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1 The Association shall make all payments for liabilities, losses, costs and expenses covered by the Association in the currency in which the Member’s Estimated Total Call is calculated (the ’premium currency’).
2 Where the Member has made a payment in respect of any liability, loss, cost or expense which is covered by the Association in a currency other than the premium currency, that payment shall be converted into the premium currency at the rate of exchange ruling on the day payment was made by the Member.
3 Where a deductible under Rule 76 is expressed in Appendix V in a currency other than the premium currency, the deductible shall be converted into the premium currency at the rate of exchange ruling on the day payment was made by the Member.
4 Where a payment in respect of a liability, loss, cost or expense is due at a fixed time and the Member without valid reason neglects to make payment when due, the Member shall not be entitled to compensation at a higher rate of exchange than that ruling on the day on which payment was due.
5 All rates of exchange for the purposes of this Rule 86 shall be as conclusively certified by the Association.
The provisions of Rule 86 recognise the reality that it is not possible in an international business environment to carry on business in one currency. However, it is also important for the financial well-being of the Association and of the membership as a whole that, whatever be the currency of a particular payment, the officers of the Association are able to maintain an accurate record of debits and credits that affect the overall financial standing of the Association. Consequently, Rule 86 provides guidelines that are intended to assist that process.
(A) The Association shall make all payments…in the…premium currency… (Rule 86.1)
Rule 86 establishes the currency in which the Association should pay claims to Members. The Association will indemnify the Member in the currency in which the Member’s Estimated Total Call is calculated (the premium currency). For example, if a Member’s premium is rated in US Dollars, he will be indemnified in that currency.
(B) …shall be converted…into the premium currency… (Rules 86.2 and 86.3)
If a Member has settled a claim in a currency other than his premium currency, Rules 86.2 and 86.3 provide the mechanism for calculating the amount of the indemnity and any deductible that is to apply. Conversion is made from the currency of payment, and from the currency of the deductible, if that is different from the premium currency, to the premium currency at the rate of exchange that prevailed on the date when the Member paid the claim. However, if the Association has exercised its discretion to pay the third party claim directly1 to the third party on behalf of the Member or made payment directly to a third party pursuant to a ’blue card’ or a similar guarantee,2 the conversion is made on the date that the Association made payment.
(C) …the Member…neglects to make payment when due… (Rule 86.4)
If a Member fails without valid reason to pay a claim when due, Rule 86.4 ensures that the Association will not be prejudiced by subsequent adverse exchange rate fluctuations. In such circumstances, the Member cannot recover more compensation than that which he would have been entitled to recover at the rates that prevailed on the date that payment was due.
(D) All rates of exchange…shall be conclusively certified by the Association. (Rule 86.5)
Rates of exchange fluctuate rapidly and constantly and much time and expense could be incurred to the detriment of the membership as a whole if such issues were to be debated at length on each and every occasion on which the issue arose for consideration. Consequently, Rule 86.5 provides that if there is a dispute as to the correct rate of exchange, the rate determined by the Association is to be conclusive.
1 See the Guidance to Rule 87.
2 This is a reference to the certificates of financial responsibility that the Association provides pursuant to the compulsory requirements of the CLC, Bunkers, and Nairobi Wreck Removal Conventions and the 2002 Protocol to the Athens Convention or pursuant to the STOPIA Agreement or the requirements of the Federal Maritime Commission (FMC) of the United States or the regulations of the European Union. See (A) to the Guidance to Rule 87.