Thursday, August 09, 2007

Business Memories of Japan

Moto Sugiura, the UK Club's Representative in Japan, with his family June 2010

I first became involved in Japan in 1972, when as a junior executive in Syndicate 1, I was called upon to look after visitors from our correspondents, Dodwell, Naga Kotsuru and Moto Sugiura. I took them, as was recommended, to a Japanese restaurant, Miyako, the first that I had ever been into in London. There I was introduced to sushi and the many other delights of Japanese cuisine. That was the start of a long love affair with Japan, which continues to this day. But it's not only built around friends and food, although both are important. Japan has also provided a vast amount of intellectual stimulation. I remember one of my first cases in the Syndicate was a Japanese tanker collision in 1974, just after the Arab Israeli war and the closure of the Suez Canal. The value of tankers soared overnight, and the owners of the "DAUPHINE" found that their ship was seriously under-insured in respect of its hull and IV policies. The shortfall of their claim was no less than $32 million! Something which led me to a close study of our excess collision and general average rules! Shortly afterwards a horrific collision occurred between the "PACIFIC ARES" and the "YUYO MARU" in Tokyo Bay. The "PACIFIC ARES", a bulk carrier carrying steel, struck the "YUYO MARU", carrying gas and naphtha, setting off a fireball which killed all the crew. The "YUYO MARU" was eventually towed out of Tokyo Bay and sunk by the Japanese Navy, not without great difficulty and pyrotechnics. That case too lasted for two decades, and also involved an excess collision claim. It was also the first recorded major LPG casualty.

My first visit to Japan in 1978, as part of trip to China to negotiate the settlement of some large demurrage claims with the Chinese state charterers on behalf of three Greek owners (Lykiardopulo and two branches of the Goulandris family). I was received by none other than Tsuboi, the chairman of Tokyo Tanker (the Club’s oldest Members in Japan) and treated like royalty by them and by NYK. This was simply because of the high esteem in which we – and particularly Sidney Fowler, then the senior partner of Millers, and Terence Coghlin, then in change of Japan, were held.

My role in Japan was seriously stepped up in 1980 when I took on the role of manager of Syndicate 1 from John Jillings. I travelled out to Japan and spent a month getting to understand the country and local conditions, the law and meeting all those who I could. Soon afterwards a number of serious casualties kept me coming back to Japan on a regular basis, including two major car carrier fires, and several collisions. In 1982 also, the case of the "ASIAN SUMMIT", where Algerian stevedores made off with eight Walkman cassette players, but told the police that the crew had sold them to them, caused the ship to be detained for 194 days while we negotiated a sensible settlement. Constant contact with the owners involved us getting the Club's first fax machine as they required, quite properly, a written report on the latest developments each evening. The case was eventually settled on terms which included a payment to the Algerian Secret Service into their bank account in Switzerland.

Several cases involved ships encountering typhoons - or at least tropical storms of the type that were found fairly regularly off the north east coast of Japan in winter. So much so that a Japanese hull underwriter, Nissan Fire & Marine, wrote a study on the subject, which helped prepare the courts for a proper defence of heavy weather.

I left the Syndicate in 1984 to help found TIM (later ITIC), and although I travelled occasionally to Japan in furtherance of that business and to maintain my links generally, Luke Readman took on my role until I returned to P&I in 1993. However I was in Japan at the time when the Japan branch licence was awarded in 1989, and I visited the Ministry to receive the licence in a ceremony known as "coming down from the clouds".

In the early '90s our major member NYK produced the NYK 21 Plan, which called upon them to become a logistics mega carrier. We looked hard at how we could best offer our support to these plans, and I prepared a long report on their insurance needs, including the possibility of writing P&I and TT Club business together. One aspect of their logistics development was the need to keep track of the claims of their key logistics customers - those who gave them large volumes of business but had no tolerance of either delays or claims of any kind. This led to a fascinating conference which we organised in New York, in which Tsujimoto, then head of the insurance / claims division at NYK explained the realities of the logistics trades from his study of Toyota. From this we developed a philosophy – ‘claims handling is part of the line's service to its customer’ - that at that time was revolutionary. In support of this, we also developed a worldwide claims handling system. In fact this was borne out of a night's work at the Palace Hotel in Tokyo. Turning up to visit Tsujimoto, we learned from our office that he expected us to come up with a fully fledged plan to deal with their logistics customers. Nigel Carden and I, working much of the night on flip charts in our room, prepared that plan, with two revolutionary features. One was that we would set up a worldwide claims reporting system, whereby claims were reported in to 25 regional centres linked electronically so that incidents and claims would be known to NYK and to us as soon as possible. The other was that all claims would be handled by our correspondents, NYK's agents and offices giving up that role. It seemed to us to be unnecessary to have a duplication of effort in each of the ports in the world. This system was adopted and went into effect from 1995 and is still running smoothly today. The annual NYK conference that takes place to discuss the workings of the system and its results, has become a valued set piece, although the full conference involving the 25 regional centres is now held only every two years, with every other year the Club and NYK alone discussing key issues.

Japan is unique in the P&I world in the number of general enquiries it generates from the Club's members. Up to 50% of the syndicate manager’s time and those involved in claims policy can be taken up in dealing with more or less esoteric questions generated from Tokyo. This helps us enormously in keeping up-to-date with issues and events, and learning to summarise them in a coherent way.

No note on our Japanese business can avoid the enormous contribution made by our correspondents Dodwell - now ISS - and the Japan Branch office. Moto Sugiura has led both for many years, and the operation is regarded as the most sophisticated that we have outside our own operations. The Branch has to produce 29 financial reports annually for the Japanese Authorities, and it does so immaculately each year through the self-taught efforts of Masako Kodaki. The Branch also looks after the underwriting of Japanese Members whereby the rates are set in London but much of the negotiation takes place in Japan. One of the Branch’s early roles was to ensure that all the Club's documentation was completely accurate - something which could not be counted on when it was sent out from London. In addition the particular way in which Japanese business is conducted - frequent meetings, constant personal attention, gifts, golf, entertaining at a high level; none of this would be possible without the work of the branch. Moto Sugiura’s role in this has been invaluable, and it is very good that he will continue with us beyond his original scheduled retirement.

Reference to our Japanese business should not avoid specific mention of Shikoku; our business began there in 1982, through the auspices of Kobe Shipping, the Tanabe operation who financed and then helped develop the then relatively small Shikoku ship owners such as the Abe family of Nissen Kaiun - which has now grown to a fleet of nearly 100 ships. We spent a lot of time in Shikoku in the '80s getting to know the individual families, attending launches and giving seminars. Unfortunately the claim surge of the late '80s/early '90s and the hike in calls that followed meant that we lost a lot of that business for the next 10-15 years, but some of it remained loyal - particularly the Abe's, and our Shikoku business is now a strongly growing area following the opening of the ISS Imabari office in 2004. This opening, coupled with the opening of Lawyer Kimura's office nearby, has given us a good platform for further growth in this area of Japanese shipping. Moto Sugiura now spends a week or more a month in Imabari.

Herry was fortunate in having his farewell party combined with the UK Club’s Directors Meeeting in Tokyo in May 2006 and over 240 of the Members, lawyers, surveyors and others attended. His speech can be found here (and in a Japanese translation at the end)

Herry Lawford
May 2006

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