SEPTEMBER 3, 1999

CIRCULAR NO. 11/99

TO MEMBERS OF THE ASSOCIATION

Dear Member:

PAPERLESS TRADING - THE BOLERO PROJECT

As Members will recall by reference to Circular No. 21/98 of December 1, 1998, the International Group of P&I Clubs has been reviewing the progress of the Bolero Project.

The Bolero Project team has advised the International Group that Bolero is expected to Ago live@ by the end of the third quarter of this year - in other words Bolero will be available to users for the replacement of traditional paper trade documentation by electronic messages prior to the end of September.

The International Group has commented on drafts of the Bolero Rule Book, its Operating Procedures and the Operational Service Contract. However, as of late August, the International Group had not seen the final form of the Rule Book and had only seen first drafts of the Operating Procedures and the Operational Service contract. Members should note that, under the Operational Service Contract, Bolero will only accept a low level of liability should it fail to provide service in accordance with its contractual obligations. In general Bolero=s liability to a user in respect of any one event, or series of events, is a maximum of US $100,000.

As stated in the Circular mentioned above, the Clubs in the International Group are sympathetic to the aims of Bolero, which offer the prospect of significant improvements and possible savings as compared to traditional paper commerce. However, since there remains a possibility that a Bolero user could incur liability which would not arise under a paper transaction and that, insofar as such a liability arises as a consequence of fault on the part of Bolero, there will be a very limited prospect of recourse against Bolero, the paperless trading endorsement will continue to apply. The paperless trading endorsement was attached to the aforementioned Circular and appears in all Certificates of Entry issued for the 1999 policy year.

At least in its early stages it is expected that the number of shipowners participating in Bolero will be small. However, for the benefit of these shipowners the International Group has arranged a market insurance to respond to P&I liabilities which are excluded by the paperless trading endorsement. This cover has a limit of US $50,000,000 any one accident or occurrence. The cover is available upon declaration and it is therefore important that Members who wish to benefit from the cover advise the Managers before commencing use of Bolero.

The additional cover has been placed at a cost of US $50,000 for one year on the assumption that, during its first year of operation, Bolero will not handle more than 10,000 transactions. Should the number of transactions be more, the premium is subject to upward adjustment. The International Group has suggested to Bolero that the cost should be absorbed as part of the operating cost of Bolero. However, Bolero says that as a matter of principle this is not feasible as carriers will form only a small proportion of the constituency of users. Accordingly, the Clubs will apportion the cost equally between all Bolero users who purchase the cover, without reference to the number of transactions. Apportionment will be made on the basis of declarations at the end of the year. Full details of the cover are available from the Managers.

Members are reminded that all users of Bolero may be exposed to liabilities which are not of a traditional P&I nature. Examples of such liabilities are breach of confidentiality undertakings and obligations to maintain computer links. At present Bolero has not arranged insurance cover for such liabilities and accordingly Members will need to consider whether they wish to make other arrangements.

Members should note that, in contrast to the position where a paper bill of lading has been issued, there will be no possibility that a Master or ship=s agent can insist upon seeing an original bill of lading before commencing discharge. It will be important therefore for carriers to ensure that the party taking delivery of goods is in fact the party entitled to the delivery under the Bolero bill of lading.

Members who intend to participate in Bolero and wish to obtain further advice are encouraged to contact the Managers.

Yours faithfully,

Joseph E.M. Hughes, Chairman & CEO

Shipowners Claims Bureau, Inc., Managers for

THE AMERICAN CLUB

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