Ladies and gentlemen, it is a pleasure to be here before such a distinguished audience.

I want to do several things in the few minutes available to me.

I particularly want to congratulate the magnificent city of St Petersburg on its 300th birthday.

I want to ask for your help to make this a safer industry, without the need for further intrusive regulation.

I want to spend some time addressing the major challenges confronting class societies.

And I want to stress that my comments are made in the spirit of continuous improvement.

I recognize what has been achieved, while at the same time emphasize that there is always more that can and should be done.

What do I mean by this?

The statistics speak for themselves.

By whatever measure you choose, the safety record of the maritime industry is one of quite remarkable improvement over the last few years.

Close to six billion tons of cargo are transported by sea every year.

An infinitesimally small proportion is lost in transit.

Right now there are more than one million seafarers at work on more than 87,000 commercial vessels of more than 100 gross tons.

It is statistically likely that between two and three hundred will lose their lives in the next twelve months.

That is a highly regrettable reality. But it is a safety performance that would be the envy of most similarly risky industries.

Of those 87,000 vessels, 86,800 are statistically likely to safely navigate the seas for the next twelve months.

Of the 200 that can be projected as possible losses, only 30 will be lost due to structural failure.

These are impressive statistics.

They are more than statistics, they are the reality of an industry with an outstanding safety record.

But I have another reality to share with you.

It is not good enough.

When one tanker spills oil on a populated coastline, the effectiveness of the existing maritime safety system will be called into question.

And it will be found wanting.

The result will be further regulation.

It is because our best is still not good enough that today I will suggest some changes in the manner in which this industry functions.

The process has traditionally been one of incremental change.

When an area needing improvement is identified, the industry responds with targeted remedies, whether through the IMO or within classification Rules.

It is a process that has served the industry well.

But I do not believe it is the appropriate response at this time.

We operate today within a changed environment.

• The public demands more of us.
• The nature of shipowning has changed.
• The tools available to the class societies are far more sophisticated today than even 15 years ago, and
• The pressures on the shipbuilding industry are different to those of the past.

It is time for the maritime safety system to recognize these changes and adapt to them in a rational and effective manner if the classification profession is to retain any relevance in the future.

We must be prepared to lead these changes by adopting bold, pro-active and co-operative measures that offer renewed confidence in the classification system to all those who rely upon our impartiality and expertise.

I want to take a moment to contrast the circumstances of the last great tanker building boom of the early 1970s with today.

Thirty years ago, the majority of orders were placed by the oil majors.

In the 1970s these organizations did not need class.

• They had large, highly skilled technical departments.
• They had their own construction standards.
• They had equally rigid maintenance procedures and
• Thirty man crews stayed on top of the continuous battle against rust and damage.

The owners’ own requirements often went beyond those of class.

When it came to maintenance, class was a partner with the owner, not a watchdog.

That same ship today would be for the account of an independent owner.

No matter how responsible that owner may be, he must operate within an unforgiving, competitive market.

Controlling costs is crucial to his success.

Part of that cost control has been the elimination of most in-house technical departments.

The classification societies have become the de facto technical resources for the industry.

Both the classification societies and the shipyards have extremely sophisticated computer programs available to them to analyze and optimize designs.

As a result, there is less steel in a modern VLCC than one built 30 years ago.

Some of that reduction can be attributed to the use of higher strength steels but most stems from the optimization of the design.

Quite simply that means there is less margin for error and less margin for shortcomings in the ship’s maintenance regime.

Today’s VLCC will almost certainly be built in a shipyard where price and production efficiencies are the driving forces.

Let’s face it. Shipyards today want to build that VLCC as quickly as possible.

That means keeping the design simple and putting as little material into the ship as possible.

I think you will agree, that is not a recipe for quality tonnage, built to last.

The classification societies have the tools available to them to analyze and optimize that modern design.

We can say that, when the vessel leaves the yard, it conforms to class rule requirements.

It is fit for its intended service provided it is properly maintained.

But the owner is under intense commercial pressure.

He has a crew of perhaps 15 people on board, not 30.

There is little capability or incentive to maintain the vessel, to repair coatings, to install anodes in the way that was done in the past.

He will run that ship until his classification society determines that it no longer meets rule requirements.

He will do everything possible to delay that day.

He will try and focus the class society surveyor’s attention away from the spaces with the most significant corrosion or coating breakdown.

He may pressure and intimidate the surveyor in an attempt to prevent inspection of suspect spaces.

He will try to squeeze permission to defer repairs until the next drydocking.

And when that time comes he will try again to limit the extent of renewals.

The concept of class as a partner is dead.

The concept of class as a self regulating mechanism is at risk.

This is an industry that responds only to specific and stringent regulation.

And here is the ultimate irony.

A large number of responsible owners are demanding tougher regulation that will apply equally to all owners.

That is the key – it must be applied equally to all so that no one is unduly penalized.

If this is to be achieved, incremental change is no longer an appropriate response.

It will not give the industry, nor the public the ships they are demanding.

If class is to remain relevant, it needs to remake itself for the modern world.

Self regulation will continue to provide an effective method for establishing and enforcing standards only if all elements of the industry recognize that substantive overhaul is needed.

That means coming together to jointly analyze the strengths and weaknesses of the existing system and jointly develop the improvements that are necessary.

And those improvements must be acceptable to all segments of the industry, particularly the regulators, and it should include the environmentalists, the seafarers and the general public.

Do I have a specific blue print? No.

That must be a jointly developed plan.

Do I have some specific issues that the plan must address? Yes indeed.

• It must address the issue of what role and what power is to be ascribed to the classification societies.

Too often we are blamed for not taking action for which we have no authority.

The power of class is severely circumscribed at the same time that greater responsibilities – for example ISM Code auditing and now Ship Security auditing, are being placed on our shoulders.

Does the industry want class to be the policeman? If it does, give us the power of enforcement.

• It must address the issue of who pays the class society.

It is immaterial to us who does but we must charge for the services we provide.

Many critics argue that we cannot be impartial when it is the owner who selects the society and who pays the class fees.

If the industry agrees with this negative assessment, then work with us to change it.

If the industry decides that the current system is effective and workable, then support it and put these criticisms to rest.

• It must address the issue of unlimited liability.

It makes no sense that an entire organization can be financially ruined over a questionable judgement call by one surveyor providing a service for which the fee is a few hundred dollars.

• It must address the issue of common scantlings and strength criteria and how those standards are established and amended.

It is no longer reasonable to place classification societies in the position where shipyards can play one off against another for the sake of 250 tons of steel in a vlcc with a lightweight of some 38,000 tons.

I am pleased to confirm to you that unanimity on this point has been reached within IACS and we are developing an implementation strategy.

• It must address the exposure of classification society personnel to criminal liabilities for their actions.

The latest EU anti-pollution regulations expose our surveyors and our management to possible jail terms for what may turn on how the field judgment of an individual is interpreted, perhaps months later.

• It must address the issue of transparency as it relates to classification records.

Does the public have a right to access these?

Do charterers have that right?

Can we continue pulling the veil of confidentiality over such information?

Let me be quite honest about this.

Much as I believe this reinvention of class is needed, the classification societies cannot and will not undertake this reform by themselves.

It is not just that the collective courage does not exist.

Any such unilateral action by class would be doomed to failure.

For the radical overhaul that I am suggesting to be successful, it must be orchestrated and accepted by the industry.

Let me repeat. Classification is the mechanism by which this industry regulates itself.

When it does not meet expectations, government will step in and impose more regulation on you and your activities.

I believe passionately that self regulation is the preferred approach.

I believe that it is very clear that, in the eyes of government and the public, the self regulatory approach no longer meets expectations.

And so the choice is simple.

Does this industry want self regulation or does it want to be regulated.

If the choice is self regulation, then we need to get together and remake the process.

And we need to do that now. We no longer have the luxury of time.

Thank you.