P&I (CLASS 3) / PART I / RULE 5

RIGHT OF RECOVERY

5.1 Right of Recovery

If a Member shall be liable as set out in Rule 19 Risks Covered, in damages or otherwise, or shall incur any costs or expenses in respect of a Ship which was entered in the Association at the time of the casualty or event giving rise to such liability, costs or expenses, such Member shall be entitled to recover out of the funds of this Class of the Association the amount of such liability, costs or expenses to the extent and on the terms, conditions and exceptions provided by these Rules and by the Certificate of Entry

Provided always that:

5.1.1 if a tonnage less than the Full Tonnage of the Ship was entered in the Association, the Member shall, unless the entry of the Ship has been accepted on special terms which otherwise provide, be entitled only to recover such proportion as the Entered Tonnage bears to the Full Tonnage of the Ship.

5.1.2 unless the Board (or, in the case of claims not exceeding USD2,000,000, the Committee) in its discretion otherwise determines, it shall be a condition precedent to a Member’s right to recover from the funds of the Association in respect of any liability, costs or expenses that the Member shall first have discharged such liability or paid such costs or expenses.

5.2 Subrogation

Any recovery by the Member from the Association is subject to the Association’s rights of subrogation and the Member will, on request of the Managers, sign a Certificate of Subrogation.

5.3 Set-off

Without prejudice to any other part of these Rules the Association shall be entitled to set off any amount due from a Member against any amount due to such Member from the Association.

5.4 Incident

Any liabilities, costs and expenses which a Member may incur in accordance with Rule 5.1 Right of Recovery above in respect of the entry of any one Ship arising from any one incident or occurrence, including any claim in respect of liability for the removal or non-removal of any wreck, shall be treated for the purposes of these Rules as if they were one claim by the Member for recovery of the total amount of such liabilities, costs and expenses out of the funds of this Class of the Association.

5.5 Currency

Where a Member is entitled to a recovery out of the funds of this Class of the Association in respect of a loss suffered by the Member in a currency other than the currency specified in the Member’s Certificate of Entry under Rule 6.3.7 (the specified currency), that loss shall be converted into the specified currency at the rate of exchange ruling on the day the relevant credit note is issued by the Association to the Member.

5.6 Sanctions

The Member shall have no entitlement to recovery out of the funds of this Class of the Association in respect of that part of any liabilities, costs and expenses which is not recovered by the Association under the Pooling Agreement, General Excess Loss Reinsurance Contract or any reinsurance(s) arranged by the Association or the Managers, because, and to the extent, of any shortfall in recovery from such parties or reinsurers by the Association which would result in a violation of any Sanction, or any prohibition or adverse action administered by any state, international or supranational organisation or other competent authority or the risk thereof if payment were to be made by such parties or reinsurers. For the purposes of this Rule 5.6 ‘shortfall’ includes any failure or delay in recovery by the Association by reason of such parties or reinsurers making payment into a designated account in compliance with the requirements of any state, international or supranational organisation or other competent authority.

5.7 Overspill Claims

5.7.1 Recoverability

Without prejudice to any other applicable limit, any Overspill Claim on the Association shall not be recoverable from the Association in excess of the aggregate of

5.7.1.1 that part of the Overspill Claim which is eligible for pooling under the Pooling Agreement but which, under the terms of the Pooling Agreement, is to be borne by the Association; and

5.7.1.2 the maximum amount that the Association is able to recover from the other parties to the Pooling Agreement as their contributions to the Overspill Claim.

5.7.2 Aggregate

The aggregate amount referred to in Rule 5.7.1 Recoverability above shall be reduced to the extent that the Association can evidence

5.7.2.1 that costs have been properly incurred by it in collecting or seeking to collect

5.7.2.1.1 Overspill Calls levied to provide funds to pay that part of the Overspill Claim referred to in Rule 5.7.1.1 above; or

5.7.2.1.2 the amount referred to in Rule 5.7.1.2 above; or

5.7.2.2 that it is unable to collect an amount equal to that part of the Overspill Claim referred to in Rule 5.7.1.1 above that it had intended to pay out of the levy of Overspill Calls because any Overspill Calls so levied, or parts thereof, are not economically recoverable, provided that if, due to a change in circumstances, such amounts subsequently become economically recoverable, the aggregate amount referred to in Rule 5.7.1 shall be reinstated to that extent.

5.7.3 Evidence of Aggregate

In evidencing the matters referred to in Rule 5.7.2.2 above the Association shall be required to show that

5.7.3.1 it has levied Overspill Calls on all its Members in respect of the Overspill Claim referred to in Rule 5.7.1 Recoverability above in accordance with and in the maximum amount permitted under Rule 11.4 Overspill Calls; and

5.7.3.2 it has levied those Overspill Calls in a timely manner, has not released or otherwise waived a Member’s obligation to pay those Calls and has taken all reasonable steps to recover those Calls.

5.7.4 Funding of Overspill Claims

5.7.4.1 The funds required to meet any Overspill Claim on the Association shall be provided

5.7.4.1.1 from such sums as the Association is able to recover from the other parties to the Pooling Agreement as their contributions to the Overspill Claim; and

5.7.4.1.2 from such sums as the Association is able to recover from any special insurance which may, in the discretion of the Association, have been effected to protect the Association against the risk of payments of Overspill Claims; and

5.7.4.1.3 from such proportion of any reserves established under Rule 39.1 General Reserve as the Board may in its discretion determine to utilise;

5.7.4.1.4 by levying one or more Overspill Calls irrespective of whether the Association has sought to recover or has recovered all or any of the sums referred to in Rule 5.7.4.1.2 above but provided the Association shall first have made a determination in accordance with Rule 5.7.4.1.3 above; and

5.7.4.1.5 from the funds held in any Overspill Reserve created under Rule 39.2 Overspill Reserve.

5.7.4.2 To the extent that funds required to meet any Overspill Claim on the Association are to be provided in the manner specified in Rule 5.7.4.1.4 above the Association shall only be required to pay such Overspill Claim as and when such funds are received by it, provided that it can show from time to time that in seeking to collect such funds, it has taken the steps referred to in Rule 5.7.3 Evidence of Aggregate.

5.7.5 Recoverability of Overspill Calls

Any issues arising under Rules 5.7.1 to 5.7.3 and 5.7.4.2 above in relation to whether

5.7.5.1 costs have been properly incurred in collecting or seeking to collect funds to pay Overspill Claims; or

5.7.5.2 any Overspill Call or part thereof is economically recoverable; or

5.7.5.3 in seeking to collect the funds referred to in Rule 5.7.4.2 above the Association has taken the steps referred to in that Rule;

shall be referred to a panel which acting as a body of experts and not as an arbitration tribunal shall be constituted in accordance with the arrangements established in the Pooling Agreement and operate in accordance with Rule 44.4 Overspill Claims.