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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> BP Plc v GE Frankona Reinsurance Ltd & Ors [2003] EWHC 344 (Comm) (27 February 2003)
URL: http://www.bailii.org/ew/cases/EWHC/Comm/2003/344.html
Cite as: [2003] EWHC 344 (Comm), [2003] 1 LLR 537, [2003] 1 Lloyd's Rep 537

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Neutral Citation Number: [2003] EWHC 344 (Comm)
Case No: 2001 Folio No. 1087

IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Strand, London, WC2A 2LL
27 February 2003

B e f o r e :

THE HONOURABLE MR JUSTICE CRESSWELL
____________________

Between:
BP p.l.c.
(On its own behalf and as a representative for and on behalf of the co-insureds listed in Schedule 1 to the Particulars of Claim as interested persons)


Claimant/Part 20 Defendant
- and -

GE FRANKONA REINSURANCE LIMITED
(and various Underwriters subscribing to Policy No. EL9801152 as listed in Schedule 2 to the Particulars of Claim)


Defendants/Part20 Claimants

____________________

Mr Jonathan Sumption QC, Miss Helen Davies and Mr Roger Masefield (instructed by Herbert Smith) for the Claimant.
Mr Mark Howard QC, Mr Neil Calver and Mr Jasbir Dhillon (instructed by Norton Rose) for the Defendants

____________________

HTML VERSION OF HANDED DOWN JUDGMENT
____________________

Crown Copyright ©

    Mr Justice Cresswell:

    Introduction

  1. The claimant ("BP") claims on its own behalf and on behalf of 37 co-insureds listed in Schedule 1 to the Particulars of Claim. The co-insureds are various oil and gas entities, including some foreign-government owned entities.
  2. The nine defendants are identified in Schedule 2 to the Particulars of Claim. They are either insurance companies (first to third defendants) or Lloyd's syndicates (fourth to ninth defendants), each of whom subscribed a slip later superseded by a Binder/Global Construction Insurance Policy ("the Open Cover") led by AIG and SR International Business Insurance Co Ltd ("Swiss Re"). The first to seventh defendants subscribed directly. The eighth and ninth defendants were bound (with their agreement) to it under a broker's cover issued by them to BP's brokers Aon Limited ("Aon"). The defendants together represent 41.667% of the following market subscribing the Open Cover in respect of offshore project risks.
  3. The Open Cover was placed, and has since been administered, by Aon.
  4. In its original form, the Open Cover provided a facility by way of standing offer for the insurance against specified categories of risk of Amoco Corporation (together with all its subsidiary, affiliated, associated and/or interrelated companies and/or their shareholders, and its co-venturers, project managers and/or financiers). Amoco Corporation merged with The British Petroleum Company Plc with effect from 31 December 1998. The named insured was amended to BP Amoco plc (together with its subsidiaries etc.).
  5. The Binder/Global Construction Insurance Policy was scratched by AIG and Swiss Re (as the leading underwriters) on 18 May 1999 and 19 July 1999 respectively. The defendants now accept that they are bound by the terms of this policy, which I refer to as the "Open Cover".
  6. The Open Cover permitted declarations to be made in respect of both onshore and offshore projects. These proceedings relate only to offshore projects. For offshore projects, the period of the Open Cover (within which declarations could be made) was between 1 January 1999 and 30 June 2000. Disregarding five declarations that were cancelled shortly after being made, the claimant contends that twenty-six offshore declarations were made during that period.
  7. The relief sought by BP is a declaration that the contracts of insurance the subject of the 26 declarations made under the Open Cover are valid and subsisting contracts of insurance, and that the defendants are obliged to indemnify BP and its co-insureds in respect of claims thereunder.
  8. The Amended Defence alleges estoppel by convention, material non-disclosure and/or misrepresentation and breach of collateral warranties. The defendants counterclaim a number of declarations, including declarations:-
  9. (1) that the defendants are entitled to and have validly avoided the Open Cover and/or each of declarations 8-26; and/or

    (2) that upon its true construction declarations 1-26 do not fall within the terms of the Open Cover and/or are non-contractual and ineffective; and/or

    (3) that the claimants are estopped by convention from contending that each or any of declarations 8 to 26 give rise to a binding contract of insurance.

  10. On 15 March 2002, Colman J. ordered that there should be a trial of preliminary issues relating to the meaning of the Open Cover and the effect of declarations made under it. The precise terms of the preliminary issues were subsequently agreed between the parties, and are set out in Schedule 1 to the Order of Toulson J. dated 15 November 2002.
     
    The Preliminary Issues
  11. The preliminary issues are as follows:-
  12. 1. So far as the claimant and each of the defendants are concerned, are the terms of the Open Cover contained in the Open Cover slip or in the relevant Binder/Global Construction Insurance Policy, including the endorsement thereto scratched by the defendants (save for the 8th and 9th defendants) in February 1999? [The defendants conceded on Day 1 of the trial that the terms of the Open Cover were contained in the Binder/Global Construction Insurance Policy (including endorsements) stamped by Swiss Re on 19 July 1999].

    2. On a true construction of the Open Cover (as determined in 1 above), in order for a project validly to be declared thereunder:

    (i) Was it necessary for the project to commence during (and neither before nor after) the period of the Open Cover?
    (ii) Alternatively is the commencement of the project irrelevant to the operation of the Open Cover and, rather, does the declared date of inception of the project risk, selected at the claimant's discretion, determine the start date of the period of insurance for each project?
    (iii) Was it necessary for the declaration to be made:
    (I) no later than 30 days after the project commencement date; and/or
    (II) within the period of the Open Cover?
    (iv) Was it necessary for the declaration to be presented by the claimant or its agent Aon to each of the first to ninth defendants during the period of Open Cover or presented to the Leader alone during the period of the Open Cover, or was it not necessary for it to be presented to any of the defendants during the period of the Open Cover?

    3. If the project commencement date is relevant in the context of the answers to Issues 2(i) to 2(iii) above, then on a true construction of the Open Cover, when did a project commence for the purposes of the insurance? In particular:

    (i) Could a project commence prior to physical construction of the project commencing and/or any parts or materials coming at risk of an Insured?
    (ii) If the answer to 3(i) above is "No", do plans and/or documents and/or blueprints and/or renderings and/or specifications and/or contract documents and/or models in connection with a project constitute parts and/or materials for this purpose?

    4. In the light of the answers to issues 1 to 3 above (taking account of who has the burden of proving the matters referred to), which (if any) of the declarations numbered 5, 12, 14 and 26 were validly declared by the claimant to the Open Cover?


     
    The Open Cover

  13. The slip was scratched between January and March 1999. It identified the terms of the facility conferred, and summarized the terms of the insurance, which would apply when a valid declaration was made.
  14. The slip stated:-
  15. "Type: Construction All Risks Open Cover
    Form: J(a) plus modified Aon Erection/Construction All Risk, Cargo, Delay in Start-up and Third Party Liability wording as more fully defined in the policy wording attached with any amendments to be agreed Leading Underwriter only, wording as agreed L/U only."
  16. The policy was prepared in April 1999, different copies of which were scratched by AIG on 18 May 1999 and by Swiss Re on 19 July 1999. The copy scratched by AIG was also scratched by Aegis. It is in two sections. The first is headed "Binder of Insurance Terms and Conditions" ("the Binder"). The second section is headed "Global Construction Insurance Policy ("GCIP")".
  17. A further policy was scratched by Swiss Re on 16 November 2001, bearing the Policy Number 823/EL9801152.
  18. The IUA policy was issued in about October 2001 on behalf of ERC Frankona (the first defendant), QBE (the second defendant), Hannover (the third defendant) and Axa (not a party to this action).
  19. No Lloyd's Policy was issued.
  20. The Open Cover was a facultative/obligatory contract. It was a standing offer whereby the defendants agreed to accept liability in respect of any declarations made within the terms of the cover. BP was free to choose in its own interest which projects to declare to the Open Cover, and which projects to insure under other arrangements or not at all. The defendants were bound to accept liability in respect of all of BP's declarations, which fell within the terms of the cover.

  21.  
    The material terms of the Open Cover are as follows:
  22. [THE BINDER]
    "BP Amoco PLC
    Global Construction Insurance
    Binder of Insurance Terms and Conditions
    Type: Construction All Risks Open Coverage
    Named Insured: BP Amoco PLC (see enclosed policy)
    Additional Assureds: As designated by BP Amoco PLC.
    Loss Payees: As designated by BP Amoco PLC.
    Project Eligibility: Automatic for all projects of whatsoever nature."
  23. [There followed clauses as to Automatic Acquisition; Period; Policy Form ("J(a) incorporating modified Aon Erection/Construction All Risk, Cargo, Delay in Start-up and Third Party Liability wording as more fully defined in the policy wording attached with any amendments to be agreed by the Leading Underwriter only."); Coverage; Extensions of Coverage; Limits (100%); Deductibles/Excesses (100%); Coverage Territory; Cargo Conveyances; Valuation; Conditions; Cancellation; Interest Insured; Discounts; Deposit Premium; Premium ("As declared by individual project. Premium payable within 30 days of attachment in respect of projects with less than a 2 year term. Payment term for projects in excess of 2 year term will be in equal annual instalments."); Profit Sharing; and Required Information ("Required Information for Declared Projects: Completed Declaration, Completed Rating Worksheet")].
  24. [Rating Categories and Rates were then set out.]

  25.  
    [THE GCIP]

    " BP AMOCO CORPORATION
    Global Construction Insurance Policy
    TABLE OF CONTENTS
    Security
    Declarations
    Section I
    Erection All Risk and Cargo
    Delay in Start-up
    Endorsements
    Section II
    Third Party Liability
    Endorsements
    Section III
    General Conditions applying to all Sections of This Policy.
    Endorsements applying to all Sections of This Policy."

     
    Security
  26. [Under the heading 'Security' the participations (offshore and onshore projects) were set out followed by Several Liability Notice (LSW 1001).]
  27. " Declarations

    "Insurance is provided by the Stock Company(s) and underwriters shown herein and hereinafter called "the Company" or "Underwriters"
    1. A. NAMED INSURED(S)
    Principal Insured(s):
    BP AMOCO Corporation (hereafter referred to as BP AMOCO) and/or all subsidiary and/or affiliated and/or associated and/or interrelated companies of every tier as may now or hereafter be constituted and/or their shareholders, directors, officers and employees, but only with respect to their interest in service to and/or employment by such companies.
    At the option of BP AMOCO, co-venturers and/or project managers and/or financiers as may now or hereafter exist and as may be declared each underlying declaration.
    Other Insured(s):
    Any other party as may be declared each underlying declaration, including but not limited to contractors, and/or their sub-contractors of every tier whether named hereunder or not, and/or architects, engineers and consultants, and/or suppliers and/or agents and/or manufacturers and/or vendors and/or licensors in connection with the subject matters of this insurance, and/or any works, activities preparations etc. connected therewith shall have benefit of this insurance, but only to the extent, and fully limited to, the Principal Insured's obligations to directly or indirectly assume the liability of, and/or provide insurance such as is afforded by this policy to, such parties.
    An Insured(s) shall not be prejudiced by any act, error or omission by an Other Insured(s) and this Policy shall remain in full force for such Insured(s) providing such act, error or omission is not with the privity of such Insured(s).
    B. ADDITIONAL INSURED(S):
    Additional Insured(s) will be added hereunder in the underlying declarations.
    All hereinafter referred to as the Insured.
    2. LOSS PAYABLE
    Loss, if any, shall be adjusted with and made payable to BP AMOCO or the loss payee specified in the individual underlying declarations, or as per order BP AMOCO, whose receipt shall constitute a release in full of all liability under this policy with respect to such loss. All adjusted claims shall be paid or made good to Loss Payee, or order, within 30 days after presentation and acceptance of satisfactory proof of loss.
    3. PROJECT ELIGIBILITY
    Automatic for all projects of whatsoever nature
    4. AUTOMATIC ACQUISITION
    Erection All Risk, Related Delay in Start-Up and Third Party Liability
    All projects shall automatically be held covered hereunder for a period not exceeding thirty (30) days from the commencement of said project. Coverage beyond this initial period shall be extended only upon declaration of the project and payment of any premium due thereon from the commencement of said project.
    Cargo and Related Delay in Start-Up
    All applicable projects to be declared hereunder prior to attachment of coverage.
    5. PERIOD OF INSURANCE
    Master Contract
    (1) Onshore - 24 Months with effect from 23:59 31 December 1998,
    Central Standard Time to 00:01 1 January 2001, Central Standard Time.
    (2) Offshore - 18 Months with effect from 23:59 31 December 1998, Central Standard Time to 00:01 1 July 2000, Central Standard Time.
    At the Insured's and Underwriters mutual agreement, this policy may be extended up to an additional twelve (12) months at any time during the policy period
    (3) Individual declarations - From inception (as declared) at 12:01 a.m. Local Standard Time at the location of the Insured Project and insures in respect of each part, item or portion of the subject matters of this insurance from the time of becoming at the risk of an Insured hereunder, including work carried out at Contractors and/or Sub-Contractors premises (and/or Manufacturers and/or Suppliers and/or Vendors premises if mutually agreed by the Insured and Underwriters and declared) and all transits (on and offshore) and shall cover continuously thereafter during all operations until completion of the entire Insured Project and issuance of certificates of acceptance ("acceptance") by Principal Insured(s) or until attachment of a separate operating insurance whichever shall first occur but not beyond a declared expiration date (anticipated) or held covered at a premium to be agreed.
    (4) Nevertheless in respect of liabilities covered hereunder, insurance shall attach from the time of signing of individual contract(s) or agreements(s) or letter(s) of intent in connection with the Insured Project even if predating the attachment date specified above and shall continue until expiry date as above plus maintenance period as below.
    (5) The interest of the Other Insured(s) shall be covered throughout the entire Period of Insurance (irrespective of contract period(s)) subject to full coverage as herein. The foregoing shall not operate to increase the limit(s) of liability contained herein.
    (6) Insurance shall apply at all times including while at temporary sites, prefabrication sites, fabrication yards, Contractors and/or Sub-Contractors premises (and/or Manufacturers and/or Suppliers and/or Vendors premises if mutually agreed by the Insured and Underwriters and declared), construction sites, offshore sites, and will be in force during the engineering, design, manufacture, procurement, storage, prefabrication, fabrication, assembly, construction or repair, float-out, load-out, lifting, installation or reinstallation, hook-up, pipelaying, tie-in, start-up, commissioning, testing, trials, performance testing, existence, modification, drilling, completion and partial/initial operating phases and declared maintenance period of the Insured Project or otherwise including:
    Up to 24 months maintenance period following the expiration date of each project.
    An option to extend coverage for up to one (1) year following acceptance for operational phase subject to a 15% charge of the annual project premium for each quarterly extension.
    (7) The foregoing is deemed to include, but not be limited to, all transits (on and offshore) and movements by any means (including air and/or ocean transit(s) by steamer(s) and/or motor vessel(s) and/or barges in tow or otherwise) including call(s) at port(s) or place(s) as may be required, whilst there for whatever reason and loading and unloading.
    (8) It is further agreed that any equipment and/or property covered under this Policy which is to be returned to shore shall be covered until safely returned to shore irrespective of the above expiry date but prior to the expiry of the final maintenance period. With privilege for the first named Principal Insured hereunder to cancel and/or amend coverage hereunder on individual items if and as required prior to scheduled expiry."

    [The numbering (1) to (8) has been inserted for convenience].

  28. [There followed further clauses:-
  29. 6. EXTENSION OF TERM OF INSURANCE

    7. INTEREST

    8. SCHEDULE OF LIMITS (100%)

    9. DEDUCTIBLES/EXCESS (Applied on a per project basis) (100%)

    10. SCHEDULE OF RATES

    11. PREMIUM AND REPORTING TERMS

    12. POLICY TERRITORY

    13. ORDER HEREON]


     
    SECTION I

  30. PART A – ERECTION ALL RISK AND CARGO provided:-
  31. "1. INSURING AGREEMENT
    This Master Policy, and all underlying declaration(s) issued hereto, insures against all risks of direct physical loss of or damage to the insured property during the Period of Insurance insured hereunder…
    2. CONDITIONS …
    3. PROPERTY INSURED
    This Policy insures:
    A. Property of every kind and description including the works infrastructure, auxiliary facilities and temporary works (including scaffolding, falsework, formwork, fences, temporary buildings and contents) executed in the performance of all the contracts relating to this entire project, and all materials, components, parts, machinery, fixtures, spare pipe, equipment or any other property destined to become a part of the completed project, or used up or consumed in the completion of the project, complete with all plant, equipment, machinery, materials, outfit and all property associated therewith whether intended to form a permanent part of the works or not. Including site preparatory work, including pipelines (to shore or elsewhere), flowlines, gathering and loading systems. …
    4. EXTENSIONS OF COVERAGE (included within the overall Limit of Liability) …
    D. Plans, Documents, Blueprints, Drawings, Renderings, Specifications or Other Contract Documents and Models
    This policy is extended to cover physical loss or damage to plans, blueprints, drawings, renderings, specifications or other contract documents and models.
    5. EXCLUSIONS APPLICABLE TO SECTION I A…
    6. FAULTY DESIGN CLAUSE …
    B) In respect of offshore projects: It is understood and agreed that physical loss and/or damage to the subject matter insured during the period of the policy caused by faulty design, faulty or defective materials, faulty or defective workmanship (including welding) and including physical loss and/or defect or damage to the faulty part shall be covered hereunder even though the fault in design and/or defect may have occurred prior to the attachment date of the policy. Including the cost of repairing, replacing or renewing any defective part or parts condemned solely in consequence of the discovery therein during the period of this policy of a latent defect.
    Notwithstanding the foregoing it is understood and agreed that coverage in respect of faulty or defective materials and/or faulty or defective workmanship, including welding, does not apply in respect of any loss solely by reason of the item failing to achieve its design specification or being unfit for its intended purpose.
    It is further agreed with respect to pipelines any rupture, twisting, holing, bending, buckling, breakage or other deformation of any kind shall deemed to be damage covered hereunder whether or not caused by or contributed to by faulty or defective workmanship or faulty or defective material, or faulty or defective construction or design.
    7. DEFINITIONS…
    8. VALUATION...
    At the time and place of loss, the basis of adjustment of a claim, unless otherwise endorsed herein, shall be as follows: …
    D) Plans, Blueprints, Drawings, Renderings, Specifications or Other Contract Documents and Models - At the cost to repair or replace the property with other property of like kind and quality including the cost of gathering or assembling information if replaced, or if not replaced, at the value of blank material; if such property lost or damaged includes renderings or models it shall be valued at cost to Insured.
    9. GENERAL AVERAGE …
    10. TOWAGE..."
  32. SECTION 1 PART B was concerned with - DELAY IN START-UP.
  33. SECTION II - THIRD PARTY LIABILITY provided:-
  34. "This section of the Policy covers Third Party Liabilities up to an overall Full Limit of Liability of US$ 50,000,000 (as per individual declaration) for 100% interest any one accident or occurrence in accordance with (A), (B), (C) and (D) below:
    (A) Protection and Indemnity, excluding crew, as per Full Clause contained in the Institute Clause for Builders Risks dated 1st December 1972, and War etc., Protection and Indemnity as Institute War Clauses and Strikes Clauses - Builders Risk dated 1st December 1972 but excluding removal of wreckage to the extent covered under Section I of this Policy. All the foregoing clauses apply in so far as they do not conflict with or restrict coverage provided by the typewritten wording of this Policy.
    (B) General Third Party Liabilities including Contractual Liability, it being understood and agreed that coverage hereunder in this respect shall be in accordance with the following:
    The Company agrees that if the Insured shall become liable (under contract or otherwise) to pay and shall pay any sum or sums in respect of any responsibility, claim, demand, damages and/or expenses, or shall incur any other loss arising from or occasioned either directly or indirectly by the Insured's operations in connection with the Insured Project or parts thereof, including operations undertaken during the maintenance period; that is to say:
    (i) loss of life, personal injury, or illness, including care and loss of service resulting therefrom. …
    (ii) loss or damage to or loss of use of property of any kind or description other than property covered under Section I of this Policy. …
    (iii) any responsibility, claim, demand, damages and/or expenses caused by or alleged to have been caused directly or indirectly by seepage, pollution or contamination arising out of the Insured's operations covered by this Policy including …
    (iv) loss or damage to or loss of use of existing property belonging to or operated by a Principal Insured(s) or their Co-Venturers, excess of any recoveries under Section I, at the project site and not otherwise forming a part of the Insured Project …
    ...
    Excluding Workmen's Compensation Acts and Employers' Liability but including liabilities resulting from legal recourses in respect of the rights of subrogation legally permitted under Workmen's Compensation Acts or other common law liability but the foregoing shall not be deemed as being substituted to Employers' legal or statutory obligations as to Workmen's Compensation Acts or Employers' Liability Acts to their own personnel.
    CONTINGENT LIABILITIES AS FOLLOWS:
    Principal Insured (and other Contractors)
    Property and/or Personnel Clause
    It is noted that Principal Insured(s) will endeavour to make each of their Contractors contractually responsible for loss or damage to that Contractors' owned and/or rented and/or hired property (which could include vessels and/or craft and/or other offshore equipment) and for that Contractor's own Personnel. Also the Principal Insured(s) may hold that Contractor harmless in respect of Principal Insured(s) property and personnel and also that of their other Contractors and Sub-contractors (which could include vessels and/or craft and/or other offshore equipment).
    Agreed that where Principal Insured(s) are unable to obtain a hold harmless from Contractor in words as above (or of similar intent), this insurance covers the contractual obligations assumed by the Principal Insured(s) under the wording of the hold harmless as above (or wording of similar intent) in respect of the Principal Insured(s)' Contractors property or personnel.
    The foregoing shall not in any way limit the cover provided by this Section Two in the absence of this agreement. …"
  35. SECTION III contained- GENERAL CONDITIONS APPLYING TO ALL SECTIONS OF THIS POLICY
  36. ...

  37. General Condition 26 was concerned with CANCELLATION.
  38. General Condition 27 TITLES OF PARAGRAPHS provided:-
  39. "The several titles of the various paragraphs of this form and endorsements attached to this Policy are inserted for reference and shall not be deemed in any way to affect the provisions to which they relate."

  40. General Condition 29 CONFLICT OF WORDING provided:-
  41. "The conditions contained in this form shall supersede those of the basic policy to which this form is attached wherever the same may conflict. Where there is a conflict between the specific sections and general conditions of this policy, the conditions of the specific section shall prevail."

  42. SECTION III also contained - ENDORSEMENTS APPLYING TO ALL SECTIONS
  43. SECTION III – Endorsement No. 4 provided:-
  44. "Furthermore, it is understood and agreed that all Underwriters subscribing hereto will be subject to all terms, clauses, credits, allowances and wording as agreed by the Leading Underwriters (AIG, Swiss Re and Aegis Insurance Services) and it is agreed to follow automatically all additions and/or deletions and/or amendments and/or alterations of any description whatsoever therein, Underwriters hereon waiving advice hereunder and also to follow all claim settlements made by the Leading Underwriters of this policy (No. EL9801152) without exception.

    ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED."


     
    The Claimant's Case

  45. The claimant's case is as follows.
  46. The following are the only requirements for a valid declaration to the Open Cover which are material to the issues pleaded in this action:
  47. (a) An identifiable project must have reached or be reasonably expected within a reasonable time to reach any of the phases referred to in the fourth paragraph under the heading 'Individual Declarations' in clause 5 of GCIP Declarations, including the design and engineering phase.
    (b) The declaration must be made within the period of the Open Cover, but as regards all the defendants, a declaration is made at the time when it was made to the leading Underwriters (Swiss Re and AIG), irrespective of the time when it was advised or shown to the defendants.
    (c) The declaration must (i) be for an inception date selected at the option of the claimant, save that it must be within the period of the Open Cover, and (ii) be within a reasonable time before or after the declared inception date or the time when any part of subject-matter of the insurance has become at the risk of an Insured (whichever is later).
  48. For the purposes of the Open Cover, a project commences at the commencement of the earliest phase referred to in the fourth paragraph under the heading 'Individual Declarations' in clause 5 of GCIP Declarations, irrespective of the time when physical construction begins or is expected to begin.
  49. All of declarations 5, 12, 14 and 26 were validly made to the Open Cover.
  50. The Defendants' Case

  51. The defendants' case is as follows and they seek the following declarations:
  52. 1. That a declaration to the Open Cover would only give rise to a binding contract of insurance if the "project" the subject of the declaration actually commenced construction prior to the expiry of the Open Cover, the contract of insurance taking effect on the date of commencement of construction, and if the declaration was made no later than 30 days after the commencement of construction. For a project to have actually commenced construction, it was necessary for contracts to have been let to a contractor (probably the main contractor) and for physical construction work to have started by a contractor at the site or possibly on shore or to have been due to start imminently.

    2. Alternatively to 1, that a declaration to the Open Cover would only give rise to a binding contract of insurance at the date of declaration if, at that date, the "project" to which it related:

    (a) either had already actually commenced construction and the declaration was made no more than 30 days after the commencement of construction; or
    (b) was bona fide estimated to commence construction prior to the expiry of the Open Cover.

    3. If, and contrary to the Underwriters' primary case, on a true construction of clause 4 GCIP Declarations, a "project" is to be treated as having commenced at any stage earlier than the commencement of construction, that a declaration in respect of such a "project" was required to be declared, if to be insured, no later than 30 days after such commencement.

    4. That, in order to make a contract of insurance with an underwriter subscribing to the Open Cover, a declaration was required to be made to such underwriter prior to the expiry of the Open Cover, the declaration to such underwriter being the means by which a contract of insurance would be made with him.

    The Witnesses

  53. Of the claimant's factual witnesses Mr William Siebenaler, Mr David Brown and Mr Michael Mangino were called to give evidence. The witness statements of Mr John Green, Mr Bradley Jorgenson and Mr Colin Gordon were admitted by agreement under the Civil Evidence Act. The statement of Mr Luyties was admitted under the Civil Evidence Act.
  54. The defendants called Mr Andrew Pembroke to give evidence.
  55. The witness statements contained a considerable amount of material that was inadmissible (e.g. declarations of subjective intent). The parties suggested that it was more efficient in terms of time to leave arguments about admissibility to final speeches, and this course was followed.
  56. I was assisted by the evidence from the claimant's witnesses as to the progress of the four sample transactions and by Mr Siebenaler's evidence as to the stages/phases of projects in general.
  57. To the extent that Mr Pembroke sought to explain what he thought the policy was intended to cover, this was inadmissible. Further Mr Sumption QC demonstrated in cross-examination of Mr Pembroke that a number of the broad statements in Mr Pembroke's evidence were not justified. Further Mr Pembroke had only seen one facultative /obligatory open cover (the Open Cover) in 14 years. Mr Pembroke's evidence by way of broad generalisation as to facultative placements was not consistent with certain sample risks written by him and others.
  58. The Expert Evidence

  59. The claimant called Mr Peter Coffey as an expert witness. The defendants called Mr Christopher Compton-Rickett as an expert witness.
  60. I will refer to the expert evidence below.
  61. The Claimant's Submissions

  62. Mr Jonathan Sumption QC for the claimant submitted as follows.
  63. The preliminary issues fall to be decided by (i) construing the language of the Open Cover and (ii) implying such further terms, and only such further terms, as are required by law or truly necessary to make the express terms workable. The relevant background is the practicalities of offshore construction in the oil and gas industry. For the limited purpose of dealing with the procedure for operating the Open Cover, the background also includes the practices of the insurance market. That is all.
  64. The question - at what stage of a project may it be declared to the Open Cover?, is answered by the express terms of the contract and by certain basic principles of insurance law. In summary, the position is as follows:
  65. (1) Insurance is available under the Open Cover in respect of 'projects'. There must therefore be an identifiable 'project' in existence at the time of the declaration to which it relates. But for this purpose the project means the entire project, including all the phases said to make up the 'Insured Project' in para. (6) of the Period of Insurance clause. There is nothing in the contract and no need to imply any restriction which would tie the making of declarations to any particular phase.

    (2) A declaration must be made either before, or within a reasonable time after, the contract attaches to any part of the subject-matter, and in any event before a known loss. For this purpose, the contract attaches to a part of the subject-matter at such time on or after the declared inception date as it becomes at an Insured's risk.

    (3) In addition, under the general law, the Insured must, at the time of the declaration, either have an insurable interest at risk or reasonably expect to acquire one.

  66. A declaration must be made during the period of the Open Cover, i.e. in the case of offshore risks between 1 January 1999 and 30 June 2000. The making of a declaration is matter of market procedure. What constitutes a declaration and when it is treated as having been made are questions which must be answered either by the express terms of the Open Cover, or by the practice of the market in which the declaration is made:
  67. (1) The effect of the Leading Underwriter endorsement to the Policy is that a declaration to the Open Cover is validly made to all insurers if it is validly made to the leading underwriters, Swiss Re and AIG. This is because the endorsement authorises them to deal with the administration of the Cover on the market's behalf including 'additions' to the Cover, which include declarations. As a matter of practice it will then be advised to the following market in due course.

    (2) If, however, this is wrong, and the contract is silent on the point, then the declaration must be shown or advised to every insurer, but where the Cover is obligatory on the Insurer's side, the market procedure is that there is a single date, namely the date of declaration to the leaders, on which the declaration is treated as being made to the whole market. This is not because the leading underwriters have any authority on behalf of the followers. It is simply because where the declaration process extends over a period of time, the date on which it is made to the leaders fixes the date of the declaration.

  68. Subject to these points:
  69. (1) The commencement of the project (however defined) is irrelevant to the right to make a declaration.

    (2) It is not necessary for the commencement of the project (however defined) to fall within the period of the Open Cover.

  70. Clause 4 of GCIP Declarations (Automatic Acquisition) is irrelevant to the issues now before the Court. It is not intended to restrict declarations to a period before 30 days have elapsed from the 'commencement of the project' (however defined). It is simply a limited additional facility by which certain risks may be insured and losses recoverable without a declaration.
  71. The parties to the London Cover (D8 and D9) were in a special position by comparison with the other defendants, because Aon was their agent for the purposes of administering that cover. The agreement between them and Aon was that declarations to the Open Cover were to be administered under the machinery agreed for the London Cover, which involved periodic bordereaux.
  72. All of the four sample projects were declared to the Open Cover during the Period of Insurance defined by the Policy and at a stage when interests insured under the Open Cover terms were at risk. In three of the four cases significant further interests were believed to be about to become at risk. These projects were declared to the leading underwriters (as well as to certain of the followers) before the expiry of the Open Cover. They were all perfectly proper declarations and ought to have been accepted as such. The actual reason for their rejection appears to have had nothing to do with the issues presently under consideration, but to have arisen wholly from the Insurers' view that there was a premium income limit on what could be declared over the life of the Cover.
  73. The Defendants' submissions

  74. Mr Mark Howard QC for the defendants submitted as follows.
  75. The need for commencement of construction within the period of the Open Cover

  76. The Open Cover needs to be construed by reference to its commercial background and purpose.
  77. The classic purpose of Construction All Risks insurance is to provide insurance against physical loss or damage to the works being executed and liabilities which may be incurred in the course of the execution of the construction.
  78. In a facultative placement, the parties define the moment when these risks are expected to arise. That can be done by reference to a specific calendar date related to when parts and materials are first at risk or, commonly, a particular stage of the project when parts and materials are expected to come at risk, e.g. commencement of works, commencement of fabrication, commencement of procurement, first letting of contracts.
  79. It would have been a most surprising omission for the parties to the Open Cover to have failed to identify the stage of a project when insurance was required and the project should become declarable and to have left this wholly to BP's discretion. For the purposes of the risks to be insured under the Open Cover, the parties chose a touchstone or trigger which is well known and often used in the insurance of construction risks, the commencement of construction. This is evident from the questionnaires which define the "project period" i.e. the period for which CAR insurance is required and Clause 4 GCIP Declarations. The facility was designed to cover projects which (i) commenced construction during the period of the Open Cover and (ii) were declared to the underwriters during that period i.e in both cases no later than 30 June 2000. It then covered those projects until their conclusion, notwithstanding that that might be long after the expiry of the Open Cover.
  80. Thus, the Open Cover allowed BP, within these parameters, a complete discretion as to which construction projects should be insured and provided that BP obtained for such projects declared within the Open Cover, a fixed premium rate and fixed conditions. In that way it did provide BP with considerable flexibility in that it avoided the need for individual underwriting decisions to be made in respect of each project. That was very valuable but that was the limit of the intended flexibility.
  81. In particular, the purpose of the Open Cover was not to allow BP to declare projects which had not reached the stage at which insurance was normally required and were represented to be required by the draft questionnaires. Is purpose was not to allow BP to make declarations prematurely merely because the rates/terms under the Open Cover were likely to be more favourable than those obtainable elsewhere after the expiry of the Open Cover, when the need or requirement for insurance in relation to a particular project might arise.
  82. Therefore, on its true construction, a declaration to the Open Cover would only give rise to a binding contract of insurance if the "project" the subject of the declaration actually commenced construction prior to the expiry of the Open Cover, the contract of insurance taking effect or attaching on the date of commencement of construction, and if the declaration was made no later than 30 days after the commencement of construction.
  83. Accordingly, the defendants are not liable in respect of any of the 4 sample projects – not one commenced construction within the period of the Open Cover.
  84. Alternatively, a declaration to the Open Cover would only give rise to a binding contract of insurance at the date of declaration if, at that date, the "project" to which it related :
  85. (a) either had already actually commenced construction and the declaration was made no more than 30 days after the commencement of construction; or

    (b) was bona fide estimated to commence construction prior to the expiry of the Open Cover.

  86. Accordingly, the declarations in respect of the 4 sample projects are invalid because:
  87. (a) It is common ground that none of Valhall, Nam Con Son and Nakika was estimated to commence construction within the period of the Open Cover at the date of declaration to any of the underwriters;

    (b) King Field was not estimated to commence construction within the period of the Open Cover at the date of declaration to the defendant underwriters, in so far as it was declared to them.

    The need for declaration no later than 30 days after commencement

  88. If, and contrary to the underwriters' primary case, on a true construction of clause 4 GCIP Declarations, a "project" is to be treated as having commenced at any stage earlier than the commencement of construction, a declaration in respect of such a "project" was required to be declared, if to be insured, no later than 30 days after such commencement.
  89. This invalidates each of the declarations in respect of the sample projects in that, on BP's case, each "commenced" outside this 30 day period.
  90. The need for declarations to be made to each underwriter

  91. In order to make a contract of insurance with an underwriter subscribing to the Open Cover, a declaration was required to be made to such underwriter prior to the expiry of the Open Cover, the declaration to such underwriter being the means by which a contract of insurance would be made with him.
  92. The leading underwriter endorsement did not provide for declarations to be made to the leading underwriters only or indeed even relate to the declaration process.
  93. As to the 2 underwriters who subscribed the Open Cover via the London Cover, the terms of the London Cover did not alter the position that declarations were required to be made to them individually.
  94. There clearly is no market practice (as alleged) to the effect that declarations to the leading underwriter prior to the expiry of the Open Cover would be somehow treated as if made to the following market.
  95. Accordingly, BP was required prior to 30 June 2000 to declare projects if otherwise properly declarable to each underwriter in order to bind that underwriter. This is not a "technical" point as alleged by BP - unless relying on the pre-conditions to cover is "technical"! It is simply a reflection of the period of the validity of the cover. If BP and its agents failed to make declarations in time to any particular underwriter, that is its (or Aon's) fault. There is nothing "technical" in underwriters refusing declarations made out of time. BP cannot claim the benefit of the Open Cover when it had expired, whether by one day, one week, or one year.
  96. A declaration is required to be an unequivocal statement that a project is being declared and providing, as a minimum, an identification of the project, its nature and inception date.
  97. It is for BP to prove that each project was declared properly to each underwriter. If BP seek to rely on the 29 June 2000 document as a "declaration", such reliance is misplaced. That document was clearly not a declaration. Those underwriters who saw it were not provided with it as a declaration to them-it was not an unequivocal statement of a declaration. Moreover, it clearly was not intended as such, not being on the usual form and not containing the information essential for the purpose.
  98. Therefore, in a large number of cases, in so far as declarations to the defendant underwriters were made, these were made outside the period of the Open Cover. Accordingly, in such cases, the purported declarations do not evidence or contain the terms of any binding contracts of insurance.
  99. Analysis and Conclusions

    The principles by which contractual documents are construed

  100. In I.C.S. Ltd v West Bromwich B.S. [1998] 1 WLR 896 at 912 Lord Hoffmann summarized the principles by which contractual documents are construed as follows:
  101. "I do not think that the fundamental change which has overtaken this branch of the law, particularly as a result of the speeches of Lord Wilberforce in Prenn v. Simmonds [1971] 1 W.L.R. 1381, 1384-1386 and Reardon Smith Line Ltd. v. Yngvar Hansen-Tangen [1976] 1 W.L.R. 989, is always sufficiently appreciated. The result has been, subject to one important exception, to assimilate the way in which such documents are interpreted by judges to the common sense principles by which any serious utterance would be interpreted in ordinary life. Almost all the old intellectual baggage of "legal" interpretation has been discarded. The principles may be summarised as follows:
    (1)    Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
    (2)    The background was famously referred to by Lord Wilberforce as the "matrix of fact," but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
    (3)    The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
    (4)    The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax. (see Mannai Investments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd. [1997] 2 WLR 945
    (5)     The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in The Antaios Compania Neviera S.A. v. Salen Rederierna A.B. 19851 A.C. 191, 201:
     ". . . if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense." "

  102. In Youell and Others v Bland Welch & Co Ltd and Others [1990] 2 Lloyd's Rep 423, Phillips J held that the slip was inadmissible as an aid to construction of the policy. He said at pages 428–9:-
  103. "The drafting of the slip formed no part of the relevant matrix in this case. That matrix was the background to the commercial adventure that formed the subject matter of the contract, not the mechanism by which the parties set about negotiating and reaching agreement. ...the strict application of the parol evidence rule has a particular justification in a case such as the present. An insurance slip customarily sets out a shorthand version of the contract of insurance, in terms which may be neither clear nor complete. Where, as here, the slip provides for the formal wording to be agreed by the leading underwriter, the other subscribers to the risk anticipate and agree that the leading underwriter will, on their behalf, agree the final wording of the slip and that of the formal contract which is embodied in the policy give rise to the possibility that the natural meaning of the slip differs from that of the policy, the natural assumption is and should be that the wording of the policy has been designed the better to reflect the agreement between the parties. To refer to the slip as an aid to the construction of the policy runs counter to one of the objects of replacing the slip with the policy."
  104. The Court of Appeal ([1992] 2 Lloyd's Rep 127) rejected the submission by the defendants that the Court was entitled to look at the slip in order to resolve any areas of doubt that arose on the wording of the policy.
  105. Staughton LJ said at page 133 – 134:-
  106. "It is now, in my view, somewhat old-fashioned to approach such a problem armed with the parol evidence rule, that evidence is not admissible to vary or contradict the words of a written contract. The modern approach of the House of Lords is that, on the positive side, evidence should be admitted of the background to the contract, the surrounding circumstances, the matrix, the genesis and aim. Almost every day in these courts there is a contest as to what comes within that description . As Lord Wilberforce said in Reardon Smith Line Ltd v Hansen-Tangen [1976] 2 Lloyd's Rep 621 at page 624, col 2; [1976] 1 WLR 989 at page 995, the expression "surrounding circumstances" is imprecise. But so to some extent is "matrix", if I may say so, although it is a picturesque metaphor. It may well be that no greater precision is possible. The notion is what the parties had in mind, and the Court is entitled to know, what was going on around them at the time when they were making the contract. This applies to circumstances which were known to both parties. And to what each might reasonably have expected the other to know.
    The negative aspect of the modern doctrine is that evidence of negotiations is not admissible as an aid to interpretation, at all events unless they show an agreed meaning for the language used. In Prenn v Simmonds [1971] 1 WLR 1381 at page 1384 Lord Wilberforce said
    "There were prolonged negotiations between solicitors, with exchanges of draft clauses, ultimately emerging in clause 2 of the agreement. The reason for not admitting evidence of these exchanges is not a technical one or even mainly one of convenience, (though the attempt to admit it did greatly prolong the case and add to its expense). It is simply that such evidence is unhelpful. By the nature of things, where negotiations are difficult, the parties' positions, within each passing letter, are changing and until the final agreement, though converging, still divergent. It is only the final document which records a consensus. If the previous documents use different expressions, how does construction of those expressions, itself a doubtful process, help on the construction of the contractual words? If the same expressions are used, nothing is gained by looking back; indeed, something may be lost since the relevant surrounding circumstances may be different."
    It can be argued that an insurance slip is different from negotiations for the formation of a contract. It contains a concluded agreement between the parties, albeit one which they may expect, and even agree, to replace by different wording in a formal contract. The nature of the problem which then arises is clearly illustrated by the present case...
    ...somebody, for some reason, has transferred the term as to 48 months from Period to Interest. But that is no help at all. Even if one could confidently discern what the words meant in the slip – which I do not think one can – there would remain the possibility, and perhaps even a probability, that the parties wished to alter that meaning when they prepared and agreed the policy. It is not argued that the leading underwriter had no authority to do so on behalf of the others.
    I accordingly would hold that the slip, whether admissible or not, is of no assistance in this case."
  107. Beldam LJ said at page 141:-
  108. "Although the slip initialled by underwriters the original agreement between the parties, if it contains words showing an intention that the terms will subsequently be incorporated into a policy form, when the policy has been issued it is the policy and not the slip which constitutes the contract or agreement between the parties. Reinsurers who invited the learned Judge to have regard to the wording of the slip as an aid to the interpretation of the contract did not seek rectification. The slip is clearly admissible in evidence for some purposes. Section 89 of the Marine Insurance Act 1906 provides that reference may be made "as heretofor" to the slip or covering note in any legal proceeding.
    If prior to the passing of the Marine Insurance Act 1906, the slip was not admissible to explain or in any way affect the construction of the policy, in my judgment it was not admissible for the purpose of affecting the construction of the policy in question in this case.
    If reinsurers had sought rectification because the policy omitted a term contained in the slip and intended to be incorporated into the subsequent policy, no doubt the Court would have looked at the slip as a document in which the parties had originally recorded their agreement. But that is not the case here and in my judgment the slip was not admissible as an aid to the construction of the reinsurance contract."
  109. In New Hampshire Insurance Co v MGN Ltd [1997] 1 L.R.L.R. 24 at pages 53-54, Staughton LJ (giving the judgment of the Court) said this:-
  110. "Secondly, it was submitted that, once a policy has been issued, its terms are conclusive evidence of the contract between the parties unless and until it is altered by the process of rectification. That can happen by agreement of the parties or by order of a Court but not otherwise. And there has been no application for rectification in this case.
    This doctrine is said to be supported by Youell v Bland Welch & Co Ltd (No. 1) [1990] 2 Lloyd's Rep 423 and Punjab National Bank v de Boinville [1992] 1 Lloyd's Rep 7. But in our opinion those cases are concerned with the situation where a policy has been agreed to by the parties. In those circumstances the policy will, at any rate in the ordinary way, be conclusive evidence of the contract unless and until it has been rectified; the slip cannot be used to add to, explain or contradict the meaning of the policy. That is not this case. Here the issue is whether the policy ever was agreed to. The insurers cannot pre-empt the answer to that question by the unilateral act of issuing it. That was the reasoning of Mr Justice Potter, and we agree with it."
  111. In HIH Casualty and General Insurance Ltd v New Hampshire Insurance Co and Others [2001] 2 Lloyd's Rep 161, Rix J after referring to Youell v Bland Welch, Punjab National Bank v de Boinville [1992] 1 Lloyd's Rep 7 (Hobhouse J), St Paul Fire & Marine Insurance Co (UK) Ltd v McConnell Dowell Constructors Ltd [1993] 2 Lloyd's Rep 503 (Potter J) and New Hampshire Insurance Co v MGN Ltd, said at page 179:-
  112. "In principle, it would seem to me that it is always admissible to look at a prior contract as part of the matrix or surrounding circumstances of a later contract. I do not see how the parol evidence rule can exclude prior contracts, as distinct from mere negotiations. The difficulty of course is that, where the later contract is intended to supersede the prior contract, it may in the generality of cases simply be useless to try to construe the later contract by reference to the earlier one. Ex hypothesi, the later contract replaces the earlier one and it is likely to be impossible to say that the parties have not wished to alter the terms of their earlier bargain. The earlier contract is unlikely therefore to be of much, if any, assistance. Where the later contract is identical, its construction can stand on its own feet, and in any event its construction should be undertaken primarily by reference to its own overall terms. Where the later contract differs from the earlier contract, prima facie the difference is a deliberate decision to depart from the earlier wording, which again provides no assistance. Therefore a cautious and sceptical approach to finding any assistance in the earlier contract seems to me to be a sound principle. What I doubt, however, is that such a principle can be elevated into a conclusive rule of law. Where, however, it is not even common ground that the later contract is intended to supersede the earlier contract, I do not see how it can ever be permissible to exclude reference to the earlier contract. I do not see how the relationship of the two contracts can be decided without considering both of them. In essence there are, it seems to me, three possibilities. Either the later contract is intended to supersede the earlier, in which case the above principles apply. Or, the later contract is intended to live together with the earlier contract, to the extent that that is possible, but where that is not possible it may well be proper to regard the later contract as superseding the earlier. Or the later contract is intended to be incorporated into the earlier contract, in which case it is prima facie the second contract which may have to give way to the first in the event of inconsistency. I doubt that it is in any event possible to be dogmatic about these matters. Is the insurance context different? Is the case of a slip followed by a policy a special case? First, it may be said that where a slip is followed by a policy there will usually be an intention to supersede the slip by the policy. That was the situation which was common ground in Youell's case etc. Secondly, the considerations mentioned by Phillips J, such as the fact that slips customarily set out the contract in shorthand in a way that is neither clear nor complete, will in general promote and underline the inutility of seeking to find in the slip an aid to the construction of the policy. Beyond that, however, I am doubtful that it is at all helpful to go."
  113. In the present case:-
  114. 1. I apply the principles summarized by Lord Hoffmann in ICS Ltd v West Bromwich B.S., to the construction of the 57 pages of the policy (contained in the Binder/Global Construction Insurance Policy).

    2. It is common ground that the policy was intended to and did supersede the slip.

    3. The placing information was not incorporated into the policy (see MacGillivray on Insurance Law 10th edn p. 287).

    4. The policy was available to an extremely wide range of Insureds (see GCIP Declarations clause 1). In commercial terms potential Insureds (other than BP) would expect to be able to, and would need to be able to, ascertain the meaning of the policy without reference to other materials.

    5. I refer below to the background knowledge which would reasonably have been available to the parties at the time of the contract.

  115. For convenience I continue to refer to the policy (contained in the Binder/Global Construction Insurance Policy) as the Open Cover.
  116. The legal principles that govern the Open Cover

  117. The Open Cover was a standing offer whereby the defendants agreed to accept liability in respect of any declarations made within the terms of the cover (Citadel Insurance Co v Atlantic Union Insurance Co SA [1982] 2 Lloyd's Rep 543 at 547, Kerr LJ).
  118. The facultative/obligatory nature of the Open Cover imposed no restriction on the claimant's right to choose whether or not to declare a project (Phoenix General Insurance Co of Greece SA v Halvanon Insurance Co Ltd [1985] 2 Lloyd's Rep 599 at 612, Hobhouse J).
  119. When a declaration was made by the claimant under the Open Cover within the terms of the cover, a contractually binding obligation was created (Citadel at page 548, Kerr LJ). A declaration within the terms of the cover constituted an acceptance of the standing offer contained in the Open Cover.
  120. In the facultative/obligatory type of cover the making of the declaration attaches the risk to the cover. If the risk declared is within the terms of the cover there is no need for any specific acceptance by the underwriter, but an underwriter is not bound until receipt of the declaration (The Beursgracht [2002] 1 Lloyd's Rep 574 at 579, Tuckey LJ).
  121. A declaration serves to inform the underwriter of what risks have attached to the cover and enables him to calculate as necessary and collect the premium due (The Beursgracht at page 579, Tuckey LJ) (and serves other purposes identified by Mr Compton-Rickett – see below).
  122. Where numerous insurers subscribe a risk, there is in law a distinct contract between the insured and each insurer. In the case of declarations under the Open Cover, each declaration to an underwriter within the terms of the cover created a distinct contract between the insured and the particular underwriter. The GCIP provided under the heading "Security":-
  123. "SEVERAL LIABILITY NOTICE...
    The subscribing insurers' obligations under contracts of insurance to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscribing insurers are not responsible for the subscription of any co-subscribing insurer who for any reason does not satisfy all or part of its obligations."

    The true construction of the policy

  124. I turn to consider the true construction of the policy.
  125. At what stage of a project could declarations be made to the Open Cover?

  126. It was part of the background knowledge reasonably available to the parties that an offshore project (including an oil and gas project) will proceed through a number of stages which will include "engineering, design, manufacture, procurement, storage, prefabrication, fabrication, assembly, construction or repair, float-out, load-out, lifting, installation or reinstallation, hook-up, pipe laying, tie-in, start-up, commissioning, testing, trials, performance testing, existence, modification, drilling, completion and partial/initial operating phases and declared maintenance period" (see GCIP Declarations clause 5(6)).
  127. Internal processes within oil companies and other commercial entities differ. In 1998 the Amoco Common Process ("ACP") was a five-stage gated business process. The ACP started with a clearly articulated business strategy. A project team, led by a Project General Manager used the ACP to make sure a project was aligned with the business strategy. Project teams were cross-functional. They included, as appropriate, individuals from different business groups/business units, shared services, joint ventures, vendors and contractors. The five stages of the ACP were Appraise, Select, Define, Execute and Operate. Mr Siebenaler explained that engineering would take place during the first four phases and could extend into the fifth phase (Operate). Design is linked to engineering. Most design activity occurs in the Appraise, Select and Define stages. Manufacture occurs in the Define and Execute stages. Manufacturing at a factory can take place during the Define stage.
  128. It does not of course follow that BP's internal procedures were the same as Amoco's (prior to the merger). Co-venturers (for example Shell) had different internal procedures.
  129. The background knowledge which would reasonably have been available to the parties also included the knowledge that one or more of a number of alternative contractual arrangements might be involved in a particular project. Mr David Sharp in 'Offshore Oil and Gas Insurance' 1994 at page 114 referred to the turnkey contract, the EPIC (Engineering, Procurement, Installation and Construction) contract, sub-contracts with specialists, and the appointment of a specialised Project Manager to manage the letting of all contracts on behalf of the operator. This should not be taken as a comprehensive list of possible contractual arrangements.
  130. A striking feature of the Open Cover is the width of its ambit. I refer by way of example (but without limitation) to the following:-
  131. (i) The width of the definition of Principal Insured(s) (BP Amoco and/or all subsidiary, affiliated, associated and inter-related companies of every tier, their shareholders, directors, officers and employees and at the option of BP Amoco co-venturers, project managers, financiers declared each underlying declaration) in GCIP Declarations clause 1.

    (ii) The width of the definition of Other Insured(s) (any other parties may be declared including but not limited to contractors, sub-contractors, architects, engineers and consultants, suppliers, agents, manufacturers, vendors, licensors, limited to the Principal Insured's obligations to assume the liability of or provide insurance as afforded by the policy to such parties) in GCIP Declarations clause 1.

    (iii) The width of the definition of project eligibility (Automatic for all projects of whatsoever nature) in GCIP Declarations clause 3.

    (iv) The width of the phrase "all operations" in the GCIP Declarations Period of Insurance clause 5(3).

    (v) The width of the places at which the "Insurance shall apply" (at all times including while at temporary sites, pre-fabrication sites, fabrication yards, Contractors and/or Sub-Contractors premises (and/or Manufacturers and/or Suppliers and/or Vendors premises if mutually agreed by the Insured and Underwriters and declared), construction sites and offshore sites) in the GCIP Declarations Period of Insurance clause 5(6).

    (vi) The width of the stages/phases during which the insurance will be in force (the engineering, design, manufacture, procurement, storage, prefabrication, fabrication, assembly, construction or repair, float-out, load-out, lifting, installation or reinstallation, hook-up, pipe laying, tie-in, start-up, commissioning, testing, trials, performance testing, existence, modification, drilling, completion and partial/initial operating phases and declared maintenance period of the Insured Project or otherwise) in GCIP Declarations Period of Insurance clause 5(6).

    (vii) The reference to any part(s) of the subject matter(s) of the insurance, in storage, ashore or afloat, loading, unloading and in transit, in GCIP Section 1 Part A clause 2(B).

    (viii) The width of the Property Insured (property of every kind and description including the works infrastructure, auxiliary facilities and temporary works...all materials, components, parts, machinery, fixtures, spare pipe, equipment or any other property destined to become a part of the completed project, or used up or consumed in the completion of the project, complete with all plant, equipment, machinery, materials, outfit and all property associated therewith whether intended to form a permanent part of the works or not, including site preparatory work...) in GCIP Section 1 Part A clause 3(A).

    (ix) Extensions of coverage in GCIP Section 1 Part A clause 4 including (in sub-paragraph D) physical loss or damage to plans, blueprints, drawings, renderings, specifications or other contract documents and models.

    (x) The width of the Faulty Design Clause 6 in GCIP Section 1 Part A.

    (xi) The width of GCIP Section II Third Party Liability cover including (without limitation) the reference to the Insured's "operations" in (B) and the terms of the Principal Insured (and other Contractor's) Property and/or Personnel Clause.

    (xii) The width of "Cargo" at page 3 of the Binder.

  132. The Open Cover should not be construed by reference to what are said to be typical terms of forms of Construction All Risks insurance (placed facultatively). The Open Cover contained a standing offer in exceptionally wide terms and should be construed by reference to its particular terms. The standing offer was unique and was plainly designed to give BP very considerable flexibility. No doubt the defendants were concerned to attract such business in 1999 at the rates provided for.
  133. Central to the defendants' case is the submission that for the purposes of the risks to be insured under the Open Cover, the parties chose a trigger, "the commencement of construction". The defendants rely on clause 4 of GCIP Declarations in support of their contention that the facility was designed to cover projects which (i) commenced construction during the period of the Open Cover and (ii) were declared to the underwriters during the period i.e. in both cases no later than 30 June 2000. The defendants' case is that while clause 4 of GCIP Declarations afforded BP the additional benefit of a held covered provision for 30 days by way of protection, if for any reason BP failed to declare the commencement of the project (i.e. of construction) before it commenced, it had a 30 day window after commencement in which to make its declaration. I do not accept these submissions.
  134. What is declared is a 'project'. Project eligibility was automatic for all projects of whatsoever nature (GCIP Declarations clause 3). Clause 5 of GCIP Declarations provided at paragraph (6) that the insurance will be in force during the "engineering, design, manufacture, procurement, storage, prefabrication, fabrication, assembly, construction or repair, float-out, load-out, lifting, installation or reinstallation, hook-up, pipe laying, tie-in, start-up, commissioning, testing, trials, performance testing, existence, modification, drilling, completion and partial/initial operating phases and declared maintenance period of the Insured Project". These words would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties, all stages/phases of an offshore project (of whatsoever nature) from engineering/design to maintenance. The parties would have appreciated that a project might well (but would not necessarily) proceed through the stages/phases in the order in which they were listed in clause 5(6).
  135. It is to be noted that "Other Insured(s)" include architects and engineers who would be concerned in the earlier phases.
  136. I have already pointed out that GCIP Section 1(A) insures plans, blueprints, drawings, renderings, specifications or other contract documents and models. Plans etc could be insured at any time during the Period of Insurance (as defined in clause 5 GCIP Declarations) for the interest of BP, or for the interest of architects or engineers if declared as "Other Insured(s)" in accordance with GCIP Declarations clause 1.
  137. GCIP Section II – Third Party Liability insures liabilities arising from or occasioned either directly or indirectly by the Insured's operations in connection with the Insured Project or parts thereof, which may give rise to an insured liability during any of the stages/phases referred to in clause 5(6) of GCIP Declarations. Liabilities referred to in the Principal Insured (and other Contractor's) Property and/or Personnel Clause could arise during the engineering, design, manufacture, procurement, storage, prefabrication, fabrication, assembly etc stages/phases.
  138. The background knowledge which would reasonably have been available to the parties included the knowledge that offshore construction projects are highly complex. In 'Offshore Oil and Gas Insurance' Mr Sharp observed at page 135:-
  139. "Period
    For an operation as complex as an off-shore construction project it is impracticable to point to one moment in time when the underwriters' risk commences. The issue is overcome by agreeing a date when the policy will incept, which is usually at some time prior to the commencement of procurement of materials and allowing underwriters' risk to attach in respect of each separate part or item when such items become at the risk of any insured party, whenever that may be subsequent to the date of inception."
  140. The specimen contract at page 421 of Mr Sharp's book provides "This Policy attaches from the date of letting the first contract or on XXX whichever is the earlier, and insures in respect of each part item or portion of the subject matters of this insurance which is at the risk of an Assured at inception or which becomes at risk of an Assured after inception...".
  141. In the present case the inception date of the contract of insurance created by a declaration was "as declared" (clause 5(3) of GCIP Declarations). Thus the inception date was a date selected by the Insured. The policy did not require it to correspond to any particular stage of the Insured project. Clause 5(3) provided that from inception (as declared) there would be insured "each part, item or portion of the subject matters of this insurance from the time of becoming at the risk of an Insured hereunder...". The declared inception date could be at any date during the Period of Insurance defined by clause 5(6). I have already emphasised the width of the terms of the standing offer contained in the Open Cover in other respects. The provision as to declared inception is another example of the flexibility afforded to BP (and others) by the terms of the policy. I stress the significance of clause 5(3). From inception (as declared by BP) each part etc was insured from the time of becoming at risk of an Insured. In an operation as complex as an offshore construction project numerous different parts, items or portions of the subject matters of the insurance would become insured from different times.
  142. I turn to consider clause 4 of GCIP Declarations which I repeat for convenience:-
  143. "4. AUTOMATIC ACQUISITION
    Erection All Risk, Related Delay in Start-Up and Third Party Liability
    All projects shall automatically be held covered hereunder for a period not exceeding thirty (30) days from the commencement of said project. Coverage beyond this initial period shall be extended only upon declaration of the project and payment of any premium due thereon from the commencement of said project.
    Cargo and Related Delay in Start-Up
    All applicable projects to be declared hereunder prior to attachment of coverage."
  144. In 'Offshore Oil and Gas Insurance' at page 245, when considering platform insurance wordings, Mr Sharp wrote:-
  145. "A further additional provision is known as the "Automatic Acquisition" clause which secures a holding covered agreement automatically on new assets acquired by the assured. It is generally subject to a sub-limit and advice to insurers as soon as practicable with payment of a commensurate premium. There have been several instances where assureds have had to invoke this clause, where for example a take-over bid conducted in the strictest secrecy is concluded very quickly, leaving little time and information available to negotiate with insurers."
  146. Clause 4 must be construed in the context of the policy as a whole. Clause 4 was for the benefit of the Insured(s). It conferred additional coverage on the Insured(s). It operated as a fail safe provision to protect the Insured(s) in circumstances such as those described by Mr Sharp. Clause 4 on its true construction did not provide that BP would be barred from declaring a project to the Open Cover after 30 days from the commencement of the project. If it had been the intention to bar BP from declaring a project to the Open Cover after 30 days from the commencement of a project, very different language would have been required.
  147. The defendants' construction of the Automatic Acquisition clause does not sit easily with clause 5(3) which provides for inception (as declared).
  148. Clause 4 refers to "the commencement of the said project" and not to the commencement of physical construction. The stages/phases of the Insured Project are set in clause 5(6).
  149. It should be noted that the automatically held covered provision only applies to Erection All Risk, Related Delay in Start-Up and Third Party Liability. In the case of Cargo and Related Delay in Start-Up, all applicable projects had to be declared prior to attachment of coverage. There was no fail safe provision in these cases.
  150. The defendants' contention that the Automatic Acquisitions clause identified a 30 day period after which declarations could not be made would, if correct, lead to a result that was impracticable and uncommercial. I repeat Mr Sharp's observation:-
  151. "Period
    For an operation as complex as an off-shore construction project it is impracticable to point to one moment in time when the underwriters' risk commences. The issue is overcome by agreeing a date when the policy will incept, which is usually at some time prior to the commencement of procurement of materials and allowing underwriters' risk to attach in respect of each separate part or item when such items become at the risk of any insured party, whenever that may be subsequent to the date of inception."
  152. In the case of the Open Cover inception was from a date declared by BP. This was, as already pointed out, another example of the flexibility afforded to BP by the terms of the Open Cover.
  153. As to the time of interest:-
  154. "In marine insurance the insured must have an insurable interest at the time of the loss [Marine Insurance Act 1906 section 6(1)]. If so, it matters not that he had no interest at the time of contract or that since the time of the loss his interest has ceased. This rule probably applies to other kinds of indemnity insurance, with two qualifications. First, in all other kinds of insurance, at the time of making the contract of insurance the person making it must have had a reasonable expectation of acquiring an interest..." (Clarke 'The Law of Insurance Contracts' paragraph 4-4).
  155. The answer to the question - at what stage of a project could declarations be made to the Open Cover?, depends on the express terms of the policy and on basic principles of insurance law. I would answer the question as follows:
  156. (1) A declaration had to be made during the period of the Open Cover, i.e. in the case of offshore risks between 1 January 1999 and 30 June 2000 (GCIP Declarations clause 5(2)).

    (2) Insurance was available under the standing offer contained in the Open Cover in respect of projects of whatsoever nature. There must therefore have been an identifiable project in existence at the time of the declaration i.e. a project which had reached one or more of the stages/phases listed in GCIP Declarations clause 5(6), including engineering, design, manufacture, procurement, storage, prefabrication, fabrication, assembly and construction.

    (3) At the time of the declaration, the Insured(s) must have had an insurable interest at risk or must have had a reasonable expectation of acquiring such an interest.

    (4) The declaration had to be made for an inception date, selected at the option of the claimant, within the period of the Open Cover.

    (5) The insurance attached from inception (as declared) in respect of each part, item or portion of the subject matter of the insurance, from the time of becoming at the risk of the Insured(s) (GCIP Declarations clause 5(3)).

  157. I leave out of consideration any further limitations imposed by the general law to the effect that a declaration must be made before a known loss and related points, because such issues do not arise in the four sample transactions.
  158. The form of declarations to be made under the Open Cover

  159. The Open Cover was a standing offer whereby the defendants agreed to accept liability in respect of any declarations made within the terms of the cover. When a declaration was made by the claimant under the Open Cover within the terms of the cover to a particular defendant, a contractually binding obligation was created. There was no need for any specific acceptance by the underwriter but (unless the claimant's arguments as to the effect of the Leading Underwriters clause and the effect of the endorsement to the London Cover scratched on 21 July 1998 are correct), no underwriter was bound until receipt of a declaration by 30 June 2000.
  160. A declaration under the Open Cover had to contain certain minimum information including (i) the project being declared and (ii) the inception date (see the reference to "inception (as declared)" in GCIP Declarations clause 5 Period of Insurance (3)). The Binder provided that the required information for declared projects was "completed declaration [and] completed rating worksheet".
  161. The conclusion that a declaration had to contain certain minimum information was confirmed by Mr Coffey. Mr Coffey said that a declaration had to have a certain amount of minimum information including the inception date (which he described as "very critical") and enough information about the risk to identify it. When asked "So if what you state is, 'This is something I intend to declare', that to you would not constitute a declaration?" He answered "No...I would make a further enquiry to discover exactly what they mean by it, but of itself, no, I agree that it does not constitute a stand-alone declaration."
  162. The timing of declarations to the following market

  163. The claimant accepts that a declaration had to be made within the period of the Open Cover (i.e. between 1.1.99 and 30.6.00), but says that as regards all the defendants, a declaration was made at the time it was made to the Leading Underwriters (Swiss Re and AIG), irrespective of the time when it was received by the defendants.
  164. The defendants say that in order to make a contract of insurance with an underwriter subscribing to the Open Cover, a declaration was required to be made to such underwriter prior to the expiry of the Open Cover on 30.6.00, the declaration to such underwriter being the means by which a contract of insurance would be made with him.
  165. I repeat Endorsement number 4 for convenience:-
  166. "Furthermore, it is understood and agreed that all Underwriters subscribing hereto will be subject to all terms, clauses, credits, allowances and wording as agreed by the Leading Underwriters (AIG, Swiss Re and Aegis Insurance Services) and it is agreed to follow automatically all additions and/or deletions and/or amendments and/or alterations of any description whatsoever therein, Underwriters hereon waiving advice hereunder and also to follow all claim settlements made by the Leading Underwriters of this policy (No. EL9801152) without exception.
    ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED"
  167. It is necessary to distinguish between:-
  168. (1) changes to the terms of the standing offer contained in the Open Cover;

    (2) declarations accepting the offer contained in the Open Cover, attaching the risk to the cover; and

    (3) settlements.

  169. I emphasise the distinction between (1) and (2). Any change to the terms of the standing offer was a matter for negotiation. If the risk declared was within the terms of the cover, there was no need for any specific acceptance by the underwriter. The Open Cover was a standing offer whereby the defendants agreed to accept liability in respect of any declarations made within the terms of the cover. Whenever an individual declaration was made thereunder (accepting the standing offer), a contractually binding obligation was created between the Principal Insured(s) (and where applicable Other Insured(s)) and the defendants to whom it was declared.
  170. The claimant says (a) that the expression "terms, clauses, credits, allowances and wording as agreed by the Leading Underwriters" is a compendious phrase for the policy and (b) that a declaration is an "addition" to the policy, and as such binding on the whole market when made to the leaders. I do not accept that the word "addition" was intended to include declarations for the following reasons.
  171. The word "declaration" is a market term, with a meaning readily understood in the market. The word "declarations" appears throughout the policy. There are numerous examples. The first page of the Binder has a heading "Individual declarations". The third page of the GCIP is headed "Declarations". The word "declarations" is used several times in the Period of Insurance clause (clause 5 of GCIP Declarations) considered above. The word "declarations" is used in Endorsement number 1, in Endorsement number 2 and the foot of the page containing Endorsement number 4. Had it been the intention to include declarations within the terms of the Leading Underwriters clause, reference would have been made to "individual declarations hereunder".
  172. The words "terms, clauses, credits, allowances and wording" refer to the terms etc of the policy (containing the standing offer) and the words "all additions and/or deletions and/or amendments and/or alterations of any description whatsoever therein" refer to all additions/deletions/amendments/alterations to the terms etc of the standing offer contained in the policy.
  173. I draw particular attention to the words "Underwriters hereon waiving advice hereunder". It is understandable that underwriters should waive advice of changes to the terms etc of the Open Cover. A declaration, however, informs the underwriter what risks have attached to the cover and enables him to calculate as necessary and collect the premium due, to monitor his position in relation to premium income limits, to deal with accounting and other issues and to provide information to reinsurers. (See further Mr Compton-Rickett's evidence below). If the claimant's construction is correct and the word "additions" should be read as including "declarations hereunder", this would lead to the extraordinary result (in commercial terms), that the following market had waived advice of declarations.
  174. The Leading Underwriters clause is concerned with defining the leaders' authority to bind the following market to policy terms etc (and settlements) which the leaders agree. The Leading Underwriters clause was not concerned with declarations to the Open Cover.
  175. Mr. Coffey agreed that there is no difficulty in practice for a broker to deliver declarations to the whole market. He can send an e-mail or a fax to the whole market or he can go round the market and deliver the declaration at the relevant boxes/offices. Mr Compton-Rickett said that there was no problem in practice in making declarations to all underwriters concerned prior to the end of the period specified in an Open Cover. All it required was anticipation of the needs involved and ensuring that the declarations were made in a timely way.
  176. There was no need for any specific acceptance by an underwriter of a declaration, but he was not bound until receipt of a declaration within the terms of the cover, and declarations could not be made after 30.6.00.
  177. Market Practice

  178. In an amendment to Voluntary Particulars served as recently as 11 December 2002 the claimant alleged in the alternative that "as a matter of market practice, delivery of the declaration to the Leading Underwriters (Swiss Re and AIG) on or before 30 June 2000 constituted a valid declaration to the following market, including the first to ninth defendants".
  179. "If there is an invariable, certain and general usage or custom of any particular trade or place, the law will imply on the part of one who contracts or employs another to contract for him upon a matter to which such usage or custom has reference, a promise for the benefit of the other party in conformity with such usage or custom; provided there is no inconsistency between the usage and the terms of contract. To be binding however, the usage must be notorious, certain and reasonable, and not contrary to law; and it must also be something more than a mere trade practice" (Chitty on Contracts 28th edn 13-018).
  180. The claimant has not pleaded and does not rely on any custom, but on alleged market practice. Mr Sumption QC submitted that a market practice is not necessarily binding or invariable. It is simply a method of doing things in a particular market which is so common as to form part of the factual background against which the parties contracted. It is relevant in the present context because a declaration is a market procedure. What a declaration is, how it is made and when it is made are all questions to be answered by examining what the market procedures are.
  181. I prefer the evidence of Mr Compton-Rickett to that of Mr Coffey and find that there was no market practice or market procedure as alleged by the claimant. Mr Coffey was not able to point to any written reference to the alleged market practice in any market commentary, guide, training manual or elsewhere. I refer to Mr Compton-Rickett's evidence which I found to be more convincing in material respects than Mr Coffey's evidence.
  182. Mr Compton-Rickett said that he fundamentally disagreed with Mr Coffey's contention that there exists any market practice whereby, in the absence of specific prior agreement of participating underwriters to be so bound (whether through a leading underwriter clause or otherwise), declarations made to and accepted by the leading underwriters are automatically binding on any other underwriter.
  183. In his witness statement Mr Compton-Rickett said "I fundamentally disagree with Mr Coffey's assertion that there is a clear and invariable market practice that following underwriters would be committed to declarations made to the leading underwriters, so long as they received the declarations within a reasonable time thereafter. In my experience, there exists no "market practice" in these terms. Not only does such "invariable" market practice not exist, but I have never previously heard of such a suggestion. Given that in this case risks would be declared to the Open Cover which would not be of a uniform nature, the obligation to make the declarations to all of the underwriters assumes even greater importance. It is imperative that underwriters are informed about and are aware of the risks which they are being required to accept, whether this acceptance be obligatory or voluntary, for the reasons set out...below."
  184. Mr Compton-Rickett explained that underwriters have pressing needs and obligations for accurate and complete records of their underwriting commitments. They need a timely record of their line exposures and periods of coverage on individual risks, together with the relevant premium due. Whilst these needs may differ in minor respects from underwriter to underwriter, all would need to have accurate details for their reinsurers, for proper accounting, and for the control of accumulation of risk. In the case of Lloyd's underwriters there are strict requirements for the recording of these features and the authorities take an extremely serious view of those who fail to comply. It would therefore be unacceptable for Lloyd's underwriters to countenance a situation where they were unable to control the proper recording of risk details in the case of individual declarations.
  185. (For completeness I should record that I do not accept the answer given by Mr Compton-Rickett in cross-examination as to the legal position that follows when a declaration is made to the leading underwriters in time, but to the following market out of time. In the case of declarations under the Open Cover each declaration to an underwriter within the terms of the cover, created a distinct contract between the insured and the particular underwriter. But this reservation does not affect my overall assessment of Mr Compton-Rickett's evidence as set out above, which evidence was based on considerable experience in the market).
  186. The Eighth and Ninth Defendants

  187. The eighth and ninth defendants' agreement to participate in the Open Cover was effected through a broker's open cover, known as the Aon Energy Risks Cover (the "London Cover"). The London Cover was a permanent open contract commencing on 1 January 1998 pursuant to which the eighth and ninth defendants (each for a share of 5% of whole) agreed to accept participations of up to a maximum of 10% in respect of:
  188. 'all Aon Natural Resources Worldwide Business .. upon which Aon Natural Resources (Houston) receive instructions to provide coverage following all terms and conditions of insurances/reinsurances in respect of such business ('Main Placing') attaching for periods as required, not exceeding 36 months, and which cover any or all of the operations of assureds involved in or connected with the Oil and/or Gas and/or Energy and/or Marine and/or Sulphur and/or Uranium and/or Mining and/or Extraction and/or Exploration Industries in all or any of their phases onshore and/or offshore including associated support and service industries.'

  189. As the period of the Open Cover exceeded 12 months, the specific agreement of the eighth and ninth defendants to its declaration to the London Cover was required. This was initially obtained on 8 and 9 September 1998 (at which time the declaration to the London Cover was numbered 64). It subsequently was re-numbered, and became declaration 111 to the London Cover.
  190. The 'Conditions' clause of the London Cover provides, inter alia:
  191. 'Agree accept Declarations subject to all terms, clauses, conditions, wordings, policies, additions, deletions, agreements, amendments, extensions, alterations, additional and return premiums, warranties, survey provisions, individual profit commissions or other premium allowances, held covered arrangements and all other stipulations and provisions of 'Main Placing' and furthermore to pay costs and expenses as 'Main Placing' and to follow payments, settlements and decisions of Underwriters thereon in every respect.
    ...
    Premium hereon to be signed to Underwriters on Monthly Bordereau(x) (Paid & declared)
    All declarations to comply with War etc. Exclusion/cancellation/ termination provisions (as applicable) in line with current Market Agreements. Each declaration complying with the foregoing shall attach hereunder automatically subject only to advice to Underwriters hereon prior to attachment date or within 14 days thereof.
    Declarations to be retained in the offices of Aon Group Ltd.'

  192. The 'Main Placing' means the placing of the remaining 90%. In the case of Declaration No. 111 to the London Cover, this was the Open Cover.
  193. Under the express terms of the London Cover, the eighth and ninth defendants were therefore bound by "all terms, clauses, conditions, wordings, policies' and 'all other stipulations and provisions of the 'Main Placing' ".
  194. The terms of endorsement to the London Cover scratched by the eighth and ninth defendants on 21 July 1998, noted that:
  195. 'For sake of good order, it is understood and agreed Underwriters hereon to be advised only of any additions, deletions, agreements, amendments, extensions, alterations to main placement(s) generating premium transaction(s).
    All other terms clauses and conditions remaining unchanged'.
  196. If (as I find) a declaration under the Open Cover had to be received by 30.6.00 by each underwriter (as opposed to the Leading Underwriters only), the question arises whether a different answer applies in the case of the eighth and ninth defendants by virtue of the terms of the London Cover?
  197. Mr Sumption submitted as follows. Under the terms of the London Cover, the eighth and ninth defendants had already agreed to be subject automatically to any 'additions' and 'extensions' to the Main Placing. The effect of the endorsement scratched on 21 July 1998 is not "entirely clear", but it cannot have been intended simply to repeat what was already in the London Cover. Its object must have been to incorporate declarations under the 'Main Placing' into the contractual machinery for administering the London Cover. This would mean that declarations to the Open Cover would fall to be retained at Aon's offices, and 'advised only' to the eighth and ninth defendants, in the event that they generated premium. That advice was effected by the same periodic bordereaux used to advise declarations to the London Cover. The London Cover was not a contract to which BP was a party. It was a contract between the eighth and ninth defendants and Aon, under which Aon was empowered as the agent of D8 and D9 to bind them to specified classes of insurance contract and to provide certain ancillary services in the administration of the cover and the business generated by it. Aon accordingly had a dual function as both agent for D8 and D9 under the Open Cover and agent for BP Amoco. So far as the eighth and ninth defendants are concerned, a declaration to Aon was a declaration to their agent.
  198. I do not accept the claimant's submissions in relation to the London Cover.
  199. It is necessary to distinguish (1) the position between BP and the eighth and ninth defendants and (2) the position between the eighth and ninth defendants and Aon.
  200. As to (1), BP was not party to the contract between D8 and D9 and Aon. D8 and D9 were in the same position as the other defendants in this case. The eighth and ninth defendants were not bound unless they received a declaration within the terms of the cover by 30.6.00.
  201. As to (2), the specific agreement of the eighth and ninth defendants to the declaration of the Open Cover to the London Cover was required for the reasons stated above. Following agreement by D8 and D9 to the declaration of the Open Cover to the London Cover, the eighth and ninth defendants were in the same position as the other defendants in this case. They were not bound under the Open Cover unless they received a declaration within the terms of the cover by 30 June 2000.
  202. It is common ground that the reference to "Declarations" in the 'Conditions' clause of the London Cover was a reference to declarations under the London Cover (not under the Open Cover). It follows that the words "Declarations to be retained in the offices of Aon Group Ltd" was a reference to declarations under the London Cover (including Declaration 111), not declarations under the Open Cover. It also follows that the words "Each declaration complying with the foregoing shall attach hereunder automatically subject only to advice to Underwriters hereon prior to attachment date or within 14 days thereof" applied to declarations under the London Cover.
  203. The endorsement to the London Cover scratched on 21 July 1998 in using the words "additions, deletions, agreements, amendments, extensions, alterations to main placement(s)" tracked the wording of the 'Conditions' clause of the London Cover. It is again necessary to distinguish between (i) the standing offer contained in the Open Cover whereby the defendants agreed to accept liability in respect of any declarations made within the terms of the cover and (ii) declarations made by the claimant under the Open Cover which bound the underwriters concerned upon receipt of a declaration prior to 30 June 2000. The endorsement scratched on 21 July 1998 applied between Aon and D8 and D9, not between BP and D8 and D9. It provided that the eighth and ninth defendants agreed to be advised only of additions etc to the main placement(s) (being insurances/reinsurances in respect of all Aon Natural Resources Worldwide Business upon which Aon Natural Resources (Houston) received instructions to provide coverage) generating premium transaction(s). In the case of most insurances/reinsurances no question of a declaration attaching a risk to a cover would arise. Changes to the terms of insurances/reinsurances generating premium transaction(s) would be advised in accordance with the endorsement. In the case of the Open Cover the endorsement applied (as between Aon and D8 and D9) to changes to the terms of the standing offer contained in the Open Cover, not to declarations under the cover. There is a marked distinction between changes to the wording of the standing offer contained in the Open Cover and declarations to underwriters under the cover. The wording of the 'Conditions' clause of the London Cover (and the endorsement of 21 July 1998) reflected (as one would expect) the distinction (that would readily be understood in the market) between "declarations" and "additions". As with the Leading Underwriters clause, if the parties had intended to encompass "declarations" in the endorsement that word would have been used.
  204. Under the 'Conditions' clause of the London Cover, the underwriters concerned agreed to accept declarations subject to all terms etc and other stipulations and provisions of the Main Placing. The specific agreement of D8 and D9 to the declaration of the Open Cover to the London Cover was however required. By the endorsement D8 and D9 agreed with Aon (not BP) that they should "be advised" by Aon only of changes to the policy wording of a main placement generating premium.
  205. Aon was acting on behalf of BP in relation to declarations to the Open Cover. Aon knew, or should have known, that declarations by BP under the London Cover had to be made to all defendants.
  206. In case I am wrong as above, I would add that if the endorsement of 21 July 1998 was intended to include declarations under the Open Cover, the essential terms of the declarations (including for example the inception date) would still have to be advised to the eighth and ninth defendants by 30 June 2000.
  207. For completeness I record that it was not until about November/December 2000 that Aon provided to D8 and D9 a file of documents containing declarations and accompanying information in respect of declarations 8 – 26.
  208. Answers to the Preliminary Issues

  209. I answer preliminary issue 2(i) to (iii) as follows:-
  210. (1) A declaration had to be made during the period of the Open Cover, i.e. in the case of offshore risks between 1 January 1999 and 30 June 2000 (GCIP Declarations clause 5(2)).

    (2) Insurance was available under the standing offer contained in the Open Cover in respect of projects of whatsoever nature. There must therefore have been an identifiable project in existence at the time of the declaration i.e. a project which had reached one or more of the stages/phases listed in GCIP Declarations clause 5(6), including engineering, design, manufacture, procurement, storage, prefabrication, fabrication, assembly and construction.

    (3) At the time of the declaration, the Insured(s) must have had an insurable interest at risk or must have had a reasonable expectation of acquiring such an interest.

    (4) The declaration had to be made for an inception date, selected at the option of the claimant, within the period of the Open Cover.

    (5) The insurance attached from inception (as declared) in respect of each part, item or portion of the subject matter of the insurance, from the time of becoming at the risk of the Insured(s) (GCIP Declarations clause 5(3)).

  211. I answer preliminary issue 2(iv) as follows:-
  212. A declaration containing certain minimum information (including the inception date) had to be received by each defendant by 30.6.00. I will refer to such a declaration as a "valid declaration".

  213. As to preliminary issue 3, I do not consider that the project commencement date is relevant in the context of the answers to issues 2(i) to (iii).
  214. As to preliminary issue 4, the outline history of the 4 projects the subject of declarations 5, 12, 14 and 26 is set out in Schedule 1 hereto. I am grateful to the legal teams for preparing a draft of Schedule 1. Where I have used words such as "the claimant says..." this indicates a matter that is either disputed or not admitted by the defendants.
  215. I find, applying the answer to issue 2 (i) to (iii), that the King Field project had reached the stage at which declarations could be made to the Open Cover. For the reasons set out below I find that no valid declaration was received by any of the defendants by 30.6.00 in the case of the other 3 projects.
  216. In my judgment, applying the answer to issue 2(i) to (iii), Valhall and Nam Con Son Midstream had reached the stage at which declarations could have been made to the Open Cover. The position was marginal in the case of Na Kika. I refer to the accounts of the progress of this project in the witness statements of Mr Siebenaler and Mr Luyties, which provide some support for the view that Na Kika had reached the necessary stage. It is not, however, necessary to consider Na Kika further because there was not a valid declaration to any of the defendants (see below). A statement that a project was "to be declared" (in the future) could not on any view constitute a valid declaration.
  217. As to declaration 5 (King Field), I find that there was a valid declaration to the first, fourth, fifth, sixth and seventh defendants. I find that there was not a valid declaration to the second, third, eighth and ninth defendants.
  218. D2 and D3 did not receive a purported declaration in any form until after 30.6.00. The bordereau scratched by D8 on 6.6.00 and by D9 on 8.6.00 did not constitute a valid declaration because, for example, it did not contain an inception date relating to the King Project. All other communications to the defendants D2, D3, D8 and D9 were made after 30.6.00. These defendants were not shown the declaration and the work sheet until after 30.6.00.
  219. As to declaration 12 (Valhall), I find that there was not a valid declaration to any of the defendants. The list provided to D1, D6, D7 and D8 on 29.6.00 did not include, for example, an inception date for Valhall. The defendants D1 to D9 were not shown the declaration and the work sheet until after 30.6.00.
  220. As to declaration 14 (Nam Con Son Midstream), I find that there was not a valid declaration to any of the defendants. The list provided to D1, D6, D7 and D8 on 29.6.00 did not include, for example, an inception date for Nam Con Son Midstream (nor did it include BPA Share). The defendants D1 to D9 were not shown the declaration and the work sheet until after 30.6.00.
  221. As to declaration 26 (Na Kika), (on the assumption that Na Kika had reached the necessary stage) I find that there was not a valid declaration to any of the defendants. The list provided to D1, D6, D7 and D8 on 29.6.00 showed Na Kika as "to be declared" and did not include, for example, an inception date (nor did it include BPA Share). A statement that a project was "to be declared" (in the future) could not on any view constitute a valid declaration. The defendants D1 to D9 were not shown the declaration and the work sheet until after 30.6.00.
  222. When cross-examined Mr Siebenaler said that there was a dispute (in I assume about June 2000) with Swiss Re and AIG as to certain declarations, which was resolved in the autumn of 2000, by BP agreeing to pay some additional premium and withdrawing some risks for some projects. When asked "Was the fact that there was this dispute with Swiss Re and AIG the reason why declarations were not produced to other underwriters at that stage?", Mr Siebenaler said that he did not know the answer, but that Aon would know. No witness was called from Aon. The dispute with Swiss Re and AIG referred to by Mr Siebenaler may explain why Aon did not make valid declarations to the defendants by 30.6.00 in the case of declarations 12, 14 and 26 (and only did so to D1, D4, D5, D6 and D7 in the case of declaration 5). But whatever the explanation, valid declarations to each of the defendants were required by 30.6.00 to create a contractually binding obligation with each of the defendants.
  223. SCHEDULE 1

    KING FIELD – DECLARATION

    Date: Event:

    02 July 96

    Preferred Supplier Master Agreement between Amoco

    and Cameron. Amoco indemnities at clauses 23.5 and

    23.9. Insurance clause at clause 23.8

    Late 97

    Work on "Spar concept" for developing King Field and

    King's Peak Field and moves through Amoco Appraise/

    Select/Define stages

    01 Dec 98

    Master Engineering Services Agreement between

    Amoco and Mustang. Amoco indemnities at clause 17.03.

    Clause 18.01 and 18.02 deal with insurance.

    25 Feb 98

    Work Order from BP to Camerons to manufacture 13

    Christmas Trees under Preferred Supplier Master

    Agreement

    Jan 99

    Sanction not approved for "Spar concept" because it was

    considered uneconomical. Work then focused on a new

    development concept, namely the modification to BP's
    Marlin TLP and a subsea tieback by way of a system of
    dual flowlines

    BP mothball manufacture of 10 of 13 Christmas trees.
    Work on 3 Christmas Trees continues

    20 Apr 99

    Work Release issued under Master Engineering Services

    Agreement by BP to Mustang for provision of preliminary

    engineering on new modifications/ tie-back concept

    22 Apr 99

    BP's alleged project commencement date (subject to the

    caveats set out in paragraphs 5 and 6 of the Amended

    Voluntary Particulars)

    26 Apr 99

    Master Engineering Services Contract between Amoco

    and Aker Engineering commences. Amoco indemnities

    at Clause 17.03. Clause 18 deals with insurance.

    10 Jun 99

    New project moves from Select to Define stage of Amoco

    CVP

    6 July 99

    Work Release issued by BP to Mustang to provide FEED

    services for topside modifications

    12 July 99

    Work Release issued by BP to Aker to provide FEED

    services for subsea modifications

    31 Aug 99

    Drawings prepared by Aker (the claimant says) come on BP's risk

    1 Oct 99

    Anticipated commencement of production/execute

    Gate for project being reached on 31.01.02

    1 Dec 99

    The claimant says first Christmas Tree comes on BP's risk at Camerons yard

    1 Dec 99

    Anticipated that 2 wells would first begin to be drilled

    in June 2000. First oil expected in December 2001.

    Preliminary Deepwater Operations Plan to be submitted

    for regulatory approval from Minerals Management Services

    (although approval had already been granted for the

    previous Spar concept and no problems were anticipated)

    15 Dec 99

    Sir John Browne sanctions the King Field project

    25 Feb 00

    Change Order issued by BP to Camerons re: modifications

    to Christmas Trees

    1 Mar 00

    Systems integration testing on the Christmas Trees at

    Camerons yard.

    6 Mar 00

    Project declaration first scratched by Swiss Re, with

    stated inception date of 1 March 2000

    15 Apr 00

    Offshore Construction Services contract let by BP to

    Allseas. This anticipated that offshore drilling would
    commence and be completed by the 2nd quarter of 2000,
    and (by clause 6.2.2 of Exhibit A) work on the pipeline
    installation was to commence at the offshore
    work site between 01.04.01 and 31.07.01.

    By Article 20.01.09 Amoco to obtain a Builders Risk

    Insurance policy covering physical loss of or damage to the

    Work, existing equipment and property and/or items.

    18 Apr 00

    Project schedule revised. Offshore drilling of 1st well to commence on 15.07.00. Commencement of pipeline installation on 01.04.01 Modification of Christmas trees completed but they remain at manufacturers' premises so that they were not insurable under the Open Cover without separate agreement from underwriters.

    2 May 00

    Date set, as at 18 April, for shipping Christmas Trees to rig

    15 May 00

    Declaration scratched by 1st Defendant

    16 May 00

    Declaration scratched by 5th & 6th Defendants

    17 May 00

    Declaration scratched by 4th Defendant

    22 May 00

    Declaration scratched by 7th Defendant

    6 June 00

    King project referred to in borderaux scratched by 8th Defendant. [D8 does not accept that this document constitutes a valid declaration]

    8 June 00

    King project referred to in borderaux scratched by 9th Defendant. [D9 does not accept that this document constitutes a valid declaration]

    21 June 00

    Offshore schedule revised: Christmas Trees now to be

    shipped to rig on 1 Oct 2000, with drilling to commence

    on 1 Dec 2000. Final submission for seeking regulatory

    approval to be made on 30.11.01.

    30 June 00

    Open Cover expires: as at this date total project spend amounts to US$ 5-6 million

    1 Sep 00

    IUA on behalf inter alia of Third Defendant stamp King Declaration

    12 Sep 00

    Declaration sent to Second Defendant

    15 Apr 01

    Christmas Trees shipped to offshore rig. Installed between 15.04.01 and 15.06.01.


     
    VALHALL – DECLARATION 12

    Date: Event:

    12 Aug 96

    FEED contract with Halliburton entered into

    1996/97

    Valhall Waterflood project originally conceived by Amoco

    1998

    Valhall Waterflood project shelved because no concessions on royalties then available from the Norwegian authorities

    Aug 99

    Norwegian authorities send encouraging signals to Amoco regarding the fiscal framework conditions, and the Valhall project is revived

    22 Sep 99

    The claimant says FEED work by Halliburton (formerly Brown & Root Energy Services AS) commenced

    BP's alleged date of project commencement (subject to

    The caveats set out in paragraphs 5 and 6 of the

    Amended Voluntary Particulars)

    07 Dec 99

    BP completed project questionnaire, which estimated start of construction as 3rd quarter 2000

    Dec 99

    Sir John Browne signs Authority To Negotiate, allowing BP to fully fund design stage of project and to negotiate the royalty relief with the Norwegian authorities.
    Define stage expected to run from 1st quarter 2000 to early 3rd quarter 2000.

    Jan – Mar 00

    Halliburton produce reports, plans, drawings and diagrams which (the claimant says) are at BP's risk from these dates

    12 Mar 00

    BP produce project plan which anticipates detailed design starting at the end of June 2000; contract award on 14.09.00 along with the start of procurement, and drilling and platform construction; and with offshore installation to take place between 01/06/02 and 30/08/02

    14 Mar 00

    The negotiations with the Norwegian authorities result in the removal of the production fee for the Valhall field, with retrospective effect from 1 January 2000, subject to the submission of a Plan for Development and Operation by Q2 2000

    11 Apr 00

    BP sends invitations to tender to 4 tenderers in respect of the EPCIC contract, which BP hoped to award in Sep 2000

    26 May 00

    Project declaration first sent to Swiss Re, with stated inception date of 1 April 2000 and estimated start of construction in Q3 2000

    16 June 00

    BP receives tender submissions from all four tenderers

    18 June 00

    Sir John Browne signs the project sanction form though Chairman of BP Norway signed the project sanction form on 12.07.00

    Project sanction form states that execute stage will run from end of 3rd quarter 2000 to early 1st quarter 2003

    21 June 00

    Project declared to AIG

    29 June 00

    1st, 6th, 7th and 8th Defendants provided with list of intended declarations, including Valhall Waterflood. [These defendants do not accept that such documents constitute declarations for the purposes of the Open Cover]

    30 June 00

    Open Cover expires: as at this date total project spend amounts to NOK 26,230,302 (approx US$3 million)

    4 July 00

    D1, D4, D5, D6 and D7 received Aon's e-mail of that date attaching updated list of declarations. [These defendants do not accept that this document constitutes a valid declaration. In any event, it was received by the relevant defendants after the expiry of the Open Cover.]

    6 July 00

    Two of the EPCIC tenderers, Aker and Heerema, are short-listed for project contract award

    12 Sep 00

    Declaration sent to Second Defendant

    15 Sep 00

    Final proposal from two tenderers received

    Oct 00

    The Valhall project moves from Define to Execute phase

    12 Oct 00

    Swiss Re scratches the project declaration

    13 Oct 00

    Letter of intent is awarded to Aker

    13 Oct 00

    AIG scratches the project declaration

    07 Nov 00

    Declaration sent to Third Defendant

    Nov 00

    Declaration sent to First, Fourth, Fifth, and Sixth and Seventh Defendants

    Nov/Dec 00

    Declaration sent to Eighth Defendant

    Nov/Dec 00

    Declaration sent to Ninth Defendant

    19 Mar 01

    The claimant says first main delivery of steel to Aker's yard in Norway

    6 Apr 01

    Following resolution of outstanding technical issues, the EPCIC contract with Aker is signed

    By article 26.7, BP became obliged at the earliest practical date following signature of the contract to procure a CAR insurance policy to cover the contractors work.

    Aug 02

    Offshore phase of project commenced


     
    DECLARATION 14, NAM CON SON MIDSTREAM OFFSHORE PROJECT

    1993 Gas discovered in the Lan Tay reservoir
    29.05.97 The claimant says:- Project moves from Select to Define stage of Amoco CVP. Contract for Front End Engineering and Design awarded to Brown & Root.

    BP's alleged date for project commencement (subject to caveats set out in paragraphs 5 & 6 of the Amended Voluntary Particulars
    07.98 Project management team demobilised
    05.99 New project management team mobilised
    BP considering abandoning project
    15.07.99 Master Contracts for Project Management Services with Halliburton International Inc and Brown & Root concluded
    10.12.99 BP sanctions expenditure of US$ 156 m for the Midstream development, conditional on execution of agreements with Vietnamese government and satisfactory licences.

    The claimants says at this time it was anticipated that the Commercial Agreements would be in place by mid 2000.
    26.04.00 Project Execution Plan issued and approved by Mr. Green. This was also provided to the Lead underwriters with the Declaration. Transition from Define to Executes stages of CVP scheduled for June 2000. Milestones are July 2000 for award of the pipeline construction contract; within October 2000 for delivery of the first load of linepipe to the coating yard; and between April to June 2001 for commencement of the installation of the offshore pipeline
    26.04.00 ITT issued for pipe and pipeline equipment (contract award anticipated June/July 2000 and anticipated delivery of first shipment was by 21 August 2000).
    Stated that tenderers should be aware that the project has not been sanctioned by BP or its Co-venturers thus it is possible that the project may be delayed or postponed.
    27.04.00



    28.04.00
    ITT produced for offshore pipeline and flowline construction (contract award anticipated 8/00)
    Stated that tenderers should be aware that the project has not been sanctioned by BP or its Co-venturers thus it is possible that the project may be delayed or postponed

    BP issue request for quotation for supply of parts to be incorporated in offshore pipeline with required delivery date of January 2001
    03.00 – 05.00

    26.05.00

    01.06.00
    Various RFQs issued


    Date for submission of 1st stage tenders under 26 April ITT

    Inception date as stated in project declaration
    07.06.00

    Piping and Instrument Diagram issued for design and (the claimant says) became BP's responsibility
    19.06.00


    26.06.00
    Insurance questionnaire completed. Estimated start of construction date given of June 2000. Attached Underwriting submission states that the offshore pipelines will be installed between April and October 2001

    Declaration made to Swiss Re
    27.06.00 Declaration made to AIG
    29.06.00 D1 provided with list of intended declarations including Nam Con Son. [The defendants (in particular D1, 6, 7 and 8), do not accept that such documents constitute declarations for the purposes of the Open Cover.]
    29.06.00 D6 provided with list of intended declarations including Nam Con Son
    29.06.00 D7 provided with list of intended declarations including Nam Con Son
    29.06.00 D8 provided with notice of intended and/or imminent declaration
    30.06.00 Cumulative project expenditure US$ 20.89 million
    04.07.00 D1, D4, D6, D7 received Aon's e-mail of that date attaching updated list of declarations. [These defendants do not accept that this document constitutes a valid declaration. In any event, it was received by the relevant defendants after the expiry of the Open Cover.]
    07.07.00

    13.07.00

    02.08.00

    Aug 00


    12.09.00

    03.10.00

    23.10.00

    26.10.00
    Date given in ITT for submission of 1st stage tenders in response to 27th April 2000 ITT

    Project approved technical bids for the proposed contract for supply of steel for offshore pipeline (26 April ITT)

    Date for submission of 2nd stage tenders in response to 27th April 2000 ITT

    Project reached significant hiatus due to inability to award purchase orders for equipment and materials, given delays in concluding commercial agreements with Vietnamese

    Declaration sent to 2nd Defendant

    Project moves from Define to Execute stages of CVP

    Project approved the technical bids for the offshore pipeline installation contract (27 April ITT)

    Project approved the commercial bids for the proposed contract for the supply of steel for the offshore pipeline
    00.11.00

    07.11.00

    Nov/Dec 00

    Nov/Dec 00

    15.12.00
    Declaration sent to 1st, 4th, 5th, 6th and 7th Defendants

    Declaration sent to Third Defendant

    Declaration sent to 9th Defendant


    Declaration sent to 8th Defendant


    Commercial agreements with Vietnamese Government and Vietnamese Government Guarantees (upon which BP project sanction was conditioned) entered into by parties.
    03.01.01 Project approved commercial bids for the offshore pipeline installation contract (27 April ITT)
    Feb 2001 Gas Transportation Agreement (one of the agreements upon which the project sanction was conditioned) was signed.
    28.03.01


    13.04.01
    An interim arrangement was issued by BP and its co-venturers which confirmed (subject to the satisfaction of a number of conditions) their intent to award the contract for the offshore pipeline construction to consortium.

    Consortium counter sign this interim arrangement on 4.4.01

    The agreements with Vietnamese Government become effective and project then given unrestricted access to the project funds.
    16.04.01 Contract for supply of pipe and pipeline equipment signed by BP. Countersigned by other parties 23.04.01. Contract effective from 31.01.01
    18.04.01 Offshore pipeline construction contract signed by BP. Countersigned by other parties 22-30.04.01. Contract effective from 28.03.01
    30.08.01 First shipment of linepipe


     
    DECLARATION 26, NA KIKA

    Mid to late 80s
    Discovery of fields
    01.02.99

    22.06.99

    15.09.99
    The claimant says project commencement date. The defendants dispute this

    Project passes through Shell's VAR 3 gate

    Shell revised Project Schedule which anticipated that facility fabrication would commence in May 2001.
    Late Jan 00 System concept finalised as semi-submersible vessel
    02.00

    01.02.00
    The claimant says detailed design and engineering work by ABB Lummus in relation to hull commences

    Inception date as stated in project declaration
    By 03.00 The claimant says project enters Define stage of Amoco CVP
    07.02.00 Offer by Marintek to test 1:60 scale model of hull, which (the claimant says) was accepted by Shell
    14.02.00 Preliminary Process and Instrument diagrams for production systems
    01.03.00 The claimant says detailed topsides design and engineering work by WH Linder and WS Nelson commenced
    27.03.00 Preliminary Process and Instrument diagrams for Utility systems
    05.04.00 Partnership Agreement signed between Shell and ABB Lummus
    06.04.00 Shell sign AFE re expenditure of US$ 5.9 million to fund preliminary engineering
    15.04.00

    27.04.00
    Preliminary Process and Instrument diagrams for Hull systems

    Insurance questionnaire completed which stated estimated start of construction as Sept 99 sanction
    05.05.00

    11.05.00
    Project sanction anticipated in 4th quarter 2000

    BP sign AFE re expenditure of US$ 11.8 million for preliminary system design and engineering
    19.06.00 BP Nakika project team inform BP insurance that declaration of project to Open Cover authorised
    19.06.00 Purchase Order numbered 4500052537 for NaKika hull design and engineering and drafting issued to ABB Lummus with delivery date of 31.12.02
    21.06.00 Declaration made to AIG
    22.06.00 BP approves Finance Memorandum authorising progress of the project from Select stage to Define stage and expenditure of US$ 25.8 million for funding define stage work. Project targeted for sanction during September 2000 and Execute stage anticipated to commence after sanction.
    26.06.00 The claimant says pre-qualification inquiry document (stated not to be a purchase order or request for quotation) issued by Shell to interested fabrication contractors. The defendants say that the document was issued on 10.07.00. Any proposals to be submitted by 10.08.00
    29.06.00 Shell notify BP by e-mail that they wish to utilise Open Cover with formal letter to follow
    29.06.00 Declaration made to Swiss Re
    29.06.00 D1 provided with list of intended declarations including NaKika. [The defendants (in particular D1, 6, 7 and 8) do not accept that such documents constitute declarations for the purposes of the Open Cover.]
    29.06.00 D6 provided with list of intended declarations including NaKika
    29.06.00 D7 provided with list of intended declarations including NaKika
    29.06.00 D8 provided with notice of intended and/or imminent declaration
    30.06.00 The claimant says total project spend c. US$ 12.1 million
    03.07.00



    04.07.00


    11.07.00


    24-28.07.00
    Project schedule revised with anticipated date for commencement of facility fabrication brought forward to April 2001

    D1, D4, D5, D6 and D7 received Aon's e-mail of that date attaching updated list of declarations. [These defendants do not accept that this document constitutes a valid declaration. In any event, it was received by the relevant defendants after the expiry of the Open Cover.]

    First revision of Project Execution Plan which anticipated that no major contract awards would take place prior to 15 September 2000

    The claimant says project passes through Shell VAR 4 gate
    12.09.00

    13.09.00

    15.09.00


    12.10.00


    18.10.00
    Declaration sent to 2nd Defendant

    Shell Group Conference approved the project

    Shell approved authorities for expenditure in respect of project execution implementation and for long lead items

    Swiss Re stamp declaration and endorsement thereto amending deductible to US$1 million and premium to US$5,946,491 (from US$3,135,238)

    BP approved project and signed authority for expenditure in respect of long lead items. The claimant says project moved from Define to Execute Stage. The defendants agree this save that the project was not governed by BP Amoco CVP
    23.10.00 AIG stamp declaration and endorsement thereto amending deductible and premium
    00.11.00

    07.11.00

    Nov/Dec 00

    Nov/Dec 00

    9th March –16th June 2001
    Declaration sent to D1, 4, 5, 6, and 7

    Declaration sent to Third Defendant

    Declaration sent to 9th Defendant

    Declaration sent to 8th Defendant

    Letters of Intend in respect of offshore installation issued
    00.05.03 Offshore installation anticipated to commence


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