Circular No Circular No. 5/98

July 1998


Dear Sirs,


We refer to previous circulars regarding the ongoing negotiations between The International Group and DGIV over the Statement of Objections issued in June 1997, the latest being our Circular No. 3/98. It will be remembered that DGIV have raised three objections against current Group practices:

  1. The Reinsurance issue, where minor amendments have been agreed to establish objective criteria and an adequate appeals procedure for those seeking reinsurance from a Group Club
  2. There is an understanding reached between DGIV and the IGA Working Group on the reinsurance issue. The recommended amendments will be put before Club Boards in due course.

  3. The Level of Cover, where DGIV objected to a uniform level of cover and have been considering the complaint from IGSCC regarding the level itself.
  4. The status on this issue is that DGIV will formally notify the complainants that it intends to approve the terms of the Group?s 1998 Pooling Agreement. Formal approval will not be given until an appeal period has elapsed. We are very happy, however, that this notification in itself will lift the legal uncertainty which was created as to the validity of the 2.5 per cent overspill cover. Information and recognition of the value of their support will be sent to all those who have kindly assisted us in achieving this significant break-through with DGIV. Attached you will find a Press Release showing that we have convinced DGIV to approve the level of cover unanimously agreed between the Clubs.

  5. The International Group Agreement and its provisions regarding restraints on rating between Clubs.
The IGA issue is still under review and we are engaged in a constructive dialogue to try to convince DGIV that the restraints within the IGA remain an indispensable facility for the continued operation of the Pool.

We will continue to keep you advised of further developments.

Yours faithfully,

John G. Bernander
Managing Director


78 Fenchurch Street, London EC3M 4BT

Secretary & Executive Officer: Telephone: 0171 488 0078
D.J.L. Watkins Fax: 0171 480 7877

From the Chairman, Mr. G.E. Greenwood

Press information


The International Group of P&I Clubs has been informed by the European Commission Competition Directorate (DGIV) that it intends to approve the terms of the Group's 1998 Pooling Agreement, which incorporates the Group's limit on cover of about $4.25 billion. The Commission will shortly be publishing an Article 19(3) notice in the EU's Official Journal confirming this.

The limit of cover was revised downwards by unanimous decision of Group Clubs last year, after DGIV issued a Statement of Objections challenging the limit of around $20 billion which applied at that time. The Greek Shipping Cooperation Committee had complained to DGIV about the $20 billion limit at the end of 1995. The new limit of $4.25 billion appears to meet DGIV's concerns.

The Group and the Commission have been discussing the issues involved since last summer. During that time shipowners from all over the world have actively supported the Group. More than 20 international and national shipowners associations have made representations to the Commission, including the Asian Shipowners Forum, the International Chamber of Shipping and Intertanko.

In April this year there was an Oral Hearing of the Group's case in Brussels before the Commission and Member State representatives at which the Group urged the Commission to approve the new limit as soon as possible so as to remove any possible uncertainty.

George Greenwood, Chairman of the International Group said -
"We are extremely pleased that DGIV feels that the new limit adopted by Group Clubs and their Members meets its objections. A Commission decision will be welcomed by shipowners who have been concerned by continuing uncertainty about the limit issue."

Any Commission decision approving the 1998 Pooling Agreement would cover new provisions that deal with the reinsurance by Group Clubs of commercial insurance companies, which was also an issue raised in the SO.

The third issue identified in the SO, which concerned the International Group Agreement, has not yet been resolved. Mr. Greenwood confirmed that constructive discussions on this issue were still continuing with DGIV, but further developments were not expected during the summer holiday period.

31st July 1998