STS: Beware Of LOI's -->

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STS: Beware Of LOI's

Ananta Gultom
March 9, 2012
The OnlineSTS team has issued the following warning about theissuing of LOIs.

Before conducting an STS operation, someservice providers issue letters of indemnities(LOIs) to the Masters of the vessels andrequest that they should be signed on behalf ofthe owner and prior to the commencement ofan STS operation.

Following several contacts, as well asdiscussions with P&I clubs, the followingprocedure is recommended to be adopted bythe shipowners as a standard policy.

1) Masters/managers should avoid signing LOI's given by STS service providers.

2) If the STS service provider insists, then the P&I club should be immediately informed and consulted. It is of utmost importance that the P&I clubshould be made awareof the LOI,otherwise, the ownermay not be covered in case of anincident.

3)Masters/ managersshould only sign theLOI, incorporating anysuggestions from theirP&I club.

Managers should beable to provideevidence, such as emailcommunication, withSTS service providers, supporting theirrejection of signing the LOI's, according toStep 1 above, as this evidence is highlyessential for the P&I clubs.

Indeed, the signing of LOIs without prior consultation with their P&I club might resultin conflict with managers' coverage.

Furthermore, in some LOIs, contractual duties with reference to the third party indemnity are included, which appear to beout of the scope of the P&I coverage, asagreed with the shipowner.STS service providers may accept partialliability on condition that the shipownerprovides evidence that the incident occurreddue to gross negligence by the provider/POAC (person in overall advisory control) etc.

In this case the owner bears the burden ofproof.It should be noted that P&I clubs understandthe commercial implications and timeconstraints in STS operations and endeavourto support their clients provided that they havebeen fully informed in advance, OnlineSTSconcluded.

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