1 of 4 DECEMBER 21, 2010 CIRCULAR NO. 36/10 TO MEMBERS OF THE ASSOCIATION Dear Member: INTERNATIONAL GROUP OF P&I CLUBS: INVESTIGATION BY THE EUROPEAN COMMISSION (EC): POTENTIAL FOR SHIPOWNERS BEING DIRECTLY CONTACTED BY THE EC As Members may already be aware, on August 26, 2010, the EC announced that it had opened an investigation under the European Union competition rules into aspects of the arrangements between P&I clubs which are members of the International Group. The EC has told the International Group that it wishes to assess whether the quotation procedures and the rules related to release calls restrain competition between the clubs and harm shipowners. It also wishes to assess whether commercial insurers are foreclosed from the P&I market. These are all matters that have been considered by the EC during two previous investigations into the International Group's arrangements in the 1980s and again in the 1990s. Those two investigations resulted in the EC granting formal exemption decisions to aspects of the International Group's arrangements. The International Group and Group clubs have been working closely with the EC case team in addressing the issues being considered by the EC in this investigation. A short note summarizing the International Group's initial views on the EC's concerns is attached. This may assist Members in understanding the current status of the investigation. As part of the investigation, each Group club has recently received a questionnaire from the EC asking for information relevant to the investigation. The questionnaire requests information about each club's individual members, including their contact details. The EC routinely issues such questionnaires requesting confidential information and operates under strict confidentiality obligations. The Group has been informed that some shipowners have also recently received questionnaires from the EC asking for information relevant to the investigation. The EC case team may well approach other shipowners for their views in due course. Shipowners may wish to seek independent legal advice in preparing responses to any such questionnaires. If any Member would like more information, your Managers will be pleased to respond to inquiries. Yours faithfully, Joseph E. M. Hughes, Chairman & CEO Shipowners Claims Bureau, Inc., Managers for THE AMERICAN CLUB 2 of 4 APPENDIX TO CIRCULAR NO. 36/10 OF DECEMBER 21, 2010 I NTERNATIONAL GROUP OF P&I CLUBS R EVIEW BY THE EUROPEAN COMMISSION -- SUMMARY OF ISSUES 1. I NTRODUCTION 1.1 On August 26, 2010, the European Commission announced that, following the expiry in February 2009 of the second 10 year exemption for the International Group Agreement ("IGA"), it had decided to carry out a review of three aspects of the Group's claims-sharing and reinsurance arrangements, namely: • provisions in the IGA relating to the "quotation procedures" that apply on movement of vessels on 20th February; • aspects of provisions in the IGA about "release calls"; • access by commercial insurers to reinsurance by Group Clubs. 1.2 The Commission has confirmed that this review is being carried out at its own initiative, not as a result of a complaint. 1.3 The precise nature of the Commission's concerns is not clear. The Group has provided preliminary views on each of the issues to the Commission and discussions are ongoing. The issues are summarised below. 2. THE ISSUE RELATING TO THE QUOTATION PROCEDURES 2.1 The Commission appears to be concerned