The Letter of Indemnity (LOI) and its Legal and Practical Problems 1 October 2012 Yutaka Tsurusaki Attorney-at-law, Tsurusaki & Kobayashi (T&K Partners) 1. General – What Are The Problems? and Counter Measures to be Taken in Advance (1) What are the Problems? Ship Owners frequently receive from charterers, cargo interests and others requests under the charter parties and the bills of lading. While the Owners may have no obligation to comply with the request, they frequently do so in exchange for a letter of Indemnity (LOI). However, since complying may expose Owners to significant legal and practical risks, they should not agree to such requests lightly. A bill of lading is a very important document/instrument. It is a document of title to valuable commodities, it provides evidence of the terms of the contract of carriage of goods and it states the quantity, condition and amount of the goods. False statements made in the bill could lead to criminal penalties, for example for a breach of the Criminal Law of Japan. Ship Owners should therefore be very cautious in deciding whether to agree to an LOI request. As mentioned below, Ship Owners could sustain signifi cant losses, damages and inconvenience as a result of making incorrect statements in the bill of lading. Many of these damages and losses would be outside the coverage of P&I and other insurances. Even where such loss or damage may usually be within such coverage, if the activities of the Member are anti-social, contrary to public policy or in violation of criminal and/or other laws, there will be no coverage under P&I or other insurances. In such a case Owners would have to satisfy any claims from out of their own pockets and therefore should take particular caution when in receipt of an LOI request from charterers and other interests. Aside from requesting changes to statements on the face of the bill of lading, shippers, charterers and others frequently make other LOIrelated demands, such as f