1. THE FUTURE RELEVANCE OF THE UKSTC AND THE IMPACT ON TOWAGE RISK BRITT PICKERING, CLAIMS DIRECTOR MAY 2016 1

2. ANALYSIS OF RISK  Two year ‘causation‘ project  Result continual analysis  Learning from incidents and near misses  an important part of an operation  Aim:  Identification of regional and sector trends  Targeted loss prevention initiatives  To assist Members in reducing their specific claims exposure 2

3. CLUB STATISTICS VESSELS ENGAGED IN TOWING IN EUROPEAN WATERS – PRIMARY CLAIM TYPE 3

4. CLUB STATISTICS VESSELS ENGAGED IN TOWING – VALUE OF INCIDENTS BY DOMICILE MOST AFFECTED US$ No. of incidents 4

5. CLUB STATISTICS VESSELS ENGAGED IN TOWING – AVERAGE COST OF CLAIMS BY DOMICILE MOST AFFECTED 5

6. TOWAGE CONTRACTS UKSTC UNDER THREAT? 6

7.  Towage Contracts:  BIMCO Towcon 2008  BIMCO Towhire 2008  UK Standard Towage Conditions (UKSTC)*  BIMCO Supplytime 89/05  BIMCO Wreckhire 99 STANDARD FORM COMMERCIAL TOWAGE CONTRACTS 7

8.  Allocation of risk  Insurance cover certainty  Legal certainty  Avoidance of litigation costs  Avoidance of double insurance costs  Proportionality of risk AIM OF STANDARD FORM CONTRACTS 8

9. UK STANDARD CONDITIONS FOR TOWAGE AND OTHER SERVICES  Dates back to 1933  1986 Revision  A paradigm standard form – protecting the tug owner  Popular in UK and Common Law jurisdictions  Harbour and offshore 9

10.  “towing”, “vessel”, “tender”  “whilst towing”  Commencement of towing  Cesser of towing  Services other than towing TOWAGE SERVICES 1(a) (b) 10

11.  Wide definitions showing width of modern towage services  Any marine operation performed by the tug (or tender) to whatever water – borne object  But towing does not include “other services” e.g.:  Anchor handling  Supply  Ancillary offshore services  Very important because defines which services the UKSTC (and exemption clause) apply 1(b)(i)-(iii) “towing”, “vessel”, “tender” 11

12.  Defines the period of towage services  Close quarters work, mishaps and collisions  Wider than common law – The Clan Colquhoun 1936  Continues irrespective of what the tug is or is not doing  The Baltyk 1947 1(b)(iv) “whilst towing” 12

13.  Either:  In a position to receive orders direct from the hirers vessel Or  When the towing line has passed  Whichever is the sooner  Objective of Tug-v-Objective of the Tow  The Apollon 1947  Close proximity  Immediacy of preparation 1(b)(iv) Commencement of towing 13

14.  Either 1(b)(iv) Cessor of towing  the final orders...have been carried out Or ...the towing line has been finally slipped  Whichever is the later And ...the tug or tender is safely clear of the vessel 1(b)(iv) Cessor of towing 14

15.  Commencement of services other than towing  Physical disposal  The Tres Flores 1974  Cesser of other services  Service for which the tug is engaged has ended  Safely clear 1(b)(v) Services other than towing 15

16.  Exemption of liability  Indemnity  Tug’s liability  Death and injury UKSTC Clause 4 16

17.  Blanket exemption of the tug from liability  Serious or “Fundamental” breaches  Photo Productions v Securicor 1980  The Cap Palos 1921  The A Turtle 2009 But...  Negligence  No need to prove breach, causation or forseeability 4(a) and (b) Exemption of liability/Indemnification 17

18.  4(c)Tug liability in two circumstances:  1. personal failure of the Tugowner to exercise reasonable care to make the tug/tender seaworthy for navigation at the start of towing or other service  The Brabant 1965  2. All claims which arise when the tug or tender, although towing is not in a position or proximity or risk to or from the Hirer’s vessel or any other craft attending the Hirer’s vessel and is detached from and safely clear of any ropes, lines, cables or moorings associated with the Hirer’s vessel 4(c) Liability 18

19.  Death or injury resulting from negligence is not excluded or restricted  Why?  Amendment to the 1974 revision  Section 2(1) Unfair Contract Terms Act 1977  No indemnity from Hirer? 4(e) Death of injury 19

20.  Law based on English law  UKSTC usually  But Australian courts have their own interpretation of commencement of services and exemption of liability  Trade Practices Act 1974 AUSTRALIA 20

21. The ‘KOUMALA’  Two questions arose:  Whether the towage period had commenced under the UKSTC at the time of a collision between the tug and the ship she was approaching to attend  Whether the limitation of the tug owners’ liability was in any event void by reason of the Trade Practices Act 1974 PNSL BERHAD V DALRYMPLE MARINE SERVICES PTY LTD 2007 AND 2008 21

22.  An overly restrictive construction of the contract?  The Court found that the tug:  Never reached a position to receive orders direct from the tow  Was not within hailing distance  Was not in a position to accept orders or carry them out THE COURT OF APPEAL 22

23.  An overly inclusive construction of the Trade Practices Act 1974?  s74 imports into a contract a warranty that the “services will be rendered with due care and skill”  s68 voids contractual terms inconsistent with that warranty  The Court held that the above sections did apply and the contractual liability terms would have been voided THE COURT OF APPEAL 23

24.  The Trade Practices Act set standards between consumers and suppliers. However, it extended into maritime industries  UCTA 1977 however exempts towage from application (except death/injury)  Unfair Terms in Consumer Contracts Regs 1999)– “Consumer” means any natural person who”is acting for purposes which are outside his trade, business or profession”. UKSTC would, be deemed unfair e.g. towing private please craft THE RISE OF CONSUMER PROTECTION 24

25. INTERNATIONAL GROUP COVER  The vessel must be towing under a “Contract approved by the Association” in the exercise of its discretion, and  The Association has exercised its discretion, by following the guidelines in the Pooling Agreement.  The guidelines state:  The following contracts are acceptable: UKSTC...[or] other contracts where... the contract limits the liability of the insured owner to the maximum extent possible by law” CLUB COVER AND RISK 25

26.  UKSTC – still relevant  Watch consumer protection legislation  Resist amendment of standard forms  As insurers we must continually assess risk CONCLUSION ON RISK 26

27. THANK YOU 27