by the enormous cost of
replacement which continues to rise as building costs increase,
British shipowners in particular, and indeed owners in any maritime
Country. Subject to similar taxation, are at a serious disadvantage
when competing with tax-free or virtually tax-free national merchant
fleets, under flags of convenience — or open registries as they are now often
termed. Two countries which featured prominently in this practice are Liberia and
Panama.

In 2004, 35 countries or territories accounted for 90% of the total tonnage of the 12
open-registry fleets. This percentage was unchanged from 2002.
Ownership is particularly concentrated in the countries/territories which control
76% of the deadweight of vessels registered in these open-registry countries,
while the top five countries/territories control 60%. Japan was ranked first in 2004
with the largest share (22%) of the open-registry fleets. Japan has the largest
foreign-flag Ownership, representing 19.2% of the total world flag tonnage,
followed by Greece at 19%. The two countries’ combined foreign-flag tonnage
represents 38 2% of the total world tonnage under foreign flags.
Overall, the share of the six major open registers in 2004 was 94.1%, with
the share of the minor open register at 5.9%. The six major open registries
are: Panama, Liberia, Bahamas, Malta, Cyprus and Bermuda. The six minor
open registries are: St Vincent and Grenadines, Antigua and Barbuda, Cayman
Islands, Luxembourg, Vanuatu and Gibraltar. The Liberia fleet expanded by
9.2 million dwt in 2004, whilst Bermuda increased by 6.2 million dwt.

Today there are a large number of classification societies and the criteria
by which a ship-owner chooses a society are complex, though many countries
specify which classification society to use. Among the criteria it is
acknowledged that the prime responsibility for the safe and pollution-free
operation of a ship lies with its owner and operator and the flag state. Hence
when a ship-owner enters the specified classification society he must comply with its
regulations and operate in accordance with three international requirements.
(a)STRUCTURAL INTERGRITY: The classification society has the task of
ensuring that ship maintenance and surveys are undertaken. The technical
work in accord with the regulations is entrusted to the society by the state.

(b) SAFETY EQUIPMENT : Every society must have the competence to

undertake an annual audit of every ship on its registry to ensure safety
equipment is fully operational and in accordance with international conditions.

(c) PERSONNEL QUALIFICATIONS : All shipboard personnel must have the

appropriate experience and documentated qualifications relative to the ship
manning levels.
THE GUIDELINES BY WHICH A SHIPOWNER WILL SELECT A
CLASSIFICATION SOCIETY SELECTION ARE GIVEN BELOW:

(a) The administration should have a comprehensive body of laws and

regulations to implement the requisite international standards.

(b) The flag state should have a recognized system of casualty investigation in
place and undertake such investigations promptly and thoroughly.

( c) There should be a corporate law identifying the link between the ship
and flag state.

(d) The flag state should require that every ship on its register has a ‘decision-
maker’ available to the registry 24 hours per day.

(e ) There should be provided a publicly available register of ships.

(f) The flag state should be a signatory to the principal international
conventions essential to maritime safety and protection of the
environment.

(g) There should be staff available who are competent to answer enquiries
from owners and operators.

(h) It should have the ability to issue seamen's identity books.

(1) There should be available a current list of al! Ships registered in its flag.

( j ) The flag state should be committed to ensuring it does not register a, ship from
another registry without a deletion certificate from the previous register .

(k) The flag state should provide the IMO with annual details of all personnel
injury records, casualties and pollution incidents occurring on or to its
ships.
The subject is also comprehensively examined in Chapter 8, the IACS

The decline in the numbers and size of vessels registered with the mainland
or domestic registers of traditional maritime nations has been dramatic. Less
than 20 years ago major maritime states like Britain, Norway and Germany
all had fleets on their domestic registers large enough to rank the world’s biggest
flags. Today not one is in top 10.

A major attraction in “FLAGGING OUT” tonnage lies not only in the reduced
manning scales/levels required but also in the tax allowances against new and
second-hand tonnage. These two factors-reduced manning cost/scales and
taxation benefits/allowances- yield cost savings in manning levels and encourage
new tonnage provision. Such factors are very powerful in the drive globally of
shipowners to develop world trade increase market share and provide more
competitive tariffs.
The practice of flagging out from national registries to open registries
has been a growth sector but the situation may change as national
governments offer more favourable terms to encourage shipowners to register with
their national flag. This embraces tax relief on ship investment/depreciation more
favourable social/insurance/taxations for seafarers improved training benefits and
tonnage tax relief.

FLAGS OF CONVENIENCE

A flag of convenience ship is one that flies the flag of a country other than the
country of ownership. For workers onboard, this can mean:
* very low wages
* poor on-board conditions
* inadequate food and clean drinking water
* long periods of work without proper rest, leading to stress and fatigue
By ‘FLAGGING OUT’, ship owners can take advantage of:

* minimal regulation
* cheap registration fees
* low or no taxes
* freedom to employ cheap labour from the global labour market

The ITF believes there should be a ‘genuine link’ between the real owner of a vessel
and the flag the vessel flies, in accordance with the United Nations Convention on
the Law of the Sea (UNCLOS ). FOC registries make it more difficult for unions,
industry stakeholders and the public to hold ship owners accountable.
In many cases, the registries themselves are not even run from the country of the
flag.
Globalization has helped to fuel this rush to the bottom. In a competitive shipping
market, FOCs lower fees and minimum regulation, as ship owners look for the
cheapest way to run their vessels.
Problems for seafarers on FOC vessels: Contractual claims

A serious injury can ruin a life, end a seafaring career and rob a family of a regular
income. On their own, seafarers have little chance of winning compensation. The
ITF and its affiliated unions help seafarers pursue these cases through the courts,
but often they must unravel complex company structures before they can work out
who has responsibility for the ship and its crew.

Getting paid

Every day, the ITF hears about crews who are owed large sums of money. Some
crews simply aren't paid. Those that are find that companies delay, or fail to make,
payments to their families when they want to send money home. In Many Cases,
months go by without any sign of the money promised to seafarers. With no pay,
they cannot even afford to escape and make their own way home.
One of the most important aspects of the ITF inspector’s work is gaining
backpay for seafarers. From 2011-2013, USD103 million has been recovered
by the ITF for crew who had not been paid - an average of USD34.3 million a
year. Many FOC vessels are now covered by ITF agreements, giving direct
protection to more than 250,000 seafarers.

Voicing their needs

Despite the hardships, many FOC seafarers are too frightened to protest.
Unscrupulous manning agents circulate the names of seafarers who complain
to inspectors. It js still common practice for a ship's captain to write ‘ITF
troublemaker’ in a seafarer's discharge book. With such a mark on their record
a seafarer may never be employed again. Some seafarers have been jailed
on returning home. And even more cheap sources of labour opening up-
notably China- conditions and pay risk becoming worse.
Insurance Clauses:- Initially cover for Hull & Machinery was affected on the
basis of clauses proposed by the Institute Underwriters. These clauses were
attached to the ancient Ships and Goods (SG) policy forms. Institute clauses
were not mandatory but were adopted by customs. The review of the Institute
Clauses was carried out under the direction of the United Nations Conference on
Trade and Development (UNCTAD) resulting in the launching of the 1983
Institute Time and Voyage Clauses. The existing ITC 1983 and ITC 1985 clauses
would continue to remain in use until ITC 2002 which is awaiting wider
acceptance, comes into force.

Institute cargo Clauses A, B & C- The institute Cargo clauses provides a choice
of coverage for the cargo owners/shipper. Generally the wider the coverage
required the higher the premium. The table below provides a comparison at a
glance:
ICC (A) ICC (B) ICC (C)

All risks except for wilful Covers everything in © plus Covers Fires/Explosions, Stranded
misconduct, ordinary leakage/loss Volcanic eruption, lightening, /grounded/sunk/capsized vessels,
of weight or volume, wear & tear, washing overboard, entry of water overrunning/derailment of land
improper packing/stowage/inherent into hold/conveyance container conveyance, collision, discharge at
vice, delay even if peril insured /lift van or place of stowage. port of distress, General Average
against, Insolvency/bankruptcy, Total loss while loading/ & Salvage charges, extended to
Nuclear/atomic war, un-seaworthy- /unloading or lost overboard . indemnify assured against liability
ness/unfit, War/rebellion/civil Does not cover theft or ,like under ‘both to blame
strife. non-delivery or short delivery. Collision‘clause.
Institute Time Clauses, Hull- The Principle risks covered by these are:
1) Liability to any other ship for damage done by collision with the insured vessel
to the extent of 3/4th of the liability and subject to a limit of 3/4th of the insured value

2) Loss or damage to Hull or Machinery directly caused by;

a) Accidents in loading, discharging or handling cargo or in bunkering or taking in fuel;
b) Explosions;
c) Bursting of boilers;
d) Breakage of shaft;
e) Latent defect;
f) Contact with Aircraft;
g) Negligence of Master, mariners, engineers or pilots.

3) Damage occasioned by the vessel being stranded, sunk, on fire, or in collision with any other
ship or vessel is payable, however small. And the expense of sighting the bottom after stranding
is paid for if reasonably incurred, even if no damage is found. The cost of scrapping and painting
the bottom, however, is not recoverable in any circumstances.

The revised 1995 (ITC 95) clauses were deemed to be universally unfavourable to ship owners.

.
Nature of Marine Losses:
Losses can generally be categorized as Total loss and Partial loss.
When dealing with cargo the loss claims would either be for a total loss, Particular
Average or General Average.
1. Total loss – In Marine Insurance total loss can be either Actual Total Loss (ATL) or
Constructive Total Loss (CTL) or Presumed Total Loss (PTL).
a) Actual Total Loss- i) Due to destruction, e.g. sinking into deep waters, burnt due to
fire, ii) Loss of species- so damaged as to cease to be a thing of the kind insured, e.g.
cement becoming concrete. iii) Irretrievable Deprivation- like precious cargo sunk in the
bottom of deep ocean, impossible to recover.
b) Presumed Total Loss – When nothing is heard of from a ship for a reasonable time
she is posted as ’Missing’. If still missing after a further reasonable period, she is
presumed to be a “Presumed Total Loss”. Proximate cause of the loss will have to be
established to make a claim under the policy. The assured will have to prove that the loss
occurred during the period covered by the policy.
c) Constructive Total Loss- When the cost of repair of a badly damaged ship is more
than the value of the repaired ship (as Asset) or the value of the damaged cargo on
arrival; at the destination, it is deemed to be “Constructive Total Loss”.
2. Partial Loss- The Partial or Particular Average loss covers all types of partial losses
including a General Average loss and a particular charge (like Sue and labour cost).
The main difference between particular average and general average is: General Average is
commonly used to express what is chargeable on all-ship, cargo and freight while Particular
Average is to express a charge against only a single thing. Both of these averages must be caused
by an insured peril.

Warranties:- Marine Insurance Act defines a warranty as a promissory warranty, that is to say a
warranty by which the assured undertakes that some particular thing shall or shall not be done, or
that some condition shall be fulfilled, or whereby he affirms or negatives the existence of a
particular state of facts. A warranty may be expressed or impressed, and two very important implied
warranties are as follows:
1) In every voyage policy it is implied that the vessel shall be seaworthy at the beginning of the
voyage when the risk commences, and where the voyage is performed in stages the ship is, at the
commencement of each stage, is seaworthy for that stage.
2) In every policy (voyage, time or mixed) it is implied that the adventure shall be lawful.
In a Goods policy there is no implied warranty for the goods as the insurance is only against
the perils enumerated in the policy. However the underwriter is not liable for losses arising
from ‘inherent vices’ of goods. But in a voyage policy on goods it is implied that the ship is
seaworthy at the beginning of the voyage and is fit/ cargo-worthy to carry the intended
goods to the destination.

The adventure may be lawful when the insurance is effected but become unlawful on
account of altered conditions and in case if/when the adventure becomes unlawful the
assured may have to abandon the voyage, the underwriter shall be liable for losses arising
from such abandonment of voyage

Express Warranties- The Act provides that an express warranty may be in any form of words
from which the intention to warrant is to be inferred; and that an express warranty does not
exclude an implied warranty unless it is inconsistent therewith.
Institute Warranties- The Institute warranties are designed to fix the
standard trading limits of vessels not engaged in regular services, like liner
ships. These warranties are six in number, of which the first four put a ban on trading to
certain icebound regions in the far north (in some cases all the year round, in others
during the winter season only), the fifth prohibits trading to certain Antarctic regions, and
the sixth prohibits the carriage of Indian coal between 1st March and 30th September
except to near Asiatic ports between certain dates (short voyages).

When breach of a Warranty is excused- The Act provides that non-compliance with a
warranty is excused a) when, by reason of a change in circumstances, the warranty
ceases to be applicable to the circumstances of the contract, or b) when compliance with
the warranty is rendered unlawful by any subsequent law.
It is always open to an underwriter to waive a breach of warranty, and a policy may make
provision for a breach of warranty to be held covered at an additional premium.
Disclosure:- The Marine Insurance Act lays down that a contract of marine
insurance is a contract based upon the utmost good faith, and, if the
utmost good faith be not observed by either party, the contract may be voided by
either party. Accordingly the assured must disclose to the underwriter every
material fact and circumstances known to him, that is everything which would
influence the judgement of a prudent insurer in fixing the premium or in deciding
whether or not to accept the risk. In the absence of inquiry, the following need not
be disclosed:
a) Any circumstance which lessen the risk;
b) Any circumstance known or presumed to be known by the insurer; that is
anything which he ought to know in the ordinary course of his business;
c) Any circumstance as to which information is waived by the insurer;
d) Any circumstance which it is superfluous to disclose by reason of an express
or implied warranty.
Excessive additional insurances by policies on freight and disbursements must be
disclosed, also over-valuation of cargo.
Deviation:- Deviation from scheduled voyage will be deemed reasonable,
and hence any breach of warranty will be waived, if:
a) resulting from saving or attempting to save life or property at sea;
b) due to stress of weather;
c) due to receiving fuel essential to continue with the intended voyage;
d) arising from calling at a port of refuse after an emergency or accident;
e) resulting from liberties granted under the insurance policy.

Delay/change of voyage:- Any delay in the commencement of the voyage or in the

prosecution of the intended voyage due to reasons beyond the control of the assured may
be waived , with or without the levy of additional premium by the underwriter so long the
assured has duly notified the underwriter, specially in cases where such delay is likely to
influence the assessment of the insurer with respect to insured risks/perils. Similarly in case
of change in the intended voyage the assured must duly notify the underwriter, specially, if
such change is likely to constitute the breach of any warranty or enhance the risk insured
against and reconfirm whether the policy will remain in force, in need cases, after payment
of additional premium. Basically it is all based upon the principle of utmost good faith.
Particular Average Loss- It can be described as a partial loss arising from any
kind of accident. General Average sacrifices and expenditures, particular charges
and salvage charges do not arise by accident and hence are not included in particular average.

A particular average loss falls directly upon the party interested in the subject matter. In case of
accidental or fortuitous damage to the ship it is the ship owner or, to the extent that he is insured
against such loss, his underwriters who must bear the loss. Similarly, in the case of accidental
damage to cargo, the loss rests with the cargo owner or his underwriters. There are innumerable
varieties of particular average, including, such things as; straining of ship in heavy weather , loss of
masts or spars through heavy weather, damage to hull, machinery, or cargo due to heavy weather
or fire, damage to ship or cargo due to collision or stranding

If a particular average loss arises in respect of ship or cargo protest should be noted and the
damage should be surveyed on the ship’s behalf. Where the ship is damaged the underwriters,
and if the vessel is abroad, the nearest Lloyd’s agent, should be informed without delay to conform
to the requirements of the ‘Tenders’ clause.
General Average Loss- This is defined as a partial loss caused by, or following
as a direct consequence of, a general average act. There is a general average
act where any extraordinary sacrifice or expenditure is voluntarily and reasonably made or
incurred in time of peril for the purpose of preserving the property imperiled in the common
adventure.
It is important to bear in mind that before any question of general average can arise:
1.The sacrifice or expenditure must be of an extraordinary nature. Damage to a ship, her
machinery, or equipment whilst being used for the purpose for which they are intended
would not amount to general average. On the other hand, using a ship’s engine in an effort
to re-float when stranded would, if the engines were damaged as a result, be an
extraordinary sacrifice.
2. There must be common adventure. That is to say, the ship, freight and cargo must all be
involved. In any case, there must be more than one interest.
3. The common adventure must be in peril. That is, all interests must be imperiled.
4. There must be a sacrifice (of property) or an expenditure (of money).
5. The sacrifice or expenditure must be made or incurred reasonably and intentionally for the
sole purpose of preserving the adventure from the immediate peril.
The G.A. acts include such things as :
- Putting into a port of refuse to affect necessary repairs;
- Voluntary standing to avoid sinking;
- Working of engines when a steamship is aground in a position of peril;

The G.A. sacrifices include:

- Jettison, for the common safety, of cargo from under the deck;
- Jettison of cargo from the deck if carried on deck by virtue of a well recognized custom of the
trade or the carriage of which covered by a Bill of Lading;
- Slipping of anchor and cable to avert fire or other imminent peril;
- Cutting away of masts and spars to right a ship dangerously listed or on her beam ends;

The G.A. expenditures include:

- Cost of discharging cargo to re-float a stranded ship or to carry out necessary repairs at a port of
refuse;
- Hire of tug to assist re-floating a stranded ship with cargo;
- Wages and provisions of crew during a period of delay at a port of refuse;
It should be noted that a G.A. act embraces both a G.A. sacrifice as well
as a G.A. expenditure.
When there is a G.A. loss the party on whom it falls is entitled to a rate able
contribution from the other interested parties. The parties benefiting by the sacrifice or
expenditure may be
i) The ship owner, for the value of the ship saved;
ii) Cargo owners, for the value of their cargoes saved;
iii) The ship owner, in respect of freight or charter hire money payable by Bs/L under a
C/P; and
iv) The Charterer, under a time charter, for freight payable under Bs/L. Each will be called
upon to contribute according to the value of his interest saved as a result of the sacrifice
or expenditure.
The main contributing interests are Ship, freight and cargo. Broadly speaking, all these contribute
on their net values at the place where the voyage ends or is abandoned. Such values are called
“contributory values “. The sum necessary to re-imburse the interest which has suffered the general
average loss is called the “amount made goods” or “general average allowance”
The amounts made good should itself contribute to the loss. Otherwise the interest making the
sacrifice or incurring the expenditure would be relatively better off by being fully reimbursed for a
loss which other interests are helping to bear.
Contributory values are:

Ship- Her value to her owners in the arrived condition at the place
where the voyage ends. If damaged, her sound value is first assessed.
The cost of repair is then deducted and the G.A. allowance is added .

Freight- The gross amount at risk and earned, less the expenses of earning
it from the date of the G.A. act, plus the G.A. allowance. Any freight paid in
advance is not at risk and is merged in the value of the cargo. If the ship is in
ballast but under charter, the chartered freight/hire contributes.

Cargo- The market value, sound or damaged, on arrival at the place where
the voyage ends, less freight and other charges payable on delivery which
would not have been incurred had the adventure been a total loss, plus a
G.A. allowance.
The amounts made good are:

Ship The reasonable cost of repairing the damage, less deductions “new for old”, if
the ship is over 15 years old.

Freight The gross freight lost by the sacrifice of goods, less any charges saved. Any
additional freight earned by carrying other goods in place of those sacrificed must be
credited.

Cargo For goods lost the allowance is the net value they would have had on the day
of discharge at the place where the voyage ends, less freight and other charges that
would have been payable had the goods not been sacrificed. If the remaining cargo
arrives damaged from causes that would equally have affected the sacrificed goods
the probable extent of such damage must be taken into account. For goods arriving
damaged through G.A. sacrifice the allowance is the difference between the net
sound and damaged values.
Where claims for G.A. contribution have arisen the amounts of such contribution are
usually ascertained at the port of first discharge. The ship owner has the duty of
appointing the Average Adjuster and of collecting the contributions due from the
various cargo owners. The ship has a common law lien on cargo for G.A.
contributions.

The Average Adjuster is a kind of arbitrator, with an expert knowledge of the law and
practice relating to insurance and average whose task is to decide what is and what is
not by law or contract allowable in G.A., and to assess the various contributory values
and G.A. allowances. The outcome of his findings, is called the “Average Statement”
and in a complex case may take many months or even years to prepare. General
Average settlement is governed by York Antwerp Rules 1974
PROTECTION AND INDEMNITY CLUBS (MUTUAL INSURANCE):
Liability Insurance
To secure cover against third party risks which are normally outside the scope of an
ordinary Marine Insurance policy and which can not be normally
foreseen/anticipated and loss/damage cannot be estimated/assessed/quantified in
advance, group of ship owners form which are known a “Protecting and Indemnity
Associations, sometimes referred to as ‘P & I Clubs’ or ‘Small Damage Clubs’.

Origin of P & I clubs

Until the 18th century few Underwriters at Lloyds held the monopoly in the Marine
Underwriting business and they charged very high premium. In order to break this
monopoly, Ship owners began to form themselves into ‘Societies’ or ‘Clubs’ for the
purpose of insuring one another on mutual non-profit making basis. Such mutual
clubs, though considered illegal under the then existing legislation, thrived even
though they were primarily concerned with the insurance of Hull and Freight.
In 1824, the UK Government removed many of the restrictions in the
Marine Underwriting and the ‘Clubs became legal but their importance began
to decline I view of the mushrooming of Marine Underwriters and resultant reduction in
premiums.
With development of Ship Technology and Trading patterns and with the ongoing
expansion of Shipping , liabilities of the Ship owners also began to increase, whilst the
cover offered by Hull Underwriters was limited to 3/4th collision liability only. Also with the
introduction of the Fatal Accidents Act of 1846 greater liability on the ship owners was
imposed for death and personal injury. Hence the ship owners began to feel the need
for a wider cover to protect themselves. The P & I Club was thus borne as an offshoot of
Mutual Hull club. The first club was started in 1855 by insuring 1/4th collision liability and
liability for death and personal injury. In 1874, Clubs started to insure liability for loss or
damage to cargo and gradually more and more third party claims. Presently, the cover
offered by P & I Club is extremely wide. The Club also has excellent Claims Handling
Service with their own Correspondents and Lawyers allover the world. A very important
aspect of Club’s service is the provision of Guarantee in respect of claims faced by the
Members. Clubs’ “Letter of Undertaking” is accepted in most parts of the world and
ensures speedy release of a ship from arrest or from a threat of arrest.
PART XA LIMITATION OF LIABILITY (MS ACT)

352. Definitions

352A. Limitation of liability of owner for damages in respect of certain claims

352B. Limits of liability

352C. Limitation Fund and consolidation of claims against owners

352D. Release of ship, etc.

352E. Application to ships in course of completion or construction etc.

352F. Application of this Part to charter, manager, etc. of a vessel

352. Definitions-- In this Part, unless the context otherwise requires:

(a) “claim” means a personal claim or property claim;

(b) “franc” means a unit consisting of sixty-five and a half milligrams of gold of millesimal
fineness nine hundred;

(c) “Fund”, in relation to owner of a vessel, means the limitation Fund constituted under
section 352-C;

(d) "liability", in relation to owner of a vessel, includes liability of the vessel herself;

(e) “occurrence” means an occurance referred to in sub-section (1) of secctin 352A;

(f) “personal claim” means a claim resulting from loss of life or personal injury;

(g) “property claim” means any claim other than a personal claim arising from an
occurance.
352A. Limitation of liability of owner for damages in respect of certain claims–
(1) The owner of a sea-going vessel may limit his liability in accordance with the
provisions of section 352B in respect of any claim arising from any of the following
occurrences unless the occurrence giving rise to the claim resulted from the actual
fault or privity of the owner--
(a) loss of life of, or personal injury to, any person being carried in the vessel, or loss of, or damage to
any property on board the vessel;

(b) loss of life of, or personal injury to, any other person (whether on land or on water), loss of or
damage to any other property or infringement of any rights:

(i) which is caused by the act, neglect or default of any person on board the vessel for whose act,
neglect or default the owner is responsible; or

(ii) which is caused by the act, neglect or default of any person not on board the vessel for whose act,
neglect or default the owner is responsible.

Provided that the owner shall be entitled to limit his liability in respect of any claim arising out of any
act, neglect or default as is referred to in sub-clause (ii) only when the act, neglect or default is one
which occurs in the navigation or the management of the vessel or in the loading, carriage or discharge
of cargo or in the embarkeation, carriage or disembarkation of its passengers.
(2) The burden of proving that the occurrence giving rise to a claim against the owner of a
vessel did not result from his actual fault or privity shall be on the owner.

(3) Nothing in this section shall apply by--

(a) any obligation or liability imposed by any law relating to the removal of wreck and arising
from or in connection with the raising, removal or destruction of any vessel which is sunk,
stranded or abandoned (including anything which may be on board such vessel) and any
obligation or liability arising out of damage caused to harbour works, navigation and
navigable waterways;
(b) claims for salvage or to claims for contribution in general average;
(c) any claim by the master or a member of the crew of the vessel or any servant of the
owner who is on board the vessel or whose duties asre connected with the vessel (including
any claim by the legal representative of such master, member of the crew or servant) if the
contract of service between the owner and such master or member of the crew or servant is
governed by the law of any foreign country and that law either does not set any limit to the
liability in respect of such claims or sets a limit exciting that set to it by section 352B.

(4) Any action on the part of the owner of a vessel to limit his liability under sub-section (1)
shall not merely by reason of such action constitute an admission of liability.
(5) An owner of a vessel shall be entitled to lmit his liability under sub-section
(1) in respect of any occurance even in case where his liability arises, without proof of
negligence on the part of the owner or of persons for whose conduct he is responsible, by
reason of his ownership, possession, custody or control of the vessel.

352B. Limits of liability-- (1) The amounts to which the owner of a vessel may limit his liability
under sub-section (1) of section 352A shall be--
(a) where the occurance has given rise to property claims only an aggregate amount not
exciding the amount equivalent to one thousand francs for each ton of the vessel’s tonnage.

(b) where the occurrrence has given rise to property claims only an aggregate amount not
exceeding the amount equivalent to three thousand and one hundred francs for each ton of the
vessel’s tonnage.

(c) where the occurance has given rise both to personal claims and property claims, an
aggregate amount not exceeding the amount equivalent to three thousand and one hundred
francs for each ton of the vessel’s tonnage of which the first portion of the amount equivalent to
two thousand and one hundred frances for each ton of the vessel’s tonange shall be exclusively
appropraited to the payment of personal claims and of which the second portion of the amount
equivalent to one thousand francs for each ten of the vessel’s tonnage shall be apropriated to
the payment of property claims.
Provided that in cases where the first portion is insufficient to pay the personal claims
in full, the unpaid balance of such claims shall rank rate ably with the property
claims for payment against the second portion of the amount.

Explanation-- For the purposes of this sub-section, the tonnage of a vessel of less than three
hundred tons shall be deemed to be three hundred tons.

(2) The limits set by sub-section (1) to the liabilities mentioned therein shall apply to the
aggregate of such liabilities which are incurred on any distinct occasion, and shall so apply in
respect of each distinct occasion without regard to any liability incurred on another
occasion.

(3) For the purposes of this section a vessel’s tonnage shall be determined in such manner as
the Central Government may, by general or special order, specify.

(4) The Central Government may from time to time by order determine the amounts which
for the purposes of this section are to be taken as equivalent to three thousand and one
hundred and one thousand francs respectively.
352C. Limitation Fund and consolidation of claims against owners--

(1) Where any liability is alleged to have been incurred by the owner of a vessel in respect
of claims arising out of an occurance and the aggregate of the claims exceeds or is likely
to exceed the limits of liability of the owner under section 352B, then the owner may apply
to High Court for the setting up of a limitation Fund for the total sum representing such
limits of liability.

(2) The High Court to which the application is made under sub-section (1) may determine
the amount of the owner’s liability and require him to deposit such amount with the High
Court or furnish such security in respect of the amount as in the opinion of the High Court
is satisfactory and the amount so deposited or secured shall constitute a limitation Fund
for the purposes of the claims referred to in sub-section (1) and shall be utilised only for
the payment of such claims.

(3) After the Fund has been constituted, no person entitled to claim against it shall be
entitled to exercise any right against any other assets of the owner in respect of his claim
against the Fund,if that fund is actually available for the benefit of the claimant.
(4) Subject to the provisions of this Part, the High Court may distribute the amount constituting
the Fund rateably amongst the several claimants and may stay any proceedings pending in any
other court in relation to the same matter and may proceed in such manner and subject to such
rules of the High Court as to making persons interested parties to the proceedings and as to the
exclusion of any claims which do not come in within a certain time, and as to requiring security
from the owner, and as to payment of any costs, as the High Court thinks fit.

(5) Where the owner establishes that he has paid in whole or in part and claim in respect of
which he can limit his liability, under section 352A, the High Court shall place him in the same
position and to the same extent in relation to the Fund as the claimant whose claim he has paid.

(6) Where the owner has established that he may at a later date be required to pay in whole or
in part, any of the claims under this Part, which could be settled from the Fund, the High Court
may notwithstanding the foregoing provisions of this section order that a sufficient sum may be
provisionally set aside for the purpose to enable the owner to enforce his claim against the Fund
at a later date in accordance with the provisions of sub-section (4).

(7) If the owner is entitled to make a claim against a claimant arising out of the same
occurrence, their respective claims shall be set off against each other and the provisions of this
Part shall only apply to the balance, if any.
352D. Release of ship, etc-- (1) Where a vessel or other property is detained in connection with a
claim which appears to the High Court to be founded on a liabillity to which a limit set by
section 352B applies, or security is given to prevent or obtain release from such detention, the
High Court may, and in the circumstances mentioned in sub-section (3) of this section shall,
order the release of the vessel, property or security if the conditions specified in sub-section (2)
are satisfied; and where the release is ordered, the person on whose application it is ordered
shall be deemed to have submitted to the jurisdiction of the High Court to adjudicate upon the
claim.

(2) The conditions referred to in sub-section (1) are--

(a) that security which in the opinion of the High Court is satisfactory (in this section referred to as
“guarantee”) has previously been given whether in India or elsewhere, in respect of the said
liability or any other liability incurred on the same occasion and the High Court is satisfied that if
the claim is established, the amount for which the guarantee was given or such part thereof as
corresponds to the claim will be actually available to the claimant; and

(b) that either the guarantee is for an amount not less than the said limit or further security is
given which, together with the guarantee, is for an amount not less than that limit.
(3) The circumstances referred to in sub-section (1) are that the guarantee was given in a port which,
in relation to the claim, is the relevant port (or as the case may be, a relevant port) and that port is in a
convention country.
(4) For the purposes of this section--
(a) a guarantee given by the giving of security in more than one country shall be deemed to have been
given in the country in which security was last given;

(b) any question whether the amount of any security is (either by itself or together with any other
amount) not less than any limit set by section 352B shall be decided as at the time at which the
security is given;
(c) where part only of the amount for which a guarantee was given will be available to a claimant that
part shall not be taken to correspond to his claim if any other part may be available to a claimant in
respect of a liability to which no limit is set as mentioned in sub-section (1).
(5) In this section--
(a) “convention country” means any country in respect to which the International Convention
relating to the Limitation of the Liability of owners of sea-going ships signed in Brussels on the
10th day of October, 1957, is in force and includes any country to which the Convention extends
by virtue of article 14 thereof;

(b) “relevant port”, in relation to any claim, means a port where the event giving rise to the claim
occurred, or if that event did not occur in that port, the first port of call after the event occured and
includes in relation to a claim for loss of life or personal injury or for damage to cargo, the port of
disembarkation or discharge.

352E. Application to ships in course of completion or construction, etc.--

The provisions of this Part relating to limitation of liability of owners shall extend and apply to the
owners, builders or other persons having an interest in any vessel built in any port or place in
India from and including the launching of such vessel until the registeration thereof in accordance
with the provisons of this Act, as they apply in relation to the owner of a vessel registered under
this Act.
352F. Application of this Part to charterer, manager, etc., of a vessel--

(1) Subject to the provisions of sub-section (2), the provisions of this Part relating to llimitation of
liability of an owner of a vessel in respect of claims arising out of an occurance shall apply to the
charterer, manager and operator of the vessel and to the master, members of the crew and other
servants of the owner, charterer, manager or operator acting in the course of their employment in
the same manner as they apply in relation to the owner.

Provided that the total limits of liability of the owner and all other persons referred to in this sub-
section in respect of personal claims and property claims arising on a distinct occasion shall not
exceed the amounts determined in accordance with the provisions of section 352B.

(2) The master or a member of the crew of a vessel may limit his liability under sub-section (1) even if
the occurrence which gives rise to a claim against him resulted from the actual fault or privity of the
master and the members of the crew or any one or more of them.

Provided that where the master ora member of the crew is at the same time the owner co-owner,
charterer, manager or operator of a vessel, the provisions of this sub-section shall only apply where
such occurrence resulted from any act, neglect or default committed by the master or, as the case
may be, the member of the crew in his capacity as master, or, as the case may be, as a member of
the crew.]
UNIT 3
MULTIMODAL,
E-DOCUMENTATION,
P&I CLUBS
MARITIME MANAGEMENT
UNIT 3
MULTIMODAL, E-DOCUMENTATION, P&I CLUBS
MULTIMODAL TRANSPORT SYSTEM
The system is based on the principle that max efficiency in transport can be achieved if
goods are transported from door to door on the basis of a single contract. When such a door to
door service is planned and co-ordinate as a single operation the burden of documentation and
other formalities connected with the conventional system is reduced to minimum.
International multimodal transport has been defined as a carriage of goods from one country to
another by more than one mode of transport on a basis of a single contract.

Although all forms of unitization are suitable to multi-modal transport it is containerization that has
been widely adopted mainly because it gives greater protection to car go against damage,
pilferage and contamination.

Status of multimodal transport operator :-

Acts as a principle for the performance of the multimodal transport contract in that capacity
undertakes to contract and provide for the different modes of transport and other services required
for the expeditious efficient and safe transport of goods from the place where he takes the goods to
the place where he delivers according to the contract. In the process he has to necessarily
engage the service of several carriers and non-carriers to provide such services.
MULTI-MODAL TRANSPORT OF GOODS:-

International multi-modal transport is defined as the carriage of goods from one

country to another by more than one mode of transport on the basis of a single
contract. The multi-modal transport operator who assumes responsibility for the
execution of the contract, acts as a principal and not as agent of the carrier or the
shipper. Under a single operation door to door service is provided, the burden of
documentation and other formalities is reduced to the minimum, thus faster transit
of goods reduces the disadvantage of distance from the market and of capital
being tied-up to the traders and results in reduction in the overall capital cost.
Unitization of cargo further reduces the time and labour involved in cargo handling
operations thus reducing the cost of transportation. Containerization provides
greater protection to cargo against damages, pilferage and contamination.
EARLY DEPARTURE PROCEDURE

In many terminals, considerable pressure is placed on the ship to leave

the loading berth quickly. In such cases, tank gauging and corresponding
generation of documentation can often be performed in a hurried fashion
and the onus is always on the ship’s officers to ensure errors are not made.

By definition, an Early Departure Procedure (EDP) normally requires

that the ship departs prior to the bill of lading having been issued, and
sometimes even before the quantity of cargo on board has been officially
determined. EDPs are especially prevalent in the North Sea and the
Middle East, and the practice raises a number of factual uncertainties
and possible legal liabilities for the shipowner. We deal with these below.
While an EDP is said to be at the option of the visiting ship,
in reality there is often heavy pressure on an owner to comply.
Terminals are keen to have maximum use of their facilities and minimum delay
to waiting ships.
Charterers are frequently worried about the effect of delay on discharging
schedules, as well as complications with regard to laytime and demurrage.
It is known that an EDP is commonly a feature of pre-fixture negotiations
and that charterers often seek to use their commercial clout with a view to
the inclusion of express provisions stating an owner’s acceptance
of an EDP and corresponding deductions from laytime for any ‘lost’ time
resulting from an owner’s non-compliance with it.
Following an EDP, the bill of lading is usually signed by the locally appointed
agent, on behalf of the master, at some later stage after the ship has
sailed the port. The master will usually authorise the agent, in writing, that he
may sign the bill of lading on his behalf under certain strict conditions. In this
respect, we strongly recommend that an EDP should not be followed unless the master
has permission from his commercial operator or the charterer.

Points to note
The master’s authorisation to the agent should also be limited to the signing and
releasing of the bills of lading only, and be valid only when all details, including
quantity/quality of cargo, have first been approved by the master.
If possible, the local agents should be required to fax a copy of the (draft) bills
to the ship for the master’s approval prior to utilising his authorisation to sign and
release the bills of lading.
Upon receipt, the master would be well advised to check through the drafts
very carefully, prior to confirming his approval of the agent’s signing them.
In particular, when confronted with a draft bill of lading, the master should examine the
following aspects (on the face of the bill) and ensure they accurately reflect his own
records and information:
i) the quantity of cargo said to have been loaded;
ii) the description and condition of cargo;
iii) the date;
iv) the description of the voyage, including load and discharge port(s).
If the bill is incorrect
If a master or ship’s crew subsequently discover that a bill has been issued
incorrectly (and hopefully against their strict instructions/written letter of authority), then
they must notify their management office immediately.
This should also be notified to the member’s usual club claims handler as soon as
possible, who will then be able to advise the member how best to proceed so as to
minimise problems and possible liabilities at the discharge port(s).
Such steps may include:
i) giving the consignee, or notify party, on the face of the bill, written notice
of the ship’s own figures;
ii) issuing LOPs to all interests, including shippers, the charterer(s),charterer’s(s’) agents,
and, if possible, the consignee or notify party;
iii) a request for the shippers to attach a copy of the LOP to the bill and to forward a copy
of the protest to the buyers. Such measures will probably not avoid liability, but may avoid
a claim for what will usually be a paper loss.

Cargo shortage
As indicated above, a port/terminal’s EDP can sometimes ‘push’ a ship to anchorage
even before the quantity of cargo on board has been properly determined by the ship’s
crew, by way of tank gauges and draft surveys.
If this occurs, then there is no ‘benchmark’ against which the ship can check the loaded
quantity against shore-side figures, and thus there may be no immediate notification
to the master of any discrepancy. It is vital that the implementation of an EDP does not
expose a ship to any unwarranted liability caused by, say, an unexpected passage cargo
‘loss’, in turn attributed to unreliable gauging at the load port shore-side terminal.
Whenever a ship and its crew come under commercial pressure to vacate
a loading terminal before they have had the proper opportunity to verify the ship’s own
figures, this must be resisted so far as possible. The use of the vessel’s own agents is
perhaps one way of avoiding the EDP problem and the pressures involved, although
it is appreciated that, with isolated terminals, this will probably be difficult and costly. This
must however be compared to the risk exposure of issuing bills with incorrect cargo figures.
ELECTRONIC DATA INTERCHANGE is the automation of data
transfer based on set parameters for the purpose of processing goods,
shipments, or for financial tasks such as invoicing and receivables. Instead of
taking time to manually enter data with every shipment or invoice processed,
the electronic data interface system automates the process based on
parameters and information already stored in the system and set to your
needed specifications.

For example, when shipping forty palettes of refrigerated perishables, scanning

a single bar code will automatically generate the necessary shipping
requirements for the warehouse team and send the necessary invoicing to the
recipient. Since the entire process is accomplished by computer and is sent to,
typically, another computer to process payment, transactions become
streamlined and efficient rather than relying on individual data entry, mailings,
and phone calls. This electronic data interface process allows for more
streamlined communication and better allocation of employee resources.
Electronic bills of lading
For many years, the industry has sought a solution to the difficulties,
costs and inefficiencies associated with paper bills of lading. One answer is to
make the bill an electronic document. An electronic bill of lading (or eB/L) is the
legal and functional equivalent of a paper bill of lading. An electronic bill of lading
must replicate the core functions of a paper bill of lading, namely its functions as a
receipt, as evidence of or containing the contract of carriage and as a document
of title.
The UK Carriage of Goods Act 1992 s.1(5) enables the trade minister to make
regulations for electronic transactions. As yet, no such regulations have been
made, as electronic interchange is already lawful. Electronic "clubs" have been
quite successful, but the maritime trade community is traditional and loath to move
away from paper transactions, so progress has been very slow. However, in
recent times, it has been proposed that Blockchain technology may be the answer
to cover the myriad steps in an export trade transaction, thereby enabling
electronic transactions and information transfer that is both speedy and reliable.
STANDARD CARRIER ALPHA CODE (SCAC)
The Standard Carrier Alpha Code (SCAC) is a privately controlled US code
used to identify road transport companies. It is typically two to four letters long.
The National Motor Freight Traffic Association developed the SCAC code in the 1960s to
help road transport companies computerize data and records.

SCAC Code Uses:

SCACs are commonly used by the automobile, petroleum, forest products, and chemical
industries; as well as suppliers to retail businesses, carriers engaged in railroad
piggyback trailers, and ocean container drayage. SCACs can be obtained online at
http://www.nmfta.org.

Freight Carriers who participate in the Uniform Intermodal Interchange Agreement (UIIA)
are required to maintain a SCAC. Certain groups of SCACs are reserved for specific
purposes. Codes ending with the letter “U” are reserved for the identification of freight
containers. Codes ending with the letter “X” are reserved for the identification of privately
owned railroad cars. Codes ending with the letter “Z” are reserved for the identification of
truck chassis and trailers used in intermodal service.
SCAC is also used to identify an ocean carrier or self-filing party, such as a freight
forwarder, for the Automated Manifest System used by US Customs and Border
Protection for electronic import customs clearance and for manifest transmission as
per the USA’s “24 Hours Rule” which requires the carrier to transmit a cargo manifest
to US Customs at least 24 hours prior to a vessel’s departure at port of loading.

The validity of the code is for 1 year, Codes are assigned and valid from July 1st
through June 30th each year. They are renewed electronically.
MAIN RISKS COVERED BY P & I CLUBS:

i) Personal injury, illness and death of crew member, loss of Seamen’s effects;
ii) Repatriation expenses consequential on wreck/loss of ship/sickness etc.
iii) Third party damage to Port installations, personal injury to the
passengers and dock workers etc;
iv) Oil pollution liability;
v) Expenses related to mandatory obligations related to Stowaways;
vi) Wreck & Salvage;
vii) 1/4th un-insured portion (by the Hull underwriters) of the collision liability;
viii) Fines and penalties imposed by various Govt. or recognized Authorities
on ships/ship owners;
ix) Cargo claims liability and legal costs of defending the claims.
RISKS COMING UNDER THE HEADING OF PROTECTION INCLUDE:

- Loss of life and personal injury claims;

- Hospital, medical and funeral expenses arising from injury claims;
- Sickness and repatriation of distressed seamen;
- Third party 1/4th liability for collision damages not covered by the
Running Down Clause of the Hull policy.
- Cargo damage due to improper navigation;
- Damage to piers, wharves, and other stationary objects;
- Cost of Government enquiries;
- Cost of raising wreck;
- Oil pollution liabilities;
- Quarantine expenses;
- Legal cost of defending claims if incurred with the consent of the
club directors;
- Cargo’s irrecoverable proportion of General Average.
RISKS UNDER THE HEADING OF INDEMNITY INCLUDE:
- Claims in respect of wrong delivery of cargo;
- Ship’s liability to cargo after collision not covered by insurance;
- Fines or penalties imposed as a result of innocent breaches of
Custom’s laws, Public health Regulations, Immigration laws,
or arising from barratrous acts, including smuggling , by the servants
of the ship owner;
- Cost of resisting cargo claims with the consent of the directors of the club.

Normally P & I clubs do not cover the owner’s own losses which are not in respect
of 3rd party liabilities. Though life salvage is covered, normal salvage and the
cargo owner’s proportion of General Average or salvage for which an owner is
liable by reason of a breach in contract of carriage is excluded. The vast
experience of these P & I clubs in dealing with claims on ship owners enables
them to suggest methods by which future claims may be avoided or minimized.
Some clubs charge a fixed premium/call money and cover more or less same
risks but clubs will limit their liability to a mutually agreed sum.
Management of the Clubs

Members appoint a Board of Directors or Committee who control the general policy
matters of the clubs in relation to cover, claims, calls, investments etc. The policies of the
Board are implemented by the Managers who are responsible for the day to day conduct
of the club’s business.

The Directors of clubs decide, after consultations with the Managers, the total income that
will be required by the club for the next Policy year. The Managers then decide the
proportion of that income which each members should pay for his ships, known as
‘Estimated Total Cost’(expressed as rate per Ton of ship’s tonnage) which ensures that
each member pays a fair contribution to the club, to reflect the risks that he brings and a
rateable proportion of the Clubs’ Re-insurance and Management cost, without any profit
margin.
A member is required to pay a %age of the Estimated Total Cost by way of
‘Advance Call’. If claims , expenses and outgoings for a year should exceed the
contributions raised by the Advance or Initial Call, the Directors, in order to make good the
deficiency, direct that a ‘Supplementary call’ shall be paid by each members at such rate
as may be decided by the Directors. This is usually levied about 18 months after the close
of the Policy year in question. Two or Three years after the end of the Policy year, Club
will be in a position to assess all outstanding claims and to decide whether and further
Supplementary call is necessary or if there be any surplus, whether any return of Call is
appropriate, before closing each Policy year.

When a member withdraws a ship or Fleet from the club, he will have an outstanding
contingent liability to pay supplementary calls for policy years during which his vessel or
fleet was insured with the club and which was not closed. The member, therefore, is
required to pay a ‘Release Call’ in respect of such vessels for such open years. The
amount of Release call is slightly higher than Supplementary call because by paying
Release call, the member is released from any liability for further call which may be levied
by the Club thereafter.
In the event of a claim in excess of the ‘Excess Loss Reinsurance Contract,
the Directors will require that a ‘Catastrophe Call’ be paid by all members,
of such amount as the Directors may decide.

REINSURANCE
The International Group of P & I Clubs (16 in all) have developed a sophisticated system
of reinsurance. Each club will itself bear claims up to US $ 1.6 million. The Group clubs
contribute under a Pooling agreement rate ably to any claim on an individual club in
excess of US $ 1.6 million, up to a limit of US $ 12 million. In addition, there is the
International Group Excess Loss Reinsurance Contract which gives all members of the
Pool, the benefit of protection ib excess of US $ 12 million up to US $ 1262 million
(applies to all claims except oil pollution claims where limit is US $ 500 million). If a claim
were to arise in excess of this limit, such excess will fall back on the Pool and will borne by
each contributing club pro rata. Thus P & I clubs have enormous financial capacity which
enable them to provide unlimited cover to their members.
LIST OF P & I CLUBS

American Steamship Owners Mutual Protection and Indemnity Association, Inc

AMT Insurance Ltd.
Al-Bahriah Insurance & Reinsurance S.A.L
Alfa Strakhovanie
Arsenal LLC
Assurance foreningen Skuld
Assurance foreningen Gard
British Marine- QBE Insurance (Europe) Limited
Bristish Marine- QBE Insurance (Singapore) Pte Ltd
British Steamship Management Limited
Central Insurance Company LLC
China Shipowner Mutual Assurance Association
China Taiping Insurance (HK) Company Limited
Coastal Marine Services Limited (CMS)
Edinburgharian PANDI Management Limited (E.Pandi)
Gard P&I (Bermuda) Ltd
Hanseatic P & I Club (Hanseatic Underwriters)
Hydor AS
Ingosstrakh Ltd.
Kish P & I Club
Korea P & I Club (The Korea Shipowner´s Mutual Protection & Indemnity Association)
Korea Shipping Association (KSA)
Maritime Mutual Insurance Association (NZ) Limited
MS Amlin Marine N.V
Navigators P&I
Lodestar Marine Limited
Osprey Underwriting Agency Limited
Post & Co (P&I) B.V
The Britannia Steam Ship Insurance Association Limited
The Japan Ship Owners' Mutual Protection & Indemnity Association
The London Steam-Ship Owners' Mutual Insurance Association Limited
The North of England Protecting & Indemnity Association Limited
 The Shipowners' Mutual Protection & Indemnity Association (Luxembourg)
The Standard Club Ltd
The Standard Club Europe Ltd.
The Standard Club Asia Ltd.
The Steamship Mutual Underwriting Association (Bermuda) Limited
The Steamship Mutual Underwriting Association Ltd
Turk Pandi Insurance Company (Turk P&I)
Skuld Mutual Protection and Indemnity Association (Bermuda) Ltd
Sveriges Ångfartygs Assurans Förening / The Swedish Club
Soglasie Insurance Company Limited
United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Limited
United Kingdom Mutual Steam Ship Assurance Association (Europe) Ltd.
The West of England Ship Owners Mutual Insurance Association (Luxembourg)