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Enron Mail |
A qualified yes. It doesn't look to me that we have much choice.
Remember--we were withholding freight as leverage to settle, which is a short term strategy at best. I am going to discuss it in detail w/ Britt Monday morning. I'll let you know if we come up with a better plan. Alan Aronowitz 11/09/2000 02:58 PM To: Harry M Collins/HOU/ECT@ECT, Michael A Robison/HOU/ECT@ECT, Richard B Sanders/HOU/ECT@ECT cc: Subject: Re: In re M/V PACIFIC VIRGO Do you concur with paying the freight without prejudice per the below notes? ----- Forwarded by Alan Aronowitz/HOU/ECT on 11/09/2000 02:57 PM ----- Britt Davis@ENRON 11/09/2000 09:26 AM To: Paul Henking/SIN/ECT@ECT cc: Alan Aronowitz/HOU/ECT@ECT, Harry M Collins/HOU/ECT@ECT, Michael A Robison/HOU/ECT@ECT, Richard B Sanders/HOU/ECT@ECT, James P Studdert/HOU/ECT@ECT Subject: Re: In re M/V PACIFIC VIRGO Paul, Thanks for your e-mail. Parenthetically, I'd be happy to explain how we got to where we are on our strategy; maybe a telephone call would be best. Let me know when you are available. I can call you early a.m. or late p.m. Re the bug issue: we were aware of this, although I am interested to hear that SGS raised it with you and Eric in mid-October. I have discussed this in the past with David Best, and spoke with him on the telephone this morning about what SGS told you. We don't think we should put anyone on notice about the bug issue unless and until it appears and is confirmed at the joint testing. Otherwise, we may be raising an inherent vice argument for both Mitsubishi and our own cargo underwriters. Let me know if you have a different view (on this or anything else I put in this e-mail). Re Mitsubishi's response to our settlement demand: David Best has just spoken with Sian Heard, Mitsubishi's lead London solicitor. It is clear from her that Mitsubishi will not be settling prior to instituting arbitration. It is also clear that Mitsubishi will not consider any substantial settlement without Heard's advice. Best believes that Heard will recommend that the joint testing take place before giving Mitsubishi an exposure evaluation. In sum, while our attempt at settlement prior to joint testing was a worthwhile effort, to avoid the risk and expense of the problematic joint survey, it now appears to David and me to be at a dead end. Re the joint testing: Again, David and I believe that the joint testing should proceed as quickly as it can be arranged. Neither our cargo underwriters nor Mitsubishi will move off dead center unless we do so. Given the problems with SGS's lab in Singapore, the "bug" issue that SGS in Subic Bay has raised (again), and that SGS did the pre-purchase of product for ECT that proved off-spec, I have asked David to re-visit with Steve Jones, our chemist, the logistics and cost of having the testing done in the U.K. I have also asked him to consider whether Heard might be amenable to splitting the costs of transporting the samples from Singapore to the U.K. I would like to get ECT's authority quickly to authorize the joint testing to go forward. Re the selection of arbitrators: David has discussed three Q.C.s that he and Neale agreed were appropriate with Hearn. Of those three, Hearn likes Nicholas Hamblin, who will charge 275 pounds an hour, and $1,750 pounds per day. She will be conferring with Mitsubishi about using him as the sole arbitrator. Given that we have initiated a good-faith discussion of the choice of arbitrators with Mitsubishi, David advises that we do not need to worry about sending Mitsubishi a letter tomorrow with our choices of arbitrator on it. We can wait for Hearn to respond, then I will make a formal request for your authority to agree to one arbitrator who has already been accepted by Mitsubishi. Re the without-prejudice settlement of Mitsubishi's freight and demurrage: I read you loud and clear (and thanks for making clear that the freight claim is only about $500,000, not $760,000, as I had inadvertantly indicated in my last e-mail). As I previously mentioned, David and I are on board with this idea, given the difficult circumstances of this case. Let me know if I have inadvertantly mischaracterized anything you said. Britt Paul Henking@ECT 11/09/2000 02:25 AM To: Britt Davis/Corp/Enron@ENRON cc: Alan Aronowitz/HOU/ECT@ECT, Harry M Collins/HOU/ECT@ECT, Michael A Robison/HOU/ECT@ECT, Richard B Sanders/HOU/ECT@ECT, James P Studdert/HOU/ECT@ECT Subject: Re: In re M/V PACIFIC VIRGO britt, thanks your reply which is noted. you will notice i have excluded david best and ngregson (?) preferring to keep my comments in house as privileged info, unless you feel this msg should be forwarded to them later. firstly, i am getting nowhere with mitsubishi on the settlement front. i have gone so far as to mention this morning to mitsuru that if this does goes to arbitration, and should mitsubishi succeed in their position, this will only serve to increase our claim by a similar amount since these costs would then become part of our contamination claim. he seems quite content to let this go to arbitration. as an example, he was suppose to call me back this afternoon but did not. secondly, with regards to your comments, i would just respond/add the following information: 1. i don't know if i am switching tactics so much as following what should have been done in the beginning (i.e. submit the claim to our insurance company and let them proceed against the owners). i honestly feel the arbitrators will say, "pay the freight (and possibly the demurrage now) and settle the contamination claim as a separate issue". clearly, the c/p says that freight is due without deduction once the vessel has completed discharge. on the issue of the "pre-sale" survey, i have discussed this matter internally with eric tan. seems our position is that singapore considered the sample that was drawn as a bad sample as well as we were not sure that the test methods used conformed with the testing methods required for first gas. this position is proved by the loading of the pacific virgo when the product subsequently tested on-spec for first gas. granted, it might still become an issue but, as you say. it could become an issue in either proceeding. i am getting a little confused on the matter of the joint testing. verbally i was advised that enron did not want to have the joint testing - at least not on a prompt basis. your msg now says that we do want to test the product and it should be done as soon as possible (as mitsubishi - and your advices that the underwriters and hear owner's p and i club would want). i assume this change is the result of the arbitration. be that as it may, i do have a bit of information that you may, or may not, be aware of or find relevant. when eric tan and i visited first gas in mid-oct to meet the personnel at first gas and witness one of the cargoes being discharged at the plant, we also took the opportunity to meet with sgs in subic bay to see their facilities and meet their personnel. during the conversation the subject of the elang cargo came up and the comment from sgs is that they were fairly certain it was off-spec due to "bugs". this may sound silly but i have heard of this before and is a problem with petroleum products. it seems sgs even went so far as to test the product themselves for these "bugs" and got a positive result. this test was not requested by enron or first gas and was done some time later in this process. i understand there may be some concern on our part over our subsequent sales to third parties if we knew there were bugs in the product. i would have to say that this was not known at the time and even today is only conjecture based on sgs' advices mid-oct (well after these sales). sgs also described "changes" to the product which would fit with the cargo having bugs (i.e. a strong sulphur smell and change in colour). if the testing is now done, i do not know if these bugs will be detected or not. however, if they are in the ship's samples, they may have changed the sample sufficiently that even a visual observation may detect the problem. the next problem becomes proving from where the bugs originated. were they in the previous cargo tanks that were not cleaned properly? or were they in the condensate when the cargo was loaded? obviously, testing of the shore sample prior to loading will determine the answer. if the shore sample is ok, then they had to come from the ship. if the shore sample also has bugs, then we should be claiming against our suppliers. this of course assumes the suggestion put forth by sgs is in fact correct. just something else to be considered. 2) i am not saying that we pay the full amount immediately but only the freight portion (about $500,000). we then advise mitsubishi (or their lawyers) that we will now review the demurrage claim (about $260,000) and revert by say end nov. the demurrage claim has been sent to our london office's demurrage department and i have asked them for their comments on the claim. after all, there may be issues with the ship's pumping performance or simple laytime errors which may reduce the demurrage claim. they will try to get me a response before the weekend. in this manner, we pay part of the money but still have a smaller portion which we may apply against our claim once the test results are known. i will leave this to legal as to decide how the approach to mitsubishi or their lawyers should be made rgds
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