All correspondence should be addressed to the Managers _______ A. BILBROUGH & CO. LTD 50 Leman Street London E1 8HQ Telephone: +44 (0) 20 7772 8000 Facsimile: +44 (0) 20 7772 8200 E-mail: london@londonpandi.com www.londonpandi.com 29 May 2009 TO ALL MEMBERS Dear Sirs Vessel Response Plans (VRPs) – Conformity with International Group Guidelines & Other Recent Developments Members have previously been advised of the terms of contract which are required under United States Federal Regulations on vessel response plans (“VRPs”) and of the contractors whose contracts conform with the International Group (IG) Guidelines on VRPs. The list of contractors whose contracts conform to the IG Guidelines has since been amended and the number of jurisdictions that require owners to maintain VRPs has increased. The IG Guidelines are contained in the Annex to this circular. It should be noted that the Guidelines for contracts for use in the United States differ from those applicable to other jurisdictions to take account of differences in legislation. Previous advice to Members on the terms of VRP contracts has concentrated on four issues which are of importance to Members and their Clubs, namely, the scope of indemnities contained in these contracts, provisions for control of the contractor’s operations by the owner, provisions for funding of the contractor’s activities, and warranties by the contractor that he is competent to perform the contracted service. As many contractors have made amendments to their contracts since Members were previously advised of the terms of contract required under the US Federal Regulations and there have been similar developments in other jurisdictions on VRPs, the following clarification is provided on the significance of conformity with the IG Guidelines. 1. Indemnity Provisions Confirmation from the Association that the wording of an indemnity provision in the contract conforms with the IG guidelines is an affirmative statement that the Member's liability to indemnify the contractor pursuant to that clause is covered by the Association under the rule covering liabilities under certain contracts and indemnities, subject, as always, to the Member not being in breach of the Rules or his terms of entry. Conversely, if the Association states that the terms of an indemnity do not conform with the IG Guidelines this means that cover does not fully extend to the liabilities that may be incurred under the indemnity. Such liabilities must then either be separately insured or, if not, cover is at the sole discretion of the Committee in the event of the Member becoming liable for a claim under the indemnity. P.T.O. - 2 Any Member being requested to agree to a variation of a contract, which when originally submitted to the Association conformed with the IG Guidelines, is advised to check with the Managers to ensure that such variations do not cause the initial confirmation to become invalid. 2. Control of the Contractor's Operations The Association continues to suggest that it is important for such contracts to clearly give the owner the right to control the operations of the contractor (rather than allowing the contractor to proceed with the contracted operations at his own discretion and to charge the owner accordingly). Contracts which the Association has stated conform with the IG Guidelines contain provisions which are considered adequate to give such control to the owner. However, Members should note that some contractors offe