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INSIGHTS


Q3 2017


But the figure should at least have a sense of realistic endeavour about it and reflect the likely full amount of our client’s damages, plus an appropriate margin for error. It should be remembered that a letter of security is simply a mechanism by which the opponent insurers can demonstrate future payment of properly proven losses up to an agreed sum, and is not a promise to pay a fixed sum without question.


The lawyer should advise the client whether the offer of security from the containership interests is fit for purpose. Among other things, they will need to consider the following:


• Is the guarantee provider financially secure?


• Is the security correctly worded and conforms to known standards?


• Is the quantum of guarantee sufficient to meet the assured’s global losses arising from the collision?


If it does not bear scrutiny, the lawyer may recommend that security should be obtained in an alternative form, such as a bank or cash guarantee.


And, for every action which our client takes in securing their losses, the same reaction can be expected from the owners of the containership. They too will want to ensure they have the protection of security and that it is in a form and of financial standing acceptable to opponents.


Generally speaking, hull insurers for marine collision liabilities are not under an obligation to provide security. More often than not they will assist the client, but, again, much will depend on who the hull insurers are and what the insurance policy says.


JURISDICTION


A competent maritime lawyer should also advise the client on issues of jurisdiction. At the time when parties in a collision are agreeing on the form of security to exchange with one another, they should also be determining which jurisdiction will apply in the event that they cannot ultimately resolve the claims between them amicably and the matter must proceed to trial or arbitration.


LIMITATION


In our example, we can see that the losses of the containership are likely to be quite large. As such, there may be an opportunity for our client to limit their liability under the applicable Convention of Limitation of Liability for Maritime Claims.


A successful limitation action effectively caps the maximum amount that a valid entity, such as a ship-owner, ship manager, or charterer and their insurers will have to pay to an opponent following a collision. The ability to limit is dependent on several criteria, including:


• The type of vessel. • The vessel’s tonnage. • The type of claim.


As one might expect, this is a hugely complicated area and one which we could devote an entire adviser to. Suffice to say that, if this is a valid avenue of enquiry, we would expect lawyers to offer advice on the feasibility of instituting a limitation fund as part of their overall suite of guidance.


5


62 | The Report • September 2017 • Issue 81


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