skuld magazine

contentsNews feature: HAZARDOUS CARGOES6 Regulating carriage of dangerous goods7 A costly affair8 Don’t let corrosion get a hold10 The danger of fertiliser11 Seed cake – can it be loaded?Legal issues12 Faster, cheaper and unused14 EU low-sulphur directiveLoss prevention16 Time to get smart18 Training the next generationCurrent20 A winter’s talenews21 Personnel news23 News4HAZARDOUSCARGOESForty-two percent of Skuld claimsare cargo-based, including thoserelating to hazardous loads. Withflammable, infectious, explosive orcorrosive shipments, Skuld-enteredvessels and their crews sail withpotential danger every day of theyear. In this feature, we take a lookat the IMDG Code governing safetransit of hazardous consignmentsand examples of cargoes and casesthat illustrate the threat.18Trainingthe nextgenerationA vessel’s crew is as important asthe ship itself. It can be an owner’spride or a source of disaster.

News featureHazardous cargoesHAZARDOUCARGOEPhoto: © 1-images.no Ammonium nitrate-basedfertilsers can become an explosionrisk if handled incorrectly.

News featureHazardous cargoes/S SForty-two percent of Skuld claims are cargo-based,including those relating to hazardous loads. With flammable,infectious, explosive or corrosive shipments, Skuld-enteredvessels and their crews sail with potential danger every dayof the year. In this feature, we take a look at the IMDG Codegoverning safe transit of hazardous consignments andexamples of cargoes and cases that illustrate the threat.beacon / april 2010 5

News featureHAZARDOUS CARGOESThe IMDG CodeRegulating carriageof dangerous goodsThe purpose of the International Maritime Dangerous Goods (IMDG) Code is set out in thepreamble of the 2008 edition as follows: Carriage of dangerous goods by sea is regulated in orderreasonably to prevent injury to persons or damage to ships and their cargoes. Carriage of marinepollutants is primarily regulated to prevent harm to the marine environment. The objective of theIMDG Code is to enhance the safe carriage of dangerous goods while facilitating the free unrestrictedmovement of such goods.The need to regulate carriage by sea of dangerous cargoes wasrecognised by the 1929 International Conference on Safety of Life atSea (SOLAS) and the present classification was adopted by IMO in 1965.The Code has been modified over the years, but until 2003 had onlyrecommendatory status through a footnote in Chapter VII of SOLAS.In 1973, the need to minimise negligent or accidental release ofmarine pollutants from cargoes to the environment was recognisedand provisions to prevent this crafted into Chapter III of the InternationalConvention for the Prevention of Pollution from Ships (MARPOL).In 1985, these regulations were implemented via the IMDG Code.The IMDG Code is updated on a two-year basis by the Maritime SecurityCouncil (MSC) – a body under the IMO umbrella – based on recommendationsfrom experts on new products and their impact on the environmentand humans. The shipper of dangerous cargoes is responsible for theproper identification, labelling and packaging of the goods.Safe carriage and unrestricted movement of dangerous goods is the IMDG Code’s goal.Photo: © 1-images.noThe IMDG Code currently lists the following classes of dangerousgoods in no particular order of danger:Class 1: ExplosivesClass 2: GasesClass 3: Flammable liquidsClass 4: Flammable solids; substances liable to spontaneouscombustion; substances which, in contact with water,emit flammable gasesClass 5: Oxidising substances and organic peroxidesClass 6: Toxic and infectious substancesClass 7: Radioactive materialClass 8: Corrosive substancesClass 9: Miscellaneous dangerous substances and articlesSpecial regulations for carriage of nuclear material is found inthe International Code for the Safe Carriage of Packaged IrradiatedNuclear Fuel, Plutonium and High-Level Radioactive Wasteson Board Ships (INF Code)./Class 9 Miscellaneous dangersItems falling under class 9 include hazardouscargoes not covered under classes 1 to 8. It’s a kindof ‘catch-everything-else’ category, which includesa wide range of cargoes from air bag inflatorsand zinc ditonite to genetically modified microorganisms,magnetic materials and rare earths.For example, a recent cargo carried by a memberconsisted of magnetic material embedded in billetsof rare earths. Although magnetic material canrealign a ship’s compass and have a detrimentalimpact on other sensitive equipment or electronicinstruments carried as cargo, it is not ‘dangerous’by itself. Rare earths, however, are a class 9 cargodue to their harmful environmental effect. Thegeneral term ‘rare earth’ covers a collection ofmineral sands, including scandium, yttrium andlanthanoids.read morewww.imo.org6 beacon / april 2010

News featureHAZARDOUS CARGOESBy Jørgen RaschVice President, Lawyer and Master Mariner, Skuld Copenhagenjørgen.rasch@skuld.com/Sulphur cargoesA costly affairThe message sends a shiver down my spine. A vessel less than one year old has sufferedserious hull damage after carriage of sulphur granular.A brand new bulk carrier entered by a charterer member carried acargo of sulphur granular from the Black Sea to South America. Afterdischarging one hold, the ballast system was found to be heavilycorroded with serious pitting evident on the tank top and the bulkheads.Other holds were in a similarly corroded state.If members were responsible for the damage the Charterer’s Liabilityto Hull (CLH) cover would come into play. What is an adequatereservation for such a claim?Adding up potential costsSerious hull damage to a vessel less than one year old, repairs to theballast system, temporary repairs to make the vessel seaworthy,possible dry docking, lost time in reaching a repair yard in ballast andtime used for repairs would all add up to….millions of dollars!Both of the relevant charter parties (time and voyage) called for alldisputes to be referred to arbitration in London. This meant the usualdilemma – should we appoint local surveyors and experts who mightbe called to London to give evidence or send an English expert toSouth America right away? The exposure of a possible claim warrantedthe cost to send an expert from England and provide him with assistancefrom a local surveyor. Owners made a similar decision and voyagecharterers appointed a local surveyor.attending experts, a number offactors could have caused orcontributed to the problem. At thetime of writing, analysis of thevarious samples has not beencompleted and any speculation onthe final liability is a waste of time.We might well end up in a situationwhere a number of factors havecontributed without a clearpredominant cause. This is thetype of situation that fuels lengthyand very costly litigation, but ifthe positive cooperation betweenthe parties continues we haveevery hope that a pragmatic andcost-efficient solution will be found.“the ballastsystem wasfound tobe heavilycorroded”All parties working togetherFortunately all three parties – owners, time charterers and voyagecharterers – agreed to cooperate fully in the first and most importantstage of any dispute resolution process; namely the fact finding.Consequently, samples of cargo, ballast water and corroded materialwere collected and jointly labelled for future analysis, the voyagecharterers produced details and certificates for the cargo and themaster produced documents from the vessel upon request, withoutinvolvement from local courts. All documents were given on a ‘withoutprejudice’ basis.What could possibly have gone wrong?The vessel had carried a similar cargo from a Black Sea port to aMediterranean port on a previous voyage without incident. So whathappened this time?As can be seen from the article on the next page, written by one of theCorrosion damage to tank top caused by wet sulphur. Note the characteristic steep-sidedpit formations.beacon / APRIL april 20107

News featureHAZARDOUS CARGOESCARRIAGE OF SULPHURDon’t let corrosionget a holdAs most sulphur cargoes are loaded wet the risk of corrosion increases considerably.Sulphur is a very important feedstock material for the world’s chemical industry. It is largelygenerated as a by-product in hydrocarbon processing and mostly used to produce sulphuricacid, which in turn is used extensively in fertiliser production. Annually, tens of millions of tonsare carried on board ships.Corrosion hazardSulphur is loaded in granular or prilled forms, but also as crushedlumps or coarsely grained material. IMO, in its IMSBC Code (formerlythe BC Code), classifies the solid granular/prilled forms as harmlessgroup C and crushed lumps/coarse-grained sulphur as hazardousclass 4.1 under UN1350. Regardless of form, when sulphur is wet,it has potential to cause serious corrosion damage to steel. IMOtherefore requires that sulphur should only be loaded after adequateprotection against corrosion is in place.8 beacon / april 2010

News featureHAZARDOUS CARGOESBy Dr. Ken KirbyMetallurgist, Brookes Bellken.kirby@brookesbell.com/Sulphur can be aggressively corrosive ifnot properly managed (photos from casedescribed on page seven).In the 1970s and 80s, there were numerous incidents of corrosiondamage to holds on board ships after loading sulphur. Researchconfirms that completely dry sulphur does not react with steel, but wetsulphur can cause serious damage. The simple fact is that sulphurplus moisture plus mild steel equals corrosion. The mechanism ofoxidation is electrochemical in nature and important characteristics are:• The reaction is promoted under anaerobic conditions and exhibitsautocatalytic behaviour, i.e. once started further corrosion is accelerated• Corrosion proceeds irrespective of the medium’s pH, although itsfastest rate is at pH neutral• Temperature promotes reaction and the corrosion rate roughlydoubles for each 10°C rise• Presence of the chloride ion promotes corrosionSulphur contains low residual quantities of acids (mainly sulphuric).This presents potential for acid-induced corrosion although this is notbelieved to be significant unless conditions are fairly acidic (pH 2 orless), which are uncommon for sulphur cargoes.Most sulphur cargoes are loaded wet and therefore present risk ofcorrosion. This is because the product is usually stored in large outdoorpiles but also, in many ports, it is standard practice during loading tospray with fresh water to reduce dust formation. On board, water andfine sulphur dust therefore gradually filter towards the tank top topresent a potent corrosive system to steel unless protective measuresare in place. The fundamental principle for protection against corrosionrelies on the presence of a completely uninterrupted physical barrierbetween steel and sulphur. This prevents direct contact with steel andhence corrosion.Protect your vesselThe following measures are necessary to protect against sulphurinducedcorrosion:• Clean holds to ‘grain clean’ standard. Not only can presence of previouscargo residues affect the protective coat that needs to be applied,but shippers also guarantee very high purity specification for sulphurand holds should be clean. Finish cleaning by rinsing thoroughlywith fresh water to remove chloride salts.• As paintwork protects againstcorrosion, damaged areasshould be repaired.• Add a protective coating toyour hold. Lime wash is themost common method toprotect against corrosion. Itmitigates against and slowsdown corrosion, but does notcompletely eliminate the riskof it occurring. Lime washserves two specific functions:- It presents a physical barrierbetween sulphur and holdstructures. As the emulsiondries, the lime (calciumhydroxide) reacts in air (carbondioxide) to form a layer ofopaque white calcium carbonate.This is significantly harder thanlime and constitutes the actualprotective coat. Lime washmust always be given ampletime to dry as wet lime doesnot protect against corrosion.The coat should last 30 days atleast, before acid neutralisationreduces its effectiveness.- The alkaline nature of thelime acts to neutralise acidpresent in the sulphur.• During voyages, bilges shouldbe pumped regularly to preventrisk of acidic water accumulatingon tank tops. When sulphurhas been discharged it isimportant that all residues arecompletely removed fromcargo spaces, including thebilge system.FlammabilityCrushed or coarsely grainedsulphur declared under theUN1350 schedule presents acertain fire and dust explosionrisk, but we refer in this respectto the IMSBC Code.References1. IMSBC Code 2009, pp 271-2.2. IMSBC Code 2009, pp 273-4.This article is abridged.For the full version, please seewww.skuld.com/publications/Beacon“sulphurplusmoistureplus mildsteelequalscorrosion”read morewww.skuld.com/publications/Beaconbeacon / april 2010 9

News featureHAZARDOUS CARGOESBy Ivan SerracinClaims Executive, Syndicate 1 Oslo (currently with Skuld Hamburg)ivan.serracin@skuld.comHandling hidden hazardsthe danger of fertiliserAs certain fertilisers are classified as dangerous goods, their storage, transport and handling need toreflect the potential hazard.The increase of marine and environmental pollution awareness hasmade countries and the industry more conscious of the potential hazardsthat transport by sea of dangerous or noxious cargo represents. Thishas resulted in the adoption of advanced and standardised guidelinesregulating the carriage of marine pollutants and dangerous cargoes inorder to promote maritime safety.These substances, materials and articles are regulated by the InternationalMaritime Dangerous Goods (IMDG) Code, 2008 edition and theInternational Maritime Solid Bulk Cargoes (IMSBC) Code, 2009 edition.The IMDG Code exposes the basic principles of dangerous cargoes,introduces recommendations for individual substances, materials andarticles, as well as recommendations for good operational practice,including advice on terminology, packing, labelling, stowage, segregationand handling, and emergency response. The IMSBC Code’s purpose isto facilitate the safe stowage and shipment of solid bulk cargoes. As aconsequence of recent implementation of safety principles and rulescovering transport by sea of potentially hazardous cargoes, a greatnumber of goods have been categorised as hazardous.Handle with careIt is known that some cargoes may change their characteristics andbehaviour when exposed to certain conditions and become potentialrisks for shipowners, governments and the environment if safety orloss-prevention measures are not taken.Safety measures for transporting ammonium nitrate-based fertilisers are outlined inthe IMDG and IMSBC Codes.For instance, cargoes such as fertilisers that contain ammonium nitratecan be dangerous when handled incorrectly. The elements within thistype of fertiliser have properties that when exposed to particularconditions, for example contamination or heat, become an explosionrisk in case of fire.In addition, these substances are capable of self-heating, although thisseldom occurs at ambient temperature because self-heating is not aninherent property of these types of fertilisers. The fertiliser’s componentsmay also act as an oxidising agent, especially in a fire, or initiate a selfsustainingdecomposition (SSD), sometimes called “cigar burning”.The transport of ammonium nitrate materials that can self-heatsufficiently to initiate decomposition is prohibited. The decompositionprocess is generally accompanied by toxic gases, such as ammonia,hydrogen chloride and nitric acid vapours.Safety measuresThe hazards that fertiliserscontaining ammonium nitraterepresent require safety measuresthat cannot be summarised in afew lines. However, the standardrecommendations are outlined bythe IMDG and IMSBC Codes.The properties intrinsic to thistype of fertiliser require theimplementation of specific safetymeasures for packing, stowageand segregation of incompatiblesubstances, as well as classification,description and labelling. Theprinciple is that harmful substancesor dangerous goods must beproperly stowed and secured tominimise the hazards that theirtransport represents to themarine environment and thesafety of both the ship and its crew.Precautionary measures aresome of the requirementsrecommended by the IMDG andIMSBC Codes. By following theseguidelines, shipowners avoidhazards and ensure that onboardsafety and environmental securityare not compromised.read morewww.skuld.com10 beacon / april 2010

News featureHAZARDOUS CARGOES/contributions byCharlotte Valentin Assistant Vice President, Skuld North AmericaKonstantinos Samaritis Claims Executive, Skuld Piraeusdefining hazardous cargoSeed cake – can it be loaded?Our member, the vessel owners, contacted us due to the planned loadingof potentially hazardous cargo.The charterers had nominated a cargo of seed cake, also traded asgolden dried distillers grain (GDDG) or brewer’s grain pellets to beloaded at New Orleans. Such cargo may self-heat slowly and, if wet,ignite spontaneously. The vessel was not classed to carry IMO Class4.2. cargo, i.e. substances liable to spontaneous combustion.Special permission to loadCharterers argued that as the U.S. Coast Guard had given specialpermission to load this cargo it could be loaded and that that they hadcarried this particular cargo on other chartered vessels many timesbefore without incident. There is some confusion as to whether thistype of cargo is hazardous. However, the only types of cargos specificallylisted in Section 4.2 of the IMO as non-hazardous seed cake aresolvent-extracted soy bean meal, rape seed meal, cotton seed meal,and sunflower seed meal. Furthermore, the Coast Guard’s specialpermission to load clearly refers to the cargo as ‘solid hazardousmaterial in bulk’, so there can be little doubt that this cargo isconsidered hazardous.Vessel not obligated to carry seed cakeThe charter party prohibited loading of ‘inflammable or dangerous goodsas defined by IMO’. The Coast Guard’s special permission to load is notconcerned with whether owners are obligated to carry the cargo underthe terms of the charter party. As owners, with Skuld’s assistance,concluded that this cargo was hazardous, they had no obligation to carry it.Whether the vessel had permission from the Coast Guard to load the cargowas irrelevant, as the vessel was not obligated to carry any dangerouscargo, including seed cake, under the terms of the charter party.Rules of ‘excluded risk’If owners had agreed to load the cargo, their P&I cover could havebeen prejudiced. The relevant clause in Skuld’s Rules is the ‘excludedrisks’ section 30.4.3: “liabilities, costs or expenses which arise out ofor are consequent upon the vessel carrying contraband, blockaderunning or being employed in a trade or on a voyage which is unlawfulor which the Board of Directors considers to be unsafe or undulyhazardous”. The phrase “unsafe or unduly hazardous” includes thecarriage of hazardous cargo. There is also a duty to disclose analteration of risk (Rule 28.1). Accordingly, had the owners failed tonotify Skuld that they would be carrying the seed cake cargo, theywould also have been in violation of this rule.Substituting cargoAfter several days of assisting our members in their dispute withcharterers, charterers finally agreed to substitute seed cake with anon-hazardous cargo.“charterersfinallyagreed tosubstituteseed cakewith a nonhazardouscargo”HNSConventionThe HNS Convention wasadopted in 1996 with the aimof providing compensation fordamage caused by hazardousand noxious substances(HNS). The regime closelyfollows that applicable for oilpollution, with strict liabilityon shipowners, compulsoryinsurance requirements and alimit on the shipowner’s liabilitysupplemented by a secondtier of compensation fundedby cargo interests. However,the Convention has notentered into force since it isnot ratified by a sufficientnumber of states. The lack ofgovernmental support is dueto perceived shortcomingsin relation to the cargocontributions.A protocol to the Conventiondesigned to address theseproblems will be consideredat a diplomatic conference atthe end of April arranged bythe International MaritimeOrganisation. The protocolcontains a package ofmeasures designed to amendthe original Convention andshould clear the way forratification by enough statesfor the Convention to comeinto force. The part of thepackage of most interest toP&I clubs is an increase inliability limits applicable topackaged goods. The increaseshould be ‘modest’, but theactual figures will only beagreed at the Conference.The clubs in the InternationalGroup support the Convention,particularly because thealternative is regionallegislation.beacon / april 2010 11

LEGALISSUESLMAA INTERMEDIATE CLAIMS PROCEDURE – ONE YEAR ONfaster, cheaperand unusedIn March 2009, the London Maritime Arbitrators Association (LMAA)introduced a new ‘condensed’ arbitration procedure for intermediate valueclaims of between USD 100,000 and USD 400,000.This Intermediate Claims Procedure 2009 (ICP) was introduced bythe LMAA, in part, to address the recent increased criticism thatinternational arbitration was becoming a prohibitively expensive andoften slow means of dispute resolution. The ICP is designed tocomplement the three existing LMAA procedures and provide a tailormademeans of resolving intermediate disputes. These cases cannotsustain the costs of standard arbitration procedure under full LMAAterms, but as they involve issues of relative complexity and/or claimvalue they cannot be appropriately dealt with under LMAA SmallClaims Procedure or FALCA (Fast and Low Cost Arbitration Procedure).The ICP’s predominant aim is to provide arbitrating parties with greatercertainty regarding their costs exposure and to ensure that such costsare more proportionate to the amounts in dispute.In essence therefore, the introduction of the ICP is an attempt by theLMAA to address the recent trend in claims-costs inflation and toprovide arbitrating parties with the means to arbitrate intermediatevalue disputes efficiently and proportionately. As such, this developmentshould be viewed by the industry as a welcome step forward fordispute resolution in London. Therefore, it is with some surprise that,a year after introduction, the ICP has not been widely utilised. Indeed,statistics shortly to be formally released by the LMAA, indicate thatthere has only been one ICP appointment received by the LMAA in thetwelve months since its introduction.It is difficult to understand why the ICP has not been more widelyadopted to date, given the apparent advantages it offers to arbitratingparties for timely and cost-effective dispute resolution. Certainly fromthe club’s perspective, the ICP is a welcome development. One mustwonder whether the reason for non-use is because owners andcharterers remain largely unaware of the ICP’s potential advantages.Consequently, for members’ benefit, the central features of the ICP arehighlighted here:1. Costs: Perhaps the most important feature of the ICP is the capplaced on parties’ respective recoverable costs. Under the ICP,parties’ recoverable costs are capped at a sum equivalent to 30% ofthe claimants’ monetary claims (and distinct counterclaims) wherethere is no oral hearing. If an oral hearing is involved, this percentageincreases to 50%. The costs of the tribunal are similarly capped atup to one third of the total at which the parties’ costs are cappedwhere a sole arbitrator has been appointed, or two thirds if thetribunal consists of two or three arbitrators. With this clearerindication of maximum costs exposure, arbitrating parties are ableto better assess the cost risk involved in arbitrating the matter, both interms of potential liability and recoverability of costs.2. Disclosure: Under the ICP there is no formal disclosure stage inarbitration proceedings. Parties are obliged to produce all relevantdocuments with their opening submissions, although each side mayspecifically request disclosure of relevant documents as well.3. Witness and expert evidence: Witness and expert evidence is limitedin scope. Parties under the ICP are entitled to serve witnessevidence 28 days after submissions have closed, but only if theyhave given prior notice that they intend to do so. Unless served withopening submissions, no expert evidence is permitted withoutexpress permission of the tribunal.4. Oral hearing: There is no automatic right to an oral hearing. Only inexceptional circumstances is one held.5. The award: The tribunal’s intention is to produce an award within sixweeks of the service of the parties’ last submissions.6. Appeal: A right to appeal is only permitted when the tribunalcertifies in its award that a question of law with general interest tothe industry is involved. Whilst this provision significantly limits theright to appeal, it is also designed to avoid the parties having toincur the (high) costs of an application to the English High Court forpermission to appeal.Members can view full details of the LMAA Intermediate ClaimsProcedure 2009 in the terms section of the LMAA’s website atwww.lmaa.org.uk.In summary, the ICP provides a significantly condensed mechanismfor dispute resolution and sets out measures to ensure predictable12 beacon / april 2010

By Nikolai IvanovLawyer, Syndicate 2, Oslonikolai.ivanov@skuld.comLEGALISSUES/Bridge over troubled water – the LMAA’s Intermediate Claims Procedure aims to reduce the cost and time of arbitration.and proportionate costs. Therefore, the procedure warrants carefulconsideration for members who routinely face, or may face, intermediatevalue claims and wish to avoid long drawn-out and expensive arbitrationproceedings.Contracting parties who want to use the ICP need to include a provisionin their contracts’ arbitration clause. To assist, the LMAA in conjunctionwith BIMCO have published an arbitration clause that expresslyprovides for the incorporation of the ICP – see BIMCO/LMAA arbitrationclause (2009). BIMCO has also drafted recommended additional wording,along with commentary, to facilitate incorporation of ICP terms.Both of these wordings are published on the Skuld website.“It iswith somesurprisethat...the ICPhas not beenwidelyutilised”read morewww.skuld.com/publications/clauseswww.lmaa.org.ukbeacon / april 2010 13

LEGALISSUESBy Nikolai IvanovLawyer, Syndicate 2, Oslonikolai.ivanov@skuld.comCURRENT ENFORCEMENTTHE EU LOW-SULPHURDIRECTIVEMembers will no doubt be aware that the new EU low-sulphur directive(Directive 1999/32/EC as amended by Directive 2005/33/EC) is now inforce and is aimed at controlling marine fuel emissions within EU ports.EU Directive 2005/33/ECArticle 4b of EU Directive 2005/33/EC requires that, with effect from1 January this year, member states must take all necessary steps toensure that ships berthed or anchored in European Community portsare not permitted to consume marine fuels with a sulphur contentexceeding 0.1% by mass. This regulation applies to all vesselsirrespective of flag, ship type, age or tonnage. 1In practice, this means that it is necessary for many ships to switchfrom residual fuel oil (heavy fuel oil) to distillate fuel, such as marinegas oil, when in port. The directive requires that this fuel changeoveroperation should be carried out as soon as possible after arrival andas late as possible prior to sailing.There are serious concerns that switching from heavy fuel oil (HFO) tomarine gas oil (MGO) in existing boilers constructed for HFO use, couldlead to operational problems and potential safety risks, includingflame failure and, in extreme cases, an increased risk of explosion. InCalifornia, where similar fuel switching regulations have been in forcesince 1 July 2009, there are 15 reported casualty investigations attributedto fuel switching in the three months following implementation.Consequently, many vessels trading to/from EU ports need to conductmodifications to boilers, engines, associated fuel storage and supply andcontrol systems in order to ensure safe compliance with the directive.Initially, many shipowners assumed (wrongly) that HFO with 1%sulphur content would become more widely available and/or thatimplementation of the directive would be postponed so it could bebrought in line with the IMO sulphur limits prescribed in MARPOLAnnex VI. For these, and other reasons, the modification process onlystarted in earnest during 2008, which has placed an enormous burdenon the shipping industry. Indeed, as the 1 January deadline approached,it was clear that a large number of vessels had not undertaken thenecessary modifications and verifications. Given this widespreadnon-compliance and the safety concerns highlighted by the industry,there were practical arguments for the EU postponing implementationor introducing a phase-in period for the directive. Consequently, therehas been considerable uncertainty (arguably with justification) as tohow, and to what extent, the directive would be enforced after the1 January deadline.“Implementationhasnot beensuspendedand thereare noeffectiveexemptions”European Commissionrecommendation:21 December 2009On 21 December 2009, the EUmoved to dispel the confusionsurrounding implementation ofthe directive by publishing arecommendation designed toprovide guidance and clarificationto member states for enforcementof the directive. The recommendationdirects member states toenforce the directive fully andcompletely from 1 January 2010.However, the recommendationalso indicates that, in assessingthe appropriate penalty to beapplied to non-complying vessels,member states should take intoaccount concrete steps undertakenby the shipowner to achievecompliance. These steps shouldinclude disclosure of a contractwith the manufacturer and aclass-approved retrofit plan clearlyproviding a completion date for theadaptation within eight monthsafter the enforcement date.In short, shipowners should beleft in no doubt that EU Directive2005/33/EC is in full force.Implementation has not beensuspended and there are noeffective exemptions, even whenmodifications have been arranged,but not yet carried out. EU membersare obliged to enforce the directivefully, although the method ofenforcement is flexible. Any noncompliantvessel is in breach ofthe directive and therefore at risk.14 beacon / APRIL 2010

LEGALISSUES/The current position on enforcementAs stated, the directive gives a great deal of latitude to member stateswhen determining the appropriate penalty for non-compliance andwhere liability falls. The only constraint is that the penalties for breachmust be effective, proportionate and persuasive. Therefore, at thisearly stage (and at least until widespread enactment 2 ) it is difficult toassess to what extent the directive is being enforced and what theappropriate penalties are for non-compliance.Prompted by an awareness that many ships calling at European portsare not in compliance with the directive, many member states are not,at present, widely enforcing the directive. However, this will change.The emerging position is that some member states are enforcing thedirective reluctantly and others with gusto.In Italy, for example, the authorities have directed that until August2010 vessels can apply to the harbour master for authorisation to burnfuels exceeding the 0.1% limit. However, the application must be madeone day prior to the vessel’s arrival and include a statement from thevessel’s registry confirming full details of the approved retrofit plan.Notwithstanding this, some Italian ports have taken a harder line andTrieste, for example, issues non-compliant vessels burning highersulphurfuels with fines of between ¤15,000 and ¤150,000, and subjectsvessels burning low-sulphur fuels without approved modi fications toPort State Control inspection due to unsafe practice.In contrast, authorities in France and Germany have confirmed thatthey will apply the directive, but have offered no clear response orguidelines (at the time of writing) on the enforcement measures orpenalties. There are also fears that the crew may bear the brunt ofadditional inspections and penalties, with some member states levyingpenalties against the master and/or chief engineer, rather than theshipowner.Members should note that fines imposed for non-compliance with thedirective are not generally covered under members’ P&I insurance.Such fines do not fall within Rule 19 (Fines) of the club’s rules, and areonly covered in exceptional circumstances under discretionary coverprovided by Rule 19.4.Given the differences in enforcement, even within member states,shipowners should be prepared. For the time being, any shipownerwith a vessel unable to safely comply with the directive should checkthe relevant control measures being taken by individual states whenfixing charters prior to entering the designated EU port.In conclusion, the enforcement and legal impact of the EU low-sulphurdirective is still far from clear. The burden and risk of modifying shipsto comply with these EU standards rests squarely with shipowners.It remains to be seen how member states will enforce the directive,but it is clear that significant operational and legal challenges remainfor the shipping industry in complying with regulations imposed bythe directive.Many ships are currently not in compliance with the directive.This article is an abridged versionof a talk given at the InternationalBunker Conference, 2010. Thecomplete text with an analysis ofthe legal implications of the directiveis found at www.skuld.com/publications/Beacon.Footnotes1) The directive has very few exceptions,but does not apply to vesselsberthed for less then two hours aspart of a published timetable, i.e.ferries on scheduled services.2) It is important to remember thateach member state must implementthe EU directive through nationallegislation to make it law in theirown country.read morewww.skuld.com/publications/Beaconbeacon / APRIL 201015

LosspreventionKnow your counterpartyTime to get smartIn many industries it is common practice to conduct extensive due diligence on business partnersnew and old, irrespective of whether the deal is a one-off or part of a multi-year, multi-milliondollar project. It’s time to get smart and extend this principal to the shipping industry.My word is my bondIn the world of shipping, people often rely on personal relationshipsand a firm handshake. Yet “trust me”, as many have unfortunatelylearnt over the last 18 months, are two very dangerous words.Some also felt that they could always secure claims quickly andcheaply through a Rule B attachment of an Electronic Fund Transfer inNew York, but since the Supreme Court has refused to review theJaldhi case that overturned Rule B, this is now impossible.Where to startWhat can you do when you are unsure whom to trust and getting yourmoney back is harder than it has been for a long time? Knowing moreabout whom you are doing business with is a good start.Parties often rely on previous business experience (not always a badthing), and information supplied by dealmakers about a new fixture.Parties may take at face value a partner’s reputation, financial standingand even non-reconfirmed third-party guarantees based on simplefixture recap statements.16 beacon / april 2010

Lossprevention/By Christian OttAssistant Vice President, Lawyer, Skuld Far East Syndicatechristian.ott@skuld.comIf it all goes horribly wrong youmay discover that guarantees arenot enforceable (even under EnglishLaw) unless made under seal orsupported by valuable consideration(just like normal contractformation). Also, not every legalsystem sees the world in the wayEnglish law does. For instance,Chinese law takes a far stricterview of contract formation, sothat fixture recap you thoughtwas fully binding is in fact nonenforceable.This can be aproblem if your counterparty issmart and quickly launches apre-emptive lawsuit to declarethe contract null and void. Oh yes,this happens!To make matters worse, yourother counterparty, the one youhad been dealing with for the lastten years, suddenly goes bankrupt.A quick check of companyrecords may have shown theywere on the way down evenbefore the crisis struck. Alternatively,a corporate intelligenceinvestigation could have revealedheavy exposure on high-riskbusiness with some chancycounterparties. The point is –take the time to be sure whomyou’re doing business with. Anddon’t be afraid to insist on theinformation you need to make aninformed decision.“don’t beafraid toinsist on theinformationyou need tomake aninformeddecision”///Information sources/ Your own company – the low-down on a hot new prospectfrom a colleague may leave you cold/ Your friends – amazing what you can learn over a cup of coffee/ Brokers and lawyers – they work for you, so make themwork for you/ Trade press – every week it’s full of information about tradeand legal disputes/ Internet – amazing what you can find these days with aquick Google search/ Corporate intelligence agencies – not cheap, but a fewthousand spent early can save a few million later/ Skuld – we have 110 years of knowledge and a very long memoryThings to watch out for/ Do not accept key information at face value/ Guarantees should be confirmed in writing and countersignedby the guarantor/ Make sure contracts and guarantees are concluded not just inline with the law of the contract, but importantly also in linewith the law of the home jurisdiction of your counterparty/ Track record – who are they and how long have they been around/ Are you signing with the parent company or just a subsidiary,and is this just a shellQuestions you should ask/ Full name and address of your counterparty/ Where is the company incorporated/ Does the state of incorporation give access to the company’saudited accounts? If no accounts have been filed, why not/ Is it a pure operator or does the company own ships or anyother physical assetsTake matters into yourown handsProtecting your business andyour money may not take a lot oftime or effort. The boxes to theright provide some tips on whereyou can gather information andwhat to look for./ Does it hold a high profile in the trade press? If yes, why/ Is the person concluding the contract fully authorised by hiscompany to do so/ Will the guarantor give a proper written guarantee (not just aone liner in a fixture recap)/ Are there unusual charter terms that may allow another partyto sub in, or is the money going to an apparently unrelatedthird party/ Ask your brokers how much is known about the people theyrecommend to you and who else they have done businesswith. Call these people and ask them what they think/ Does the company have official brochures? Does it publish anannual report and final accounts? If so, get copiesbeacon / april 2010 17

LosspreventionBy Nicola MasonVice President Skuld Far East Syndicatenicola.mason@skuld.comCombining theory with practicetraining the nextgenerationA vessel’s crew is as important as the ship itself. It can be an owner’s pride or a source of disaster.BS Teeka constructed a fully-classed shipat Lonavala in 2007.Increasing claims due to human error“Crew shortages and a dwindling pool of skilled officers in the marineindustry could result in increasing claims due to human error....additionalships will exacerbate the existing crew shortage, especially for complexvessels such as the new generation of LPG/LNG tankers.... Bigger ships,tankers and dredgers are creating bigger concentrations of risk andmagnifying the potential scale of disaster for P&I, liability and cargoinsurers as well as hull underwriters.” 1Indeed many experts attribute the record-high pool claim years of2006 and 2007 to an increase in human error caused by the shortageof competent crew.How will the economic slow down alter the picture?The economic slow down may provide a temporary reduction indemand for ships and crew, but demand for crew still exceeds supply,with the industry predicting a global shortage of as many as 46,000qualified officers by 2010. 2Bridging the gap between theory and practiceCrew training often falls short without real shipboard experience tosupplement theoretical education. In this respect, the SamundraInstitute of Maritime Studies (SIMS) at Lonavala, India has created thefirst ever ‘Integrated Gas Tanker Simulator’ (IGTS). This facility, whichhas been inspected and fully approved by DNV Norway, trains crew towork on gas tankers managed by Executive Ship Management (ESM).This state-of-the-art facility is intended to bridge the gap betweentheory-based knowledge and practical experience.SIMS campuses in Mumbai and Lonavala were established in 2002 and2004 respectively. SIMS is the brainchild of BS Teeka, Managing Directorof Executive Ship Management, Singapore and Principal Trustee ofSIMS. Teeka saw the desperate need to pair theory with practice and,in addition to other innovative training equipment, constructed a fullyclassedship at Lonavala in 2007. Now with IGTS, he has takenpractical experience to the next level.The writer attended the IGTS launch on 15 December 2009 where shehad the opportunity to discuss with Ms Sikha Singh, HRD Director, ESMand a principal trustee, SIMS’scommitment to quality maritimetraining and the challenge ofnurturing a competent generationof officers and crew.A holistic approach to cadettrainingMs. Singh explained that a holisticapproach is taken by ESM whilerecruiting and training crew.SIMS, Mumbai conducts over50 value-added post-sea coursesfor the officers and ratingsalready sailing on board, whileSIMS, Lonavala is the cradle ofthe organisation nurturing thefuture generation of officers. Theselection and training processesboth ensure that a cadet has therequisite calibre and mentalstamina for life at sea.The campus itself is set in landscapedgrounds with art andsculpture thoughtfully placed toinspire the cadets during theirtraining. Facilities include aswimming pool, gym and othersports facilities that create asense of balance to the academicand practical training. Cadets joinmandatory yoga lessons and areencouraged to play musicalinstruments. Developing andenhancing emotional and socialintelligenceskills are especiallyrelevant for life at sea wherecrewmen are vulnerable to18 beacon / APRIL 2010

Lossprevention/According to Ms Sikha Singh, HRD Directorat ESM, SIM’s selection and trainingprocesses ensure cadets have the calibreand mental stamina for life at sea.emotional and social difficulties, and face a high degree of stress intheir working environment. At SIMS, the emphasis is on the completeperson. ESM’s aim is that SIMS graduates well educated, sociallyintelligent and motivated crew members who contribute not only totheir organisation, but to the entire global maritime industry.Motivation and inspirationAt both the formal inauguration of SIMS Lonavala on 1 Nov 2007 andthe IGTS on 15 December 2009, Mr John Ridgway, CEO of BP Shipping,officially opened the facilities. As a long-term business partner, ESM &SIMS provide full training to all Indian seafarers employed on BP Shippingvessels. Mr Ridgway joined BP as an officer cadet in 1971, where herose to the rank of captain, and is now the CEO of BP Shipping. Whennew recruits hear of the increasing criminalisation of seafarers andthe risk of piracy, it is important that they are inspired by their careerchoice. In this respect, Mr Ridgway is the perfect role model for thesenew recruits who enthusiastically listened to his speeches where hehighlighted the importance of “shining a light on ignorance,” and“lighting up talent on cadets”.commitment to the industry andresponsibility to the communitythat we all belong to.”References1. Aon 2008 Marine InsuranceMarket Review.2. “Today’s Shorthanded MerchantMarine: The Cause, Risks, andThe Solutions”, Bill Davies,Senior Vice President, WellsFargo Insurance Services,white paper, 2009.“ESM’s aim isthat SIMSgraduateswelleducated,sociallyintelligentand motivatedcrewmembers”SIMS has responded to the industry challenge by focusing on crewrecruitment, training and retention. Combining theory with practicalexperience gained from the IGTS helps ensure a supply of competentgas tanker officers for the new generation of LPG tankers.Finally, in Teeka’s own words: “Our journey in pursuit of excellence isnot going to stop here. SIMS will continue to develop and perfectmaritime training. SIMS will continue to serve as the beacon of ourFurther information:www.samundra.comwww.executive.comwww.skuld.comBeacon Issue 187 2006:Crew claims – the human factorbeacon / APRIL 2010 19

CURRENTS/S Shtandarta winter’S TALEThis winter, Marion Carlmar, Senior Claims Executive in Syndicate 2 Oslo, provided us with acopy of an e-mail sent to members in St Petersburg. We want to share both the story and thephoto with our readers./Dear All!As you no doubt know, the S/S SHTANDART is a replica of Tsar Peterthe Great’s battleship built in the year 1703.It is functioning as a training ship for young cadets. Due to badweather this autumn, they did not manage to get into the Baltic andto their home port of St. Petersburg before the waterways froze over.Hence, they ended up spending the winter along the Norwegiancoast. This is actually a good reminder of why P&I cover starts on 20February – the breaking of the ice in the Baltic.Saturday, they sailed into the small port of Drøbak, south of Oslo,which happens to be my home town. The ship was open for visitors,so a lot of people took the opportunity to visit the ship. My husbandtook the attached photo.Being merely 100 feet long and not very wide, it is rather incredible thatwhen the original ship was “working” as a battleship, she had a totalcrew of 150 persons and they had to take turns in sleeping. Food forthought in case your crew members are complaining of the standardof accommodation...Have a nice day.Kind regardsMarion CarlmarS/S ShtandartBuilt: St. Petersburg. First set sail in 1999Design: A replica of the 1703 battle ship ofTsar Peter the GreatCaptain: Vladimir MartensCrew: Some 40 young Russian sailors taking part inthe Shtandart project. This instils in them thecompetence, self-esteem and ability to work as a teamSummer 2010: Visiting festivals, regattas andtall-ship races in EuropeWeb: www.shtandart.comP&I and the Baltic iceWhy are P&I renewals completed by 20 February?The answer lies in the Baltic. Traditionally, thewinter season led to most claims, so when the Balticice started melting around 20 February every year itwas considered a clear sign that winter was over. Inthe world of P&I this meant that claims figures wereconcluded and a new P&I year could begin. Thetradition lives on with the majority of P&I clubs stillcelebrating new years’ on 20 February.Photo: Per Carlmar20 beacon / april 2010

personnelnewsfrom skuld officesaround the worldNEW EMPLOYEES & PROMOTIONS12SKULDBERGENskuldHONG KONGSKULDNEW YORK35461 / Kristian ValevatnClaims ExecutiveKristian joined Skuld in October2009 with Master of Law degreesfrom both the University ofBergen and the University ofSouthampton. He has alsostudied international businessat La Trobe University inMelbourne.SKULDCOPENHAGEN4 / Rita LauLawyerRita Lau joined Skuld (Far East)in December 2009. Rita has aLLB from the University ofLiverpool and is a Hong Kongqualifiedsolicitor with nineyears’ post-admission experiencein shipping and commerciallitigation. From 2000 to 2009,she worked with Johnson Stokesand Master as Senior Associate.Rita speaks fluent English,Cantonese and Mandarin.6 / Tiffany MaldonadoAdministrative AssistantTiffany joined Skuld in October2009. She has a Bachelor inLegal Studies from John JayCollege of Criminal Justice andsix years’ experience within lawand administration from New York.2 / Vibeke GuldagerHR Executive, PersonalAssistant to Helle LehmannVibeke joined Skuld in December2009 as HR executive andPersonal Assistant for HelleLehmann. She has worked forABB Scandia and Maersk Airafter taking a degree ininternational sales at the Academyof Business in Hobro. Vibekehas also studied ‘coaching inorganisations’.5 / Nicole NgSecretaryNicole joined Skuld in September2009. She graduated from alocal commercial school andhas over nine years’ clerical/secretarial experience.3 / Åse Naaman JensenClaims ExecutiveÅse was appointed ClaimsExecutive, Assistant Lawyer inJanuary 2010. While studyinglaw at the University ofCopenhagen, Åse joined Skuldas Claims Assistant and wasappointed Claims Executive inFebruary 2009. Before joiningSkuld, she worked at MAQS LawFirm in Copenhagen and Cardillo& Corbett in New York. Prior tostudying law, she was a shippingassistant at MediterraneanShipping Company in Copenhagenand Oslo.more »beacon / december 2008 21

PERSONNELNEWSNEW EMPLOYEES & PROMOTIONS7911138101214skuldOslo7 / Ronny LarsenAssistant Vice President,Syndicate 1Ronny has joined Syndicate 1as Assistant Vice President,Claims. He first joined Skuld in2001 as Claims Executive andwas promoted to Claims Managerin 2005. From 2007 to 2009,Ronny was Head of SkuldHamburg and returns to theclub after a short period withthe Norwegian Society for SeaRescue. Ronny has seafaringexperience from the merchantnavy and the Royal NorwegianNavy. He has studied maritimelaw at the University of Osloand the Insurance Academyat BI Norwegian School ofManagement.8 / Christina P. BerghSenior Executive,Underwriting SupportChristina is promoted to SeniorExecutive having joined Skuld in1996 as Underwriting Assistant.In 2002, she was named AssistantUnderwriter and, in 2008,Executive Underwriting Support.She has studied sales andmarketing in Australia and Norway,and has worked at differentlegal offices in Australia.10 / Eirik BøhmSenior Executive,Business ControllerEirik is promoted to SeniorExecutive, Business Controller.After joining Skuld in 2001 asCredit Controller, he wasappointed Business Controllerin Skuld’s Finance departmentin 2007. Eirik has studiedauditing at Telemark UniversityCollege, Norway.11 / Christin FalkClaims ExecutiveChristin is promoted to ClaimsExecutive. She joined Skuld in1988 as Secretary in the formerDry Cargo Department and hassince held positions in variousdepartments and syndicates.Alongside work, she studied atBI Norwegian School ofManagement and graduatedwith a Bachelor in BusinessAdministration.12 / Marianne NordlienAssistant UnderwriterMarianne is appointed AssistantUnderwriter in Syndicate 2.Marianne joined Skuld in 1990as an Accountant and wasnamed Credit Controller in 2000.While working, she has alsostudied business economics atthe BI Norwegian School ofManagement.14 / Inna van SprielSenior Claims Executive, LawyerInna is promoted to SeniorClaims Executive, Lawyer havingjoined Skuld in 2007 as ClaimsExecutive. She has a law degreefrom Immanuel Kant StateUniversity, Kaliningrad and aMaster of Maritime Law fromOslo University. Inna has tenyears’ experience with Russianand international shipping andinsurance companies./ Total number ofemployees in Skuld1699 / Ole H. BrobergSenior Executive, ITOle is promoted to SeniorExecutive. He joined Skuld in2002 as IT Developer with afour-year education withineconomics and informationtechnology from BuskerudUniversity College, Norway.13 / Merethe NydahlCredit ControllerMerethe is promoted to CreditController after joining Skuld asAccounting Assistant in 2009.She has a financial backgroundfrom companies such asInternational Maling AS andAreva T&D AS, where she was incharge of administration andaccounting-related assignments.22 beacon / march 2009 beacon / december 2008 22

newsSOME CURRENT CASES AND OTHER SKULD NEWSThe iron ore cargo could seriouslycompromise ship and crew safety./ Excessive moisture contentof iron ore cargoA vessel loaded a cargo of iron orein bulk at Mangalore. On behalfof Skuld charterer members,local experts were appointed andfound that the cargoes’ moisturecontent was in excess of theTransportable Moisture Limits(TML) allowed in the BC Codeand could seriously compromisethe safety of the ship and crew.Skuld assisted the member incooperating with the owner andnegotiating a favourable settlementwith the sub-charterer in respectof demurrage and damages fordetention at the load port./ Bunker consumption disputeA dispute arose as a result of themaster reporting incorrect bunkerfigures to the charterer on delivery.As a survey was not carried outpre-delivery, the key issue wasthe quantity of bunkers on boardas the charterer did not acceptthe mistake. Skuld supported theowner member in negotiationswith the charterer. The appointmentof an independent expertwas discussed, but the chartererdropped the claim against ourmember before the appointmentbecame necessary./ Short-loading of cargoSkuld owner members were indispute with their charterers overlost freight revenues from abalance of cargo unable to becarried, allegedly due to problemswith the vessel’s ballast systemand/or the starboard windlass.Simultaneously, charterers pursueda claim against their sub-charterers.Skuld appointed experts to assistthe member in successfullydefending charterers’ claim.BALLAST WATERMANAGEMENTThrough Skuld’s cooperation with publishers Witherby SeamanshipInternational Ltd., the 2010 edition of ‘Ballast Water Management’ byCaptain Nadeem Anwar will soon be available to all members. Thishelps readers understand the regulations and various treatmenttechnologies for effective ballast water management.FactsThe five dominant vessel categoriesin Skuld at renewals 2010 in percentagesbased on the number of vessels enteredfor owner members:33%General cargo18%Tank18%Bulker types16%Container15%Chemical tankerSOURCE: Skuld UnderwritingHave you used the Clause Library yet?/ Focus on clausesThe Skuld website now containsa new section on commonly usedclauses connected with P&I orwith other areas where we receiveenquiries from members. Wehope that this Clause Libraryprovides a useful referencesource. The intention is to graduallyextend the scope of the clausesand we welcome input andsuggestions from readers.read morewww.skuld.com/publications/clausesEvery day on literally every ship at sea, millions of marine organismsare carried in ballast water. The World Wildlife Fund has estimatedthat around 7.5 million litres of ballast water are released every hourinto US waters alone and 10 billion litres a year are transferred aroundthe world.The ‘International Convention for the Control and Management ofShips’ Ballast Water and Sediments’ was adopted in February 2004.Our book represents an up-to-date guide to the regulations andvarious treatment technologies. It also details all the systems withbasic or final approval from IMO or type approval from class.Every Skuld member will receive a copy of the book free of charge. Furthercopies may be ordered directly from www.witherbyseamanship.com.By entering the promotional code SKULDSPEC, Skuld membersreceive 20% discount on the retail price of GBP 75.read morewww.witherbyseamanship.com/category/skuld.htmbeacon / april 2010 23

Skuldmagazinenext issueout september 2010LifeAt seaHow is everyday life at sea for crew members in 2010?What conditions do they live with and how are theseimproving? In the next issue, we look at health andsafety, personal injury trends and share members’initiatives for improving life on board.about skuldAs the New Generation P&I Club,Skuld provides liability insuranceto New Generation shipowners andclients in the shipping industry.The head office for our globaloperations is located in Oslo,with additional offices in Bergen,Copenhagen, Hamburg, Hong Kong,Moscow, New York and Piraeus.24-houremergencynumber+47 952 92 200Call this number if you havean emergency incident whereSkuld can assist.beacon back issuesFor back issues of Beacon, please go to the publicationssection of our website. You can print an entire issue oruse the table of contents to select individual articles.S k u l dm a g a z i n eS o m e 1 l 1 i k e i t h o t /th e Rd R Ru a o S m l t 1 e t / 6 eEarlier editionswww.skuld.com/publications/BeaconWh e nPiRa Sa t e t a c kRUSELØKKVEIEN 26NO-0251 OSLOP.O. BOX 1376 VIKANO-0114 OSLONORWAYTEL +47 22 00 22 00FAX +47 22 42 42 22skuld.com