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Wednesday, 5 October 2011

London Club issues warning on inflated claims and legal delays

THE London P&I Club has warned that shipowners face a significant increase in exposure to claims and fines levied against them in jurisdictions which suffer from a combination of high interest rates and a reputation for protracted legal proceedings.

In the latest issue of its StopLoss Bulletin, the club notes, “Brazil provides a good example of such a jurisdiction. The prevailing interest rate is in the region of 12 per cent per annum, in addition to which the courts apply a further variable uplift to take into account the effects of inflation, which can be as much as 6 per cent.

“In practice, this means that a club member’s exposure to a claim or fine can increase by almost 20 per cent for each year that the matter is pending. Bearing in mind that it is not unusual for a claim to take five years from start to finish, this can result in a member’s ultimate exposure potentially doubling.”

The club warns that there are times when the effect may be even more severe. It cites one instance where a cargo claim, initially presented for an amount in the region of $1m, ultimately resulted in an adverse judgment of just under $4m, after protracted litigation.

The club concludes, “Careful consideration should be given to any opportunity to settle at a reasonable level at an early stage.”

Also in StopLoss, the club highlights an emerging trend in Brazil for crew members to be required to obtain visas for up to 30 days for entering Brazilian waters. The club understands that such visas are only required for tourists and are in fact completely unnecessary for members of a ship’s crew. Nevertheless, there have been instances where unexpected delays to ships have meant that the crew have remained within Brazilian territorial waters after their visas have expired, resulting in fines being levied upon ship operators for a breach of immigration regulations.

P&I correspondents in Brazil say such fines have no legitimate basis and recommend that they be challenged. The club has urged its members to contact it for further advice if faced with demands for payment of such fines.


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