Security for
Recovery Claims
A fundamental issue in being able to succeed in obtaining a recovery from a third party responsible for a loss is whether that third party has any assets or funds against which you will ultimately be able to enforce the recovery claim. You might be in a very strong position with respect to the merits of the recovery claim or, indeed, even have a judgement in your favour against the third party responsible. However, if that third party does not have any assets or funds from which to pay your recovery claim, then you will almost definitely not be able to obtain reimbursement.
The issue highlighted above can a potential problem in any case where a carrier or third party responsible for a loss might not have the assets or funds against which to enforce a recovery claim. However, it is particularly relevant for recoveries on claims involving carriage of goods by sea. Almost all of the world’s shipowners and sea carriers, if having any insurance cover, are insured on a “pay to be paid” basis. This means that the insurer of the shipowner / sea carrier is almost always only obliged to compensate the shipowner / sea carrier when a recovery claim is enforced against the shipowner / sea carrier. There is almost always no obligation for the insurer of the shipowner / sea carrier to directly deal with or compensate the claimant pursuing the recovery claim. The majority of the shipping tonnage used to carry cargo at sea is in single ship ownership with the vessel being the only asset of the shipowner / sea carrier. Therefore, if there is a recovery claim against a vessel and that vessel is then sold or scrapped, it can fatally undermine the prospects of getting any reimbursement on the claim. The solution to this problem is, where necessary, to try and obtain appropriate security and guarantees from third parties as soon as possible to ensure that funds are ultimately available to compensate a recovery claim. This is done by way of the threat of arresting appropriate assets of the third party in appropriate jurisdictions.
Stean Shaw LLP can help. Our team has extensive experience and expertise in obtaining appropriate guarantees and security to ensure that the recovery claims of our clients are as well protected as possible. This experience and expertise is essential as these documents are generally very complex and include a number of issues that will determine whether or not the guarantee or security will ultimately be valid. These issues include title to sue, applicable contract (s), law and jurisdiction for the recovery claim, any legal / arbitration proceedings that may be necessary, and terms of payment / settlement.
In order to provide assistance and input on possible security or guarantee issues, we request our clients to contact us as soon as possible when they are aware of a loss occurring. Ideally, for losses involving goods shipped by sea, this should be before the vessel has completed discharge. In any event, Stean Shaw LLP has access to considerable resources to determine the available assets against which to enforce any recovery claim. These resources include being able to identify and track appropriate vessels that could be attached for security. Importantly, since Stean Shaw LLP acts on a “no win – no fee” basis, we will not charge our clients for obtaining security provided that we handle the recovery claim. If so, Stean Shaw LLP will only charge in the event that we are successful in obtaining a recovery on the claim. For example, if we obtain security and the claim is subsequently withdrawn or no recovery is possible, then we will not charge our clients. Therefore, there is no cost “upfront” to our clients by using the services of Stean Shaw LLP to obtain security. |
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| If you have any enquiries about Stean Shaw LLP, our services and fees, or questions on security / guarantees for recovery claims, our team would be happy to hear from you through our listed contact details. Alternatively, to e-mail us, please click here. | ||
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