NEW BIMCO REDELIVERY CLAUSE FOR TIME CHARTER PARTIES

E‐Bulletin –September 2017

Re: NEW BIMCO REDELIVERY CLAUSE FOR TIME CHARTER PARTIES

By Carlos Vazquez, London office

Introduction

BIMCO has recently issued a Redelivery Clause for Time Charters (“the BIMCO Clause”) to their members for use in time charterparties. A copy of the BIMCO Clause can be found attached to this bulletin as Annex 1.

The essence of this new BIMCO Clause is to reduce the scope for disputes between owners and charterers by developing a standard clause that, amongst other things, provides clear wording about giving notices and a regime for the measure of owners’ damages if the ship is redelivered late.

All time charterparties contain a redelivery clause either in their printed forms or in their rider clauses (or both). For example, clause 4 of the 1946 NYPE form and 2015 NYPE (and clause 10 of the 1993 NYPE form) versions provide:

NYPE 2015 ‐ Redelivery

(a) The Vessel shall be redelivered to the Owners in like good order and condition, ordinary wear and tear excepted, at ……. (state port or place).

(b) The Charterers shall keep the Owners informed of the Vessel’s itinerary. Prior to the arrival of the Vessel at the redelivery port or place, the Charterers shall serve the Owners with ……. days’ approximate and ……… days’ definite notices of the Vessel’s redelivery. Following the tender of any such notices the Charterers shall give or allow to be given to the Vessel only such further employment orders, if any, as are reasonably expected when given to allow redelivery to occur on or before the date notified.

(c) Acceptance of redelivery of the Vessel by the Owners shall not prejudice their rights against the Charterers under this Charter Party.

NYPE 1946 and 1993

[…]

… hire to continue until the hour of the day of her re ‐delivery in like good order and condition, ordinary wear and tear excepted, to the Owners (unless lost) at ______ unless otherwise mutually agreed. Charterers are to give Owners not less than ______ days’notice of vessels expected date of re ‐delivery, and probable port.

The changes introduced in the new NYPE 2015 reveal BIMCO’s and other pro‐Owners’organisations tendency towards introducing language in their work under the premise that doing so will help to add clarity and hence to reduce disputes. A different (more cynical) way of looking at this is that the additional language is predominantly designed to suit Owners’interests. By way of example, clause 4 (b) of the NYPE 2015 reproduced above introduces changes that are notably favourable to Owners as the standard position under English law is that where a Charterer provides an approximate notice of redelivery that is marked without guarantee they can employ the ship to a later date provided this is within the last permitted date for redelivery under the charter.

The new BIMCO Clause goes significantly wider in contents than the above by expressly requiring that Charterers:

  • be proactive by keeping Owners informed of any changes in the vessel’s itinerary;
  • give Owners a set of approximate notices and one definite notice. In particular: “Minimum 30 followed by 20, 15, 10, 7, 5 and 3 days’ approximate notice and 2 days’ definite notice of redelivery” though these notices may be changed to suit the particular trade or duration of the fixture;
  • ensure all notices are consistent with the above agreed spread, that is, the sequence of notices should always be consistent save that if the issuing of one of said approximate notices (but excluding the first 30‐day notice) is missed for reasons beyond charterers’control, this will not be considered a breach provided the next notice is given within the agreed spread;
  • will not give voyage orders that are inconsistent with the first notice (30 days);
  • shall nominate a definite redelivery area/range together with the first 30‐day notice;
  • shall nominate the definite redelivery port together with the 15‐day approximate notice;
  • shall not redeliver the ship more than 24 hours earlier than the expected redelivery date as stated in the 5‐day approximate notice without Owners’written consent;
  • shall be entitled to qualify the approximate redelivery notices ONLY with the words “weather permitting” and/or “unforeseen circumstances always excepted” save for

the “definite notice”. Any other qualification will not have any legal value

  •     shall pay hire at the prevailing market if redelivery exceeds the charter period;
  •     shall be liable for any foreseeable additional losses declared likely to occur resulting from providing orders which the vessel cannot be reasonably be expected to complete within the charter period (late redelivery);
  • cannot redeliver the ship before the expiry of the definite notice of redelivery or the minimum charter period (early redelivery).

Attached to the new clause, BIMCO has produced a set of explanatory notes commenting on the reasons behind each of the above requirements. BIMCO’s overall conclusion is that redelivery notices under a time charter must be given correctly, consistently and reliably to allow Owners to plan in advance future employment of the ship. This is naturally a fair expectation and one Charterers must meet to avoid being in breach of charter. However, as a general proposition, our view is that the use of a detailed standard clause of this type may be flawed as well as having a draconian impact on Charterers’ position:

  • it is by necessity generic and is not vessel/trade specific. Assureds’ current rider clauses should address their specific trade and may thus be more appropriate;
  • the wording in parts appears unclear and thus potentially contentious; for example, the provision “except for circumstances beyond Charterers’ controlcould well lead to differences of opinion between Charterers and Owners in terms of interpretation;
  • The detailed wording of the clause is primarily aimed at protecting Owners’ position. In contrast with the more standard shorter redelivery clauses, it expressly (and unnecessarily) imposes on Charterers too many obligations some of which appear to be aimed at varying English common law decisions favourable to Charterers’ interests (for instance, the Zenovia1);
  • The late redelivery sub‐clause expressly entitles Owners to recover damages at the market rate for late redelivery as well as foreseeable additional losses (such as a loss of profit on a next charter that the vessel was due to perform). These two aspects combined set out a rather punitive damages regime to which Charterers would not be exposed expressly (other than by way of the application of common law principles) when the more standard shorter redelivery clause is used. In our view, if the clause is to be accepted by Assureds, the “additional losses” aspect ought at least to be deleted.

On the plus side, the wording is reasonably clear and clearly strives to remove some uncertainty that has hitherto existed.

It is also worth pointing out that the English law position on breach of redelivery notices remains one of the difficult “rey” areas of English shipping authority so anything (clausing wise) to avoid litigation is a good idea in minimising disputes (even if result is that we will not get any authority to clarify the legal effect, for example, of a charterer failing to comply with an approximate redelivery notice!).

Assureds are reminded that, absent wording to contrary, they can be held to the charter party if they try to throw in the towel too early (i.e. where another legitimate voyage would be capable of being performed and there is accordingly legitimate interest in holding them to do so) and, as mentioned above in terms of “additional losses” they should be particularly wary

1 IMT SHIPPING AND CHARTERING GMBH V CHANSUNG SHIPPING COMPANY LTD [2009] EWHC 739 (Comm)

of any wording which threatens to extend the scope of damages recoverable by an Owner to more than market measure for the overrun period.

Conclusion

The new Redelivery Clause is an attempt by BIMCO to create a clear wording that will serve to lessen disputes which are not unusual when redelivering a ship; however, how successful it will be depends on its uptake. That will require buy‐in from Owners and Charterers.

Broadly speaking the changes introduced by BIMCO are mostly owner‐focused and therefore to charterers’ detriment. If asked if the new BIMCO Clause offers a better option for Charterers than previous standard clauses or the bespoke rider clauses we normally see in Assureds’ contracts, our view is that the answer is no from a Charterers’ perspective.

The Club would recommend caution is exercised if Assureds intend to use this clause. Where the BIMCO Clause is used cross‐checking with existing terms may be needed to avoid conflict and ensure it meets Assureds’ specific needs.

Assureds are invited to contact the claims department in London or Shanghai should they have any questions arising from this bulletin.

Michael Else and Company Limited, as Managers E. & O.E.

Dated London 18 September 2017

Annex 1

BIMCO Redelivery Clause for Time Charter Parties

(a) Itinerary for the Final Voyage and Redelivery Notices – The Charterers shall keep the Owners informed of the Vessel’s itinerary and any changes thereto and in any event when requested by the Owners. In addition, the Charterers shall give the Owners the following notices of the Vessel’s redelivery, unless otherwise agreed:

Minimum 30 followed by 20, 15, 10, 7, 5 and 3 days’ approximate notice and 2 days’ definite notice of redelivery.

All notices shall be consistent with the above agreed spread of notices except for circumstances beyond the Charterers’ control. Except for the first notice, the absence of one single approximate notice of redelivery shall not be considered as breach of this clause if the next notice given is within the agreed spread.

Once the first redelivery notice has been given the Charterers shall not give any employment orders that are inconsistent with that notice.

Together with the thirty (30) days’ notice the Charterers shall, where there is more than one permissible range/area, nominate the definite redelivery range/area.

Together with the fifteen (15) days’ notice the Charterers shall nominate the definite redelivery port. After giving the five (5) days’ notice the Charterers shall not be entitled to redeliver the Vessel more than twenty‐four (24) hours earlier than the expected date of redelivery given in such notice without the Owners’ written consent.

The Charterers shall be entitled to qualify redelivery notices, save for the definite notice, with “either permitting ” and/or “unforeseen circumstances always excepted” and all other

qualifications shall be null and void.

(b) Late Redelivery –If the last voyage exceeds the period agreed and declared under this

Charter Party, the Charterers shall pay hire at the prevailing market rate, if

higher than the charter rate, for such overrun period. In addition, if the Charterers provide

orders that the Vessel cannot reasonably be expected to complete within the

charter period, or fail to comply with their duty to give revised orders, the Charterers shall be

liable for all losses caused by such overrun, provided the losses were

foreseeable or declared likely to occur as at the date the order was given or latest at the time

when performance fell due.

(c) Early Redelivery –The Owners shall not be obliged to accept redelivery of the Vessel before:

(i) the expiry of the definite notice of redelivery; or

(ii) the minimum Charter Party period.