Explanatory notes

Applicability of the ISM Code

Full industry compliance with the International Safety Management (ISM) Code is to be phased in over a period of 4 years based on two key implementation dates. The ISM Code will apply compulsorily under international law to all cargo vessels and mobile offshore drilling units of 500 gross tonnage and upwards. Although not a mandatory requirement, the IMO has also urged Governments to implement the ISM Code as far as practicable for cargo ships of 150 gross tonnage and over, but less than 500 gross tonnage. The first key implementation date is 1st July 1998 by which time all passenger ships, including high-speed craft, oil tankers, chemical tankers, gas carriers, bulk carriers and cargo high-speed craft of the stipulated gross tonnage must comply with the requirements of the Code. The second and final key implementation date is 1st July 2002 by which time other cargo ships, such as container ships, and mobile offshore drilling units of 500 gross tonnage and over must comply with the Code.

Background to the BIMCO ISM Clause

In recent months, BIMCO has listened carefully to the concerns expressed by many sectors of the industry regarding the likely effect on commerce of the coming into force of the ISM Code. The ISM Code represents only one part of the substantial volume of regulations to which shipowners are bound under the law of the Flag State. As part of the SOLAS Convention 1974, as amended, implementation of the ISM Code is mandatory for all Contracting States under international law. Most standard charterparties contain fairly all-embracing provisions requiring the owner to ensure that the vessel is in full compliance with all relevant international rules and regulations, and possesses the necessary certificates, to permit the vessel to trade within the agreed trading limits. Therefore, from a strictly legal point of view, BIMCO considers that there is no readily identifiable contractual need to make a specific reference to the ISM Code in a voyage or time charter.

Nevertheless, in response to the demand of Members and for those who may feel more comfortable incorporating a specific reference to the ISM Code in their charterparties, BIMCO has devised a broad and neutrally worded ISM Clause.

The BIMCO Standard ISM Clause

In drafting the Standard ISM Clause BIMCO considered that the Clause should contain the following essential elements:

• Reference to compliance with the Code by the vessel and shore management throughout the currency of the charterparty. 
• A requirement for owners to provide charterers with copies of the relevant DOC and 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. 

The Standard ISM Clause produced by BIMCO consists of two paragraphs. The wording has been carefully drafted so as not to place upon owners or operators any greater obligation or guarantee of compliance with the ISM Code than is required under international law. As the two coming into force dates of the ISM Code are predicated upon particular vessel types and to avoid the Clause becoming over-lengthy, reference to specific dates have been omitted. The term ‘owner’ is used throughout the Clause in addition to “the Company”, as defined by the ISM Code – although it is appreciated that “the Company” may also mean the vessel’s owner. This has been done for the sake of consistency with the use of the term ‘owner’ in the charterparty and to avoid any doubt that the Clause applies to the parties to the contract. The final part of the first paragraph requires the owners of the vessel to provide, upon charterers’ request, copies of the relevant ISM Certification. Reference is made only to owners in this part as even if they are not operating the vessel they can easily act as an effective conduit to ensure that the charterers are provided with copies of certificates.

The second paragraph gives primacy to other charterparty liability provisions over the liability provisions of the ISM Clause. Where there is a causative connection between the failure of “the Company” to comply with the requirements of the ISM Code and loss, damage, expense or delay to the vessel, then such costs are to be met by the owners of the vessel. This provision is careful to avoid the onerous liability burden that would arise where a failure to comply with the ISM Code might be linked to a contemporaneous non-ISM related event. The provisions of the second paragraph also remove any implied liability of a third party ship manager operating the vessel that may run contrary to the ship management agreement.

Originally published in BIMCO Special Circular No. 1, 4 February 1998 - BIMCO Standard ISM Clause for Voyage and Time Charterparties