Contracts and clauses - BIMCO Bulletin

Contracts and clauses

CONTRACTS AND CLAUSES The quarterly update. At any given time, BIMCO’s Contracts and Clauses department is working on numerous projects – providing contracts for all sectors of the shipping industry and developing new ones as the world, markets and demands change. The team offers a quarterly update and shares insight into current and upcoming projects. AIS “Switch Off” Clause – compliance with US and international rules Sanctions have been, and continue to be, a widely used geopolitical tool for governments and international bodies. The rules seem to be ever-changing and are often complex and imprecisely drafted. However, one thing they all seem to have in common is the fact that violations can be very costly. To address these challenges, BIMCO has, over the past couple of years, published sanctions clauses for time and voyage charter parties, as well as a dedicated time charter clause requirement for the container trade that specifically tackles the unique sanctions issues faced by the segment. In May 2020, the US Office of Foreign Assets Control (OFAC), together with the Department of State and the US Coast Guard, issued a new Sanctions Advisory covering, among other things, the maritime industry. Part of this advisory suggested that charter parties should include an automatic identification system (AIS) switch- off clause without further elaboration on what such clauses should cover. Responding to the OFAC advisory and in a bid to counter bespoke, one-sided clauses that were being floated on the market, BIMCO has taken a fair and balanced approach in the development of the AIS “Switch Off” Clause for Voyage and Time Charter Parties 2021. It allows the charterer to terminate the contract where it is proved there has been malicious use of the AIS system, and the owner similarly if the charterer either requests the ship to maliciously use the AIS or orders it to perform ship-to-ship cargo transfer with another ship maliciously using the AIS. The clause should be available in July. Carbon Intensity Indicator – ensuring contractual clarity before new rules kick in BIMCO has established a study group to investigate the potential contractual implications of the International Maritime Organization’s carbon intensity regime, which is due to come into force in 2023. While this may seem a long way off, long-term contracts are already being fixed into the period. The conclusion of the study group is that new and existing contracts will need additional clauses to address compliance – currently, time charters and bareboat agreements spanning 2023. BIMCO is talking to owners and charterers about the challenges of compliance and continuous vessel improvement, and a number of drafting teams are already being established. Electronic Signature Clause – catering for new practices The world has, for a while, been moving towards allowing contracts to be signed electronically. As a result of the restrictions imposed by the pandemic, with many people working from home without easy access to post, courier or, sometimes, even the relevant signatories, we are seeing an increased use of electronic signatures for documents. As a result, BIMCO has partnered with DocuSign to allow users of our contract-editing platform, SmartCon, to sign documents in an easy and safe manner. It is not for BIMCO to dictate how parties should sign their contracts. We merely want to allow those who agree to signing electronically to do so in a way that suits them. For this reason, the methods of signing allowed under the clause range from pasting an image of a signature to using dedicated signature software. Many documents are issued in connection with, for example, a charter party. It has been considered both practical and helpful to the industry to ensure that routine documents, such as letters of indemnity, can be issued electronically whenever this clause is included in the contract. The new clause is expected to be published in June. Force Majeure – it’s not my fault! In 2005, BIMCO developed a force majeure clause that was included in SUPPLYTIME. The clause has been included in several of our contracts since – but it has never been published as a free-standing clause. The COVID-19 pandemic has led to many force majeure declarations across the maritime industry. While these may have sparked the project, it is important to highlight that this is not merely a COVID-19 clause. It is a general force majeure clause and the focus of the drafting team has been on ensuring it is specifically useable for – and in – shipping contracts and shipping activity in general; for example, it makes special provision for when a ship has cargo on board. The clause has a high threshold before it is triggered; it is not a “get-out-of-jail-free card”. It should only be possible to invoke it when someone is prevented from performing their obligations because of an unforeseen event that could not be avoided or overcome. The clause will aim to strike a balance between “classic” and “modern” force majeure events. An example of a classic event is an “act of God” whereas a modern event, for example, is a “cyber security incident”. The drafting team also found it appropriate to include “obstruction of waterways” to address situations similar to the Suez Canal blockage in March 2021 in the specification. The clause is due for publication later this year. 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