Current developments in charterparty clauses

It is essential that the language of standard shipping documentation should reflect current practice in the various trades and sectors for which the documents were originally drafted and the updating and revision of shipping documentation is an important, although often time consuming task. Standard forms of charterparties, for example, start to lose their credibility if there are more rider clauses and amendments than original text.

Additional clauses and amendments will, of course, always be a feature of charterparties depending on the circumstances of each particular fixture. Nevertheless an evenly balanced and up-to-date charterparty should minimise the necessity for too many additional clauses. The principal organisation concerned with the development of standard shipping documentation is the Baltic and International Maritime Council (BIMCO). Over a period of more than 90 years BIMCO has developed a large number of standard charterparties, bills of lading and other forms and contracts which are used in numerous shipping transactions worldwide every day.

ITIC is represented on the BIMCO Documentary Committee and recent examples of drafting work carried out by this Committee include the following:-

Standard ISM Clause for Voyage and Time Charterparties

Although most standard charterparties contain fairly comprehensive provisions requiring the owner to ensure that the ship is in full compliance with all relevant international rules and regulations and in possession of necessary certificates to permit the ship to trade within the agreed trading limits, BIMCO decided to respond to the demand from members who asked for a specific reference to the ISM Code to be included in their charterparties. In drafting the Standard ISM Code Clause, BIMCO considered that it should contain the following essential elements:-

Reference to compliance with the Code by the ship and its shore management throughout the currency of the charterparty. A requirement for owners to provide charterers with copies of the relevant Document of Compliance (DOC) and Safety Management Certificate (SMC) upon request. Primacy to be given to the liability provisions of the charterparty over those provided in the ISM Clause in order to maintain the balance of the charterparty. A remedy for loss, damage, expense or delay caused by failure of “the Company” to comply with the Code where there is a causative connection between failure of “the Company” to comply with the ISM Code and the loss or damage caused.

Standard Law and Arbitration Clause

The November 1997 meeting of the BIMCO Documentary Committee authorised the drafting of a revised Standard Law and Arbitration Clause. The impetus for this revision was the new UK Arbitration Act 1996 and one of the key issues addressed by the BIMCO Sub- Committee that was formed was to remove all references to Arbitration Acts that predate the latest statute, in order to clarify and emphasise the repeal of earlier Arbitration Acts. In order to provide the widest possible application to various types of agreement the term “Charter Party” has been substituted by “Contract” throughout the new clause.

The Sub-Committee was also conscious of the fact that occasionally the appointment procedure of arbitrators can be protracted. “In September 1995 BIMCO established a sub- committee for the purposes of drafting a new general purpose time charterparty”

In order to avoid the parties being able to use delaying tactics, the revised clause was drafted so as to limit the time between the first notice being served and the arbitration panel being formally constituted to a period of 14 calendar days. This is significantly shorter than the time permitted under the non-mandatory provisions of the Arbitration Act 1996 which could allow a party up to a maximum of 51 days under certain conditions.

Under the new clause by default, the reference is to three arbitrators. Failure by one party to appoint an arbitrator within the specified time results in the first appointed arbitrator being appointed without a requirement for a further notice to act as sole arbitrator. To avoid any possible misunderstanding between the parties, the party whose arbitrator has been appointed sole arbitrator must advise the other party that such an appointment has taken place.

Standard Scrap Metal Clause

Although there are guidelines for the safe loading and stowage of scrap metal, charterparties for this cargo rarely, if ever, fully incorporate them. Given the substantial risk of hold damage caused by the careless loading of scrap metal into unprotected holds, it was felt by BIMCO that a standard clause providing safe loading and stowage guidelines and a remedy for damage would be welcomed by owners participating in this trade. The key elements of BIMCO's Scrap Metal Clause are as follows:-

owing to the hazardous nature of metal borings, shavings and turnings when carried in bulk (dealt with by the IMO Code of Safe Practice for Solid Bulk Cargoes) their carriage is expressly excluded;

• charterers are required to instruct the terminal operators or stevedores to load and stow the cargo in compliance with the IMO guidelines;
• compliance with the IMO guidelines not to affect the counting of laytime;
• magnets cannot be used for loading and/or discharging; however, this does not preclude the parties from agreeing otherwise;
• charterers are liable for any stevedore damage to the vessel. All costs for repairs to be for charterers' account and any time used in repairing the vessel to count as laytime.

General Time Charter Party - “Gentime”

In September 1995 BIMCO established a sub-committee for the purposes of drafting a new general purpose time charterparty. It had originally been the intention to revise the traditional ‘‘Baltime’’ charter but in view of strong opposition from the Documentary Committee it was decided that it would be impossible to achieve any fundamental change to that document. It was therefore felt that the “Baltime” charter should not be subject to a radical transformation but that after a modest revision of some of its terms it should be left as an alternative document to a new general time charter.

At the last meeting of the BIMCO Documentary Committee in Rome in May 1998 a ‘final’ draft of the “Gentime” General Time Charter Party was placed before the meeting. It became apparent that further drafting was necessary on one particular aspect of the document and accordingly approval was deferred until the next meeting which will take place in November 1998. BIMCO Year 2000 Clause BIMCO has recently examined the commercial and legal need for a balanced standard Year 2000 Clause for voyage and time charter parties that reflects the obligations of both owners and charterers. This clause does not place any obligation on either party to warrant Year 2000 conformity or compliance, or to specify that "effective" plans are in place to address the Year 2000 problem. The standard Year 2000 Clause has been specifically developed for easy incorporation into charterparties without affecting their balance. Consequently, the requirements of the clause are designed so as not to prejudice the other rights, obligations and defences of the parties under the charterparty. In addition, specific remedies have not been provided for breach of the clause, in case this might affect the other rights, obligations and defences of the parties.

The full text of the clause is reproduced below: -

"Year 2000 conformity" shall mean neither performance nor functionality of computer systems, electronic and electro-mechanical or similar equipment will be affected by dates prior to or during the Year 2000.

Without prejudice to their other rights, obligations and defences under this Charter Party including, where applicable, those of the Hague or Hague-Visby Rules, the Owners and the charterers, and in particular the Owners in respect of the Vessel, shall exercise due diligence in ensuring Year 2000 conformity in so far as this has a bearing on the performance of this Charter Party.

The next issue of the Intermediary will contain a more detailed review of the “Gentime” Charter Party as well as a summary of other charterparty clauses which are under consideration by BIMCO. In the meantime if any Member would like additional information on any of the clauses mentioned in this article they should contact the Club.