TheBaltic_CODE.pdf

THE BALTIC CODE

Introduction .................................................................................... 3

The Baltic Exchange ................................................................ 4

Ethics & Market Practices .................................................... 6

Chartering ...................................................................................... 8

Chartering Negotiations ...................................................... 15

Tanker Chartering .................................................................. 28

Disputes ...................................................................................... 29

General Average .................................................................... 34

Sale and Purchase ................................................................ 34

Freight Derivatives .................................................................. 35

Insurance ...................................................................................... 43

Associated Shipping Organisations ............................ 44

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The Baltic Code 3

INTRODUCTION

The Code

“This Code is based on the distilled experience of Baltic brokers over many years and is

approved by the Board of Directors of the Exchange under Rule 3.2 of the Rules of the

Exchange dated January 1998. It contains guidance for brokers who operate within the

self-regulated market of the Exchange and is relevant to both new members of the

Exchange and existing members for reference. The Code was first produced in 1983,

revised in 1988, 1996, 2000, 2002, 2003 and 2007. All members are required by the

Rules of the Exchange to have a thorough knowledge of and to comply with the

provisions of the Code. A breach of the Code by a member may be considered by the

Directors of the Exchange to constitute a breach of the Rules of the Exchange, resulting

in the suspension or expulsion from membership of the Exchange. This edition, published

in December 2008, supersedes the earlier versions.”

Corporate members nominating new members of the Exchange need to ensure that they

are conversant with the principles and details of the Code. For new members it is a

requirement of the Exchange that they satisfy Directors on this account.

There is no international code covering shipbrokers specifically - and this Code applies

to members of the Baltic Exchange only.

The text of the Code should not be regarded as definitive or necessarily comprehensive,

and it may be supplemented by Directors by notices to members. Any interpretation of

the text or spirit of the code is at the sole discretion of the Directors.

Our word our bond

4 The Baltic Code

THE BALTIC EXCHANGE

The Role and Organisation of the Exchange

The Baltic Exchange is the world's only independent source of maritime market

information for the trading and settlement of physical and derivative contracts.

It traces its name to the Virginia and Baltick Coffee House, established in 1744. It was

then used mainly by merchants who had a major trade in tallow from the Baltic seaboard.

From those informal meetings the Baltic has developed into the world's most prestigious

and only truly international, self-regulated market for matching ships and cargoes and

buying or selling ships. "The Baltic", "the Baltic Exchange" and "the Exchange" are also

used to describe the unincorporated association whose members participate in this

market.

A large part of the world's maritime cargo chartering and sale and purchase business is

negotiated at some stage by members of the Baltic. The Baltic publishes numerous daily

indices which indicate the state of the markets. As well as providing guidance to brokers

these form the price mechanisms in the freight futures market which is used for risk

management.

Members of an associated body, the Baltic Air Charter Association, include specialist

brokers who charter aircraft.

At the time of writing in 2008, membership of the Baltic stood at over 560 companies with

around 2300 individual members. Member companies are based in all the world's major

shipping centres and the Baltic is headquartered in London with a regional representative

office in Singapore. There are some 70 different nationalities represented on the Exchange.

The Baltic Exchange Limited ("The Company") is a company limited by shares and owned

by its shareholders most of whom are the member companies. Some are individuals who

trade in their own right. They are required to hold a minimum number of shares. The

Company is governed by a Board of between 12 and 15 Directors with up to 12 elected

by shareholders and up to three elected by members of the Exchange (who do not need

to be shareholders). The Board has disciplinary powers of censure, suspension and

expulsion over members and is responsible for maintaining proper, ethical standards in

trading. Disputes involving members are referred to the Exchange for assistance with

mediation. Defaults by non-members against members are pursued.

Our word our bond

The Baltic Code 5

The Exchange derives its income from membership subscriptions, rents of offices in the

St Mary Axe Exchange, government chartering, the sale of market data, its club facilities

for members and catering/function facilities for non-members, in addition to investments.

Membership of the Exchange is available in one of three broad groups:

• Principals who trade on their own account. They either own or control ships or have

cargoes to move;

• Brokers , who act as intermediaries between shipowners and cargo interests, and do

not trade on their own behalf;

• Non-Market Members who, whilst not trading in the Exchange market, wish to be

associated with this hub of international shipping. They include maritime lawyers,

arbitrators, ship financiers and other maritime institutions.

The Exchange categorises its members so that all those in the market know the status of

those with whom they trade. For example, members who will be acting as an intermediary

only, and will not trade on their own behalf, sign an undertaking to trade in the market

only as a broker and are denoted as such in the official List of Members. Those who are

principals may act both on their own behalf, and as brokers. Different entrance

requirements need to be satisfied for the two categories.

Those acting as brokers can represent:

• Shipowners , sometimes exclusively, in which case they are referred to as

‘‘owners brokers’’;

• The Charterer , sometimes exclusively, in which case they are referred to as

‘‘charterers’ agents’’;

• Either the Shipowner or Charterer on a non-exclusive basis, when they are referred

to as ‘‘competitive broker(s)’’.

Each person elected as a member is required to demonstrate to the satisfaction of the

Board and at any time subsequently at the request of the Board that they are of sufficient

financial standing to carry out with confidence the business in which they are engaged.

A member who at any time holds money on behalf of clients must maintain a separate

account for client monies and must act in a fiduciary capacity as regards such clients’

money. Each member shall maintain professional indemnity insurance at a level

appropriate to the nature, scope and scale of its business or at such level and on such

basis as the Board may from time to time determine.

Information is available for the guidance of members who are expected to conform with

directives made by the Directors from time to time in the interests of the market as a whole.

Our word our bond

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