CONSENSUS BUILDING - MILES A. KULUKUNDIS 1994-1996
- 12 January 2001 11:32
- 06 September 2011 12:19
Perhaps the major challenge facing INTERTANKO under its new Chairman Miles Kulukundis was the continuing question of “quality shipping” and “substandard tankers”.
Although recognition had been breaking through of considerable differences between good and bad tanker operators, the big question was how to tell the difference before a problem arose. What are the visible telltale signs of a substandard tanker operator?
The shipping industry in general has historically never been particularly adept at handling public relations. Even passenger shipping, which has the opportunity to meet the public much more often than freight shipping like tankers, has famously mishandled itself, back to the Titanic and before. Whilst
INTERTANKO’s new ventures into seeking to project positive images of the industry were having some positive results, INTERTANKO recognised the need to make sure that the image of a “clean, green” industry matched the actuality.
INTERTANKO’s discussions identified two particular thresholds for “quality” tanker shipping: adequate safety certification, and adequate insurance. Determination of the first, INTERTANKO believed, depended on the comprehensive inspection and certification systems of the major Classification Societies like Lloyd’s Register, Det Norske Veritas and the America Bureau of Shipping. The eleven Societies which were members of the International Association of Classification Societies, IACS, had adopted standards applicable to all of them for improved quality of service, as well as adopting the needs of the “enhanced survey” scheme called for in resolutions of the International Maritime Organization, IMO. INTERTANKO resolved at the 1994 and 1995 Annual Meetings that all the tankers owned by all new and existing members of INTERTANKO must be classed with an IACS member society.
There was also widespread concern about adequacy of insurance cover against pollution liability - generally provided by the Protection and Indemnity Clubs. Cover up to 700 million dollars was available through the P.& I.Clubs and INTERTANKO resolved in 1994 that all its members’ ships should be covered by pollution insurance of this level.
Modest in measure though these measures may have seemed to be - over 90 percent of deep sea tanker shipping was already classed with IACS societies - they were significant and valuable in the message they gave to tanker shipping and to the wider world. For the first time, a members’ association in shipping had quality criteria for membership. To be in INTERTANKO imported a certain degree of quality. Doubts about whether these measures would be vigorously enforced - after all, to expel a member is to lose a membership subscription - were dispelled when one member was required by the 1995 Annual Meeting to resign for having failed to show evidence of satisfying the membership requirements.
The move against the particular owner - Adriatic Tankers - turned out to be well timed as shortly afterwards a sequence of withdrawals of classification from Adriatic ships was started by leading Classification Societies, coupled with a number of arrests of Adriatic ships by various creditors, and foreclosures by mortgagees on parts of an eighty-ship tanker and dry shipping fleet. INTERTANKO had quietly dropped members in the past - members rather subjectively viewed as substandard were not discouraged from quitting when for example their subscriptions became outstanding, but this case was a first publicised resignation request made to a member.
Those in favour of further tightening of standards in tanker shipping and in INTERTANKO’s membership had other ambitions and these came forward in work on a policy of “transparency”, or access to information about tanker shipping. INTERTANKO began to offer “media awareness” courses to members - the Secretariat and the Executive Committee being early students on the course. Run by professionals, these courses taught students - to Chief Executive level - how to cope with the difficult business of handling press and media attention, in case of a high-profile incident (a casualty) or other event drawing media attention. The courses were not in “cover-up” but in fact urged more, rather than less, exposure.
The old methods of declining to comment and refusing access were no longer seen as adequate. Many people believed that the American Oil Pollution Act of 1990, whilst passed directly following the Exxon Valdez grounding, owed as much to years of avoiding the media and failing therefore to publicise “good news” about shipping. Now, members were urged to invite journalists and opinion-formers onboard ships, to make contact with local “green” groups - some tanker owners were members of Greenpeace even - and to be more positive in promoting the industry’s image.
A short video based largely on the publicity material and current statistics about tanker shipping was professionally produced in 1995 and achieved wide distribution in places where it mattered - political leaders, port authorities and local community leaders, government officials, schools, Universities, customers (tanker charterers) and, most important, the press and television.
In Britain, INTERTANKO appointed a Parliamentary Consultant, Member of Parliament Edward Leigh. A reception hosted at the British House of Commons attracted a large number of Members of Parliament from all the main political parties to meet INTERTANKO’s leaders. INTERTANKO received favourable mention in British Parliamentary debates over tanker operations and pollution prevention. Contacts with American Congressmen and their staffers increased.
INTERTANKO issued a publication calling for transparency for other industry partners as well as tanker owners: charterers were urged to be more open about their chartering policy, insurers about insurance decisions, class societies about the results of their surveys. The target was to make public the differences between “good” and “bad”, and the many shades of grey between the two.
A number of developments were now working to improve transparency. The Oil Companies’ International Maritime Forum, OCIMF, had developed a register for collecting and exchanging the results of the inspections their members had carried out on tankers, and making them available to other charterers. This system, called “SIRE”, the Ship Inspection Reports Programme, started in 1994 and rapidly built up over a thousand inspection reports. It was INTERTANKO that suggested the concept and went on to assist in its development. A similar system of inspection report exchanges was developed by the Chemical Distribution Institute, a Europe-based group of chemical industry companies involved in shipping.
Other bodies began to open up as well. Classification Societies produced more informative reports of ships from whom society membership had been withdrawn. Port State Control under the Paris Memorandum increased the incidence of its inspection of ships in sixteen European maritime countries and began to publish detailed summaries of the results of the inspections. The British Department of Transport published monthly list of ships which had been detained in British ports for failure to comply with international standards, and the United States Coast Guard developed an on-line information system on ship inspections the Coast Guard had carried out, published major results, and “targeted” owners, flags and ships which showed statistically bad inspection result records.
INTERTANKO was able to note that - as had been found in the Australian study two years previously - tankers did not in fact feature prominently in the lists of substandard or detained ships. The tanker industry, it became more and more apparent, had in fact a better safety and environmental record than other parts of the shipping industry. A number of reasons for this are posited - the knowledge of tanker owners, operators and crew that most bulk liquids are more dangerous than dry cargoes and require more care, is just one.
Contact with environmental groups in Europe and the United States continued, leading to an INTERTANKO presence in 1994 at a major, government-sponsored, North Sea environment conference in Denmark - the only international shipping organisation there. A benefit of taking part was a “pro-shipping” resolution, realistic about the needs of shipping including the ever-present problem of waste reception facilities. A collaboration with the Royal Society for the Protection of Birds (RSPB), a British wildlife charity with a leading position in Bird Life International, resulted in an INTERTANKO-sponsored poster titled “Don’t Dump At Sea”, and on a more fundamental level, informed RSPB on the problems facing the tanker industry - at the same time informing tanker owners more of the needs of sea birds.
Miles Kulukundis launched a major INTERTANKO programme under the title “Prevention Through Partnership” in 1994. In a presentation in America he called on the active support of other industry partners in improving the infrastructure of tanker shipping. Tanker owners had improved the safety and pollution prevention capability of the ships themselves but other sectors had still to respond at the same level. Onshore traffic control in ports and congested areas, proper regulation of pilotage and towage, shore-based casualty response capabilities, improved salvage provision, and of course adequate waste reception facilities were all highlighted. The campaign shadowed closely the United States Coast Guard’s programme of “Prevention Through People” spotlighting human failings as causes of accidents.
INTERTANKO noted that better results could be achieved from preventing accidents rather than cleaning up after them and handling compensation provision. A long-time active Association and former Exxon man, William O. (Bill) Gray was commissioned in 1995 to study casualty prevention and equipment provision in American ports and on busy American coasts.
Good news on oil compensation provision developed over these two years with the ratifications falling into place of the 1992 Protocols to IMO’s oil spill liability and compensation conventions, raising the maximum level of compensation available and widening the scope for example to cover bunker fuel spills. The Protocols take effect in ratifying countries in 1996. Japan ratified in 1994 and following European Union pressure, most European Union member countries ratified soon after.
Debate started in 1994 about terminating the voluntary agreements TOVALOP and CRISTAL, which provided insurance cover to fund oil spill cleanup and compensation in states not party to the Convention. TOVALOP and CRISTAL had always been intended as interim measures until the IMO Conventions received universal ratification. It was now being perceived that the continued existence of the voluntary agreements might be hindering further ratifications, because TOVALOP and CRISTAL provided adequate cover.
Further progress was made in putting more pieces of the Americans’ enormous law the Oil Pollution Act 1990 into place, OPA: not that tanker owners thought of the new measure as “progress”. The Act provided that tankers trading to the United States must carry certificates that sufficient funds were available to meet any possible claims up to the limitation levels required under OPA. Similar provisions existed under the international Conventions and had been provided by the P.& I.Clubs. OPA did not accept the international certificates the P.& I.Clubs provided, and the extra burdens in these “Certificates of Financial Responsibility” were such that the Clubs now refused to provide this extra certification.
The Coast Guard had laid down their requirements for these Certificates in 1991 and following representations - from INTERTANKO, the Clubs, and shipowners’ associations - had carried out further studies but in 1994 reconfirmed their original requirement - effectively overruling all objections. As the deadline for compliance approached - December 28 1994 - even American Congressmen feared that the industry could not come up with a way of certifying the required financial capacity in time. The Greek and the Norwegian Shipowners’ Associations had proposed a shipping industry insurance fund raised by premiums, styled the “Mandatory Excess Insurance Fund”. Although hard work was put into promoting this scheme, and some interest was expressed by the American administration and the Coast Guard, finally it was not adopted.
New cover providers emerged to “sell” an insurance product providing the backup funding enabling the certificates to be approved, but the initial effect on tanker shipping was perceived as a lot of cost for little concrete benefit either in insurance cover or in better access to compensation for oil pollution damage. INTERTANKO styled the Certificates “an expensive ticket to trade”.
Despite taking a stand on principle against the need for the Certificates, INTERTANKO recognised that come what may they would be applied and, after a vote at the Council meeting in October 1994, INTERTANKO worked hard with the P.& I.Clubs to achieve a consensus solution.
A new American challenge appeared in 1995 from one of the American States - Washington. The State government published rules and requirements for tankers trading in Washington waters which went further than the Federal rules and, according to INTERTANKO, conflicted with them. INTERTANKO now took the unusual step of commencing legal action to have the Washington “Best Achievable Protection” provisions set aside. The case, started in 1995, continues. INTERTANKO believed that if the Washington rules were to be applied, they would lead to another round of extra rules and requirements state-by-state, always adding extra burdens to the tanker operation and often conflicting state by state.
Not every state caused the concerns that Washington did. Close co-operation with California for example assisted in more reasonable state rules. INTERTANKO had assigned their Legal Counsel, Svein Ringbakken, to their American legal advisers for some months in 1994 to involve himself in the OPA application process, and to meet with State administrations involved in the process of implementing pollution control measures.
The tanker market showed some positive signs. 16 million deadweight tons of tankers were scrapped in 1994, including large amounts of scrapping of ships by oil companies, several of whom were visibly disengaging themselves from ship owning and operating. Timechartering by oil companies was minimal. In 1995 scrapping slowed as employment opportunities improved. Increased transparency and concern over tanker quality began to create a “two-tier” market between tankers recognised as being of a good standard and the rest. Oil companies certainly spoke of tightening their criteria although the evidence on the ground, at the chartering stage, was not so clear.
The positive signs were balanced by some negative ones. Plans were discussed for widening and deepening the Suez Canal to allow Very Large Crude Carriers (VLCCs) to transit with a full cargo, though the work was not started. The 550,000 deadweight ton ship Jahre Viking became the largest ship to transit the Canal in 1995. Discussions took place about resuming Iraqi oil exports through pipelines to the Mediterranean, and the progress of peace in the Middle East had led to discussion of recommissioning or building of pipelines from Middle East oil producers to the Mediterranean through Israel - all of which would cut tanker employment. Product tanker employment remained buoyant particularly for modern clean product tankers.
A promising development in 1995 arising from one of INTERTANKO’s historic platforms was an agreement at the Organisation of Economic Development and Co-operation, OECD, to end shipbuilding subsidy. A Convention agreed at OECD’s meetings began its circulation to obtain ratification. INTERTANKO had for a time been battling with a bill in the United States Congress, the “Gibbons Bill”, which would have penalised shipowners operating their ships under flags identified with shipbuilding subsidy. After the OECD agreement was reached the Gibbons Bill was withdrawn.
A major development from IMO was the International Ship Management Code, adopted as an amendment to the Safety of Life at Sea Convention SOLAS 1974. For the first time after 1998 anyone managing ships involved with ratifying states would have to evidence compliance with provisions of a Management Code and show safety and operational competence both onboard ships and in head office management. Much work was to be involved in laying down the provisions for application of the Code and particularly for policing its application. Who could confirm that it was being properly applied, and how could one be sure of these “policemen”? INTERTANKO took a vigorous role in discussions at IMO and with Classification Societies about the provisions and application of the new Code.
The Association also took part in the work of the newly-formed “Human Element Group” in IMO, working on ways to reduce the risk of human error in casualties. A “human element” initiative from INTERTANKO was the publication of some practical guidelines for tanker operators called SOTNAV - Safer Oil Tanker Navigation.
INTERTANKO’s major work has inevitably concerned oil tankers, these forming the largest part by number and by tonnage of the tanker fleet. However over the years the Association’s role in helping chemical tanker owners had grown. The Chemical Tanker Owners’ Advisory Group, founded in the 1980’s, was revived in 1994 to assist owners in discussions with the Chemical Distribution Institute and in sessions at IMO considering a new chemical cargoes liability convention - a Hazardous and Noxious Substances, HNS, Convention. By 1995, some 53 percent of chemical tankers were now entered in INTERTANKO.
In 1994 the Freight and Demurrage Information Pool passed an important milestone with its thousandth case, and in 1995 was shown to have been involved in attempted recovery since its establishment of 60 million dollars of unpaid or overdue freights or demurrage. In a market which for over twenty years had been a buyer’s market, standards in honouring of contractual agreements by charterers remained below what might have been hoped.
By the end of 1995 INTERTANKO’s membership continued to amount to some 80 percent of the eligible tanker tonnage. Possibly most significantly, contrasting the position of ten or twenty years before, the list of Associate Members and Subscribers to INTERTANKO’s publications now included oil companies Amoco, ARCO (Atlantic Richfield), BP (United States and United Kingdom), Chevron, Elf, Mobil, Neste, Norsk Hydro, Petrofina, Shell International Marine and Statoil.
In July 1995 INTERTANKO opened a Representative Office in London headed by Trygve Meyer. The office is in the building that the Baltic Exchange had newly occupied after the old Baltic Exchange building had been destroyed in a terrorist bomb explosion in 1992. INTERTANKO’s London office in Saint Mary Axe is some 30 metres from the site of the International Tanker Owners Association’s office established in 1934.
Over the previous two years INTERTANKO’s senior Executive members, under Chairman Andreas Ugland and then Miles Kulukundis, had been working hard to find a successor to Tormod Rafgård as Managing Director, in time for his retirement. This search concluded early in 1995 and on October 31 1995 Tormod Rafgård, Managing Director of INTERTANKO for 25 years, retired and handed over to his successor Dagfinn Lunde.