Lloyd's Maritime and Commercial Law Quarterly
The revised Club letters of indemnity: Hope clings to her anchor
John Weale*
In 2023, the P&I Clubs within the International Group issued a revised version of their pro forma Letters of Indemnity. This article seeks to show that, under today’s market conditions, their approach was too cautious.
I. INTRODUCTION
People who surely know better sometimes talk loosely about the pro forma letters of indemnity (“LOIs”) which are published by the P&I Clubs within the International Group (“IG”), characterising them as “recommended”.1 This is unfortunate, because it will boost the misconception that the indemnified practices are approved, even covered, by these insurers. They are not, and these LOIs should not be recommended. Indeed, the Clubs themselves make this clear in the warning which appears at the head of their most recent (September 2023) revision of the three LOI forms,2 stating in bold type that such practices fall outside normal P&I cover: “Acceptance of a Letter of Indemnity in the form set out below does not reinstate P&I cover and you may be at risk of significant financial exposure.”
The Clubs’ most recent revision also adds two other sensible cautions. The indemnity being drafted as subject to English law and High Court jurisdiction, the user is warned that other jurisdictions may be less favourable to the indemnitee/owner, and possibly inconsistent with other indemnities in a charterparty chain. And another footnote emphasises the need to identify the person signing the indemnity, and to take reasonable steps to verify their authority.
* Formerly Vice-President, Risk Management, Fednav Limited.
1. “So common and accepted is this procedure that the International Group of Protection and Indemnity Clubs circulates to its members recommended standard form letters of indemnity for use in the various situations which typically arise” (Great Eastern Shipping Co Ltd v Far East Chartering Ltd (The Jag Ravi) [2012] EWCA Civ 180; [2012] 1 Lloyd’s Rep 637, [1]); “The LOIs were in the Club-recommended form …” (Yangtse Navigation (Asia) Co Ltd v TPT Shipping Ltd [2024] EWHC 2371 (Comm), [4]); “… the draft proforma LOIs which the P&I Clubs recommend for use by their members …” (F Arizon and D Semark: Maritime Letters of Indemnity (2014), §9.1). Also, in September 2023, the IG Clubs themselves issued their revised wording with the heading Updated Suite of IG-Recommended Letters of Indemnity Wordings.
2. The IG Clubs continue to publish three forms of LOI: (A) Delivery of cargo without production of the original bill of lading; (B) Delivery of cargo at a port other than that stated in the bill of lading; and (C) Delivery of cargo at a port other than that stated in the bill of lading and without production of the original bill of lading. For the combined texts, see post, Appendix.
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