Minutes of ECGD Meeting
MINUTES OF MEETING HELD AT OFFICES OF ECGD ON MARCH 8, 1985
ECGD Cochrane, Assistant Secretary, Claims Dept.
Cochrane of ECGD (the insurance company) opened the meeting by saying that the claims were being processed as fast as possible but due to Consarc's present adverse cash position the department was willing to make an interim payment to account of l.5 million and the government's payment order to that value was handed over. Cooke requested that ECGD consider increasing l.5 million at this time but ECGD said this was not possible and that any payment of account was highly irregular. In return for this payment to account, Cochrane requested that Consarc sign two documents, these being as follows:
- Receipt in respect of the l.5 million paid to Consarc at this meeting.
- Letter agreeing to the transfer of property currently held by H M Customs & Excise at Hull Docks to ECGD (copy letter attached to these minutes).
Cochrane reiterated his department's position that on the payment of the claim in full that ECGD is very much in the driving seat, especially in relation to seeking ways to work with Consarc to minimize ECGD losses in this matter. He continued by saying that as yet he was unable to give Consarc any authorization in the manner in which it should reply to communications received from Machinoimport but that he hopes to be in such a position within the next 3/4 days.
Cochrane also said that yesterday there had been a meeting attended by senior officials of DTI, MOD, H M Customs & Excise and ECGD to try to reach a consensus viewpoint as to how each of these departments should approach the problem as already mentioned earlier to try to minimize the government's losses in this area. He continued by saying that recognizing the expected differing views of each of these departments. he stated it was not surprising to report that no clear line of decision was taken at this meeting and that the situation was that each of the representatives of the above departments was reporting its own view to the Ministers concerned and naturally will revert to Consarc as soon as a definite line of pursuit is agreed.
ECGD expects Consarc, under the terms of the guarantee, to take all steps which at this juncture Consarc thinks are expedient to recover as much of the costs as possible and Cochrane said that he did recognize that any steps which we think expedient have to be with the full approval of the other three departments, DTI, MOD and HM Customs & Excise.
On the contractual side, Metcalf said that the buyer has not yet canceled the contract and he re-stated the fact that Consarc had already removed its service engineers and in any event that the maximum number of man days (350 man) have already expired.
Fear commented that it is the ECGD's belief that the Soviets will continue to push for Consarc to complete the balance of its contractual obligations as far as is legally possible and this appeared to be the view also held by Consarc at this time. The goods in Hull will remain there for the time being and will henceforth be held there on order of ECGD.
Claims on ECGD as rendered
Fear said that it was essential that ECGD was informed in respect of the goods not dispatched, the aggregate value of same that has been paid to suppliers and the aggregate value of same, unpaid as yet to suppliers and further that this statement would also require to be audited.
Cooke made the point that as far as he was aware, so long as Consarc had a valid invoice in respect of any items not yet paid, that upon receipt of the goods and the invoice, then surely it had a legal obligation to pay its suppliers, so therefore he did not understand the ECGD request to have such an additional Audit undertaken.
ECGD however insisted that it was essential for their purposes that the above exercise be undertaken and that it be audited and reported accordingly.
With regards to the spares list which is the subject of the above claim ECGD stated that it understood that these goods were apparently not the subject of an Export license. Cooke reported that we had applied for an Export License in respect of the goods under this claim and that the DTI had said it would prefer to have this matter placed in abeyance meantime although it is highly probable that the vast majority of the items being considered on an individual basis would not be the subject of an Export license.
ECGD requested and Consarc agreed to re-apply for an Export license in respect of these spare parts and Wilson suggested that we also include the relevant purchase orders which may help the DTI's task in deciding on the Export license application.
ECGD also stated that making this application, Consarc should state that it is its belief that the buyer will still wish to have the balance of the contract shipped (Export license permitting) and further that Consarc should also mention its trading position with Machinoimport in particular and the USSR in general.
ECGD also recommended that Consarc should apply for an Export license in respect of item 2.7 (Calcarb know-how and equipment). Both these applications have to be made in the context of the Machinoimport contract.
Fear referred to one point in the covering letter which accompanied the claim on the undispatched goods and this was in relation to suppliers whose conditions of sale were amended at Consarc's request to mirror its contractual obligations with Machinoimport. He asked us to confirm full details of this as to names of supplier(s) and how much they are owed, albeit whether invoiced or not.
Claims - Goods dispatched.
Cochrane said that he understood from one of our telexes that certain of the goods already dispatched had problems in the field. He produced the Telex in question and it was explained that this was not the case but what Consarc had been saying was a hypothetical set of circumstances which the buyer may try to use to claim more liquidated damages and Consarc re-confirmed that as far as it was aware, none of the goods dispatched in the field were defective, with the sole exception of a minimum amount of damage in transit which had already been reported in respect of a Heat Exchanger as supplied by Controlled Circuit Cooling Limited.
Cooke reported that as far as he was aware 700 to 800 pounds of damage had been back-charged to the supplier and Cooke was asked to confirm if this was indeed the case and if so it would probably have to be regarded as a specified deduction from ECGD claim.
Before the check was passed to Consarc it was necessary to correct the error made by Customs in its illegal seizure of the last container.
Consarc Engineering Limited
Please treat this letter as a request pursuant to Article 23a iii of the Guarantee to deliver up and transfer to the Department all the items comprised in your contract with Machinoimport (the items) to which the Export of Goods (Control) (Amendment No 10) Order applies.
It is my understanding that the items are presently the subject of seizure by HM Customs and Excise and are held by them at the port of Hull. In order, therefore, to effect this transfer. I would be grateful if you could signify your agreement thereto by signing the acknowledgment contained on the attached copy of this letter which I will then present to HM Customs and Excise in Hull for them to acknowledge that thereafter they will hold the items to our order.
We hereby agree to the aforementioned transfer of property to ECGD and acknowledge that from the date of presentation to HM Customs and Excise they will hold the items on behalf of ECGD.
For and on behalf of Consarc Engineering Limited:
Consarc Engineering Ltd.
12 North Road
BUYER MACHINOIMPORT - RUSSIA
GUARANTEE NO CXTP/493821/1076 - C8
I refer to your claim dated 22nd February 1985 in respect of the above named buyer and would inform you that a claimed interim payment of 1,500,000 is now made to Consarc Engineering Ltd.
In making this payment, may I remind you of your obligations under Article 23a and 24 to take action to effect recoveries and remit them to ECGD. Until such recoveries are remitted, it should be clearly understood that they are held in trust for ECGD. Failure to comply with these obligations to take recovery action entitles ECGD to refund of this claim payment upon demand.
J G M COCHRANE