Background

SHIPMAN is one of the most widely used ship management agreements in the shipping industry. The agreement was first published in 1988 and updated in 1998 and 2009 to reflect changes in ship management practices, regulatory developments, etc.

 

Despite the continuing wide use of SHIPMAN 2009, changes in ship management practices coupled with the need to include a significant number of freestanding BIMCO clauses as riders warranted an overall review of the SHIPMAN agreement itself. The review was launched in May 2022 and culminated in March 2024 with the adoption of the 2024 edition of the agreement by BIMCO’s Documentary Committee.

 

In addition to a general review of the SHIPMAN agreement, the drafting team spent a significant amount of time developing the ETS – SHIPMAN Emission Trading Scheme Allowances Clause 2023 which was published in December 2023 as a standalone, bolt-on, version for use with SHIPMAN 2009. The clause has been incorporated within the 2024 edition of SHIPMAN (Clause 10) with references to the box layout.

 

To provide users with a comprehensive agreement, SHIPMAN 2024 includes a number of clauses which have been developed since the previous edition of the agreement was published in 2009, including the Law & Arbitration Clause 2020, the Mediation/Alternative Dispute Resolution Clause 2021, the Personal Data Protection Clause for SHIPMAN 2009, the Electronic Signature Clause 2021, the Cyber Security Clause 2019 and the MLC Clause for SHIPMAN 2009.

 

Drafting Team

SHIPMAN 2024 is the result of a collaborative and consensual process between owners, managers, P&I clubs, insurance and legal experts. BIMCO is grateful to the drafting team for their considerable time, effort and commitment in producing the revised agreement:

 

• Captain Ajay Hazari, Anglo-Eastern (Chairperson)
• Captain Gaurav Rajora, Fleet Management
• Graham Prayel and Dora Costa, V Ships
• Manolis Nicolaou, Columbia Shipmanagement
• Sebastian Hardenberg, BSM
• Steve Davies, Anglo International Shipping Operations
• Torfin Eide, Hansa Tankers
• Johan Botes, Oldendorff Carriers
• Tim Davies, West P&I Club
• Tim Howse, Gard P&I Club
• Robert Hodge, ITIC
• Stephen Mackin, Clyde & Co.

BIMCO representatives:

• Christian Hoppe
• Zehra Göknaz Engin

 

As part of the development work, the drafting committee consulted a large group of stakeholders engaged in ship management. BIMCO would like to thank them all for their support and valuable input to the process.

 

Explanatory notes

The following explanatory notes provide information about the scope of the key provisions and clarify how the agreement is intended to operate. The notes are also intended to provide users with guidance as to the nature and extent of changes made in the SHIPMAN 2024 form. The 2009 edition of the form was only accompanied by a comparison against the 1998 edition, but it is considered more user friendly to set out comprehensive explanatory notes in line with usual BIMCO practice. If you have any questions, please contact us at contracts@bimco.org and we will be happy to assist.

 

Key features of the form

SHIPMAN is the most widely used industry standard contract for ship management. It is an agency agreement whereby managers are appointed by owners to carry out ship management services as defined in the contract. This will usually include technical management and may also include crew and commercial management as well as insurance arrangements in respect of a ship. 

 

The 2024 edition of the agreement brings it up to date with commercial developments in ship management practices over the past 15 years whilst adding a number of boilerplate provisions that have become relevant because of regulatory changes, thereby reducing the need for rider clauses. Amongst the most notable novel features, SHIPMAN 2024 includes provisions addressing emission trading scheme allowances, access to ship’s data through the managers’ information system and predelivery services.

 

Structure

The agreement is divided into seven main sections. Part I, Part II and Annexes A to E. Part I is the traditional BIMCO box layout used to insert the deal-specific information that has been agreed between the parties. Part II contains the standard provisions which have been drafted with the intention that these are left unamended by the parties, unless they deliberately wish to alter the careful balance of provisions. Annexes A to E enable the parties to insert more detailed information about the ships covered by the management agreement. Due to the addition of several new clauses in this latest edition of the agreement, it has not been possible to maintain the clause numbering in Part II the same as compared with the previous edition.

 

The priority of the different sections of the agreement is set out above the signature boxes in Part I, namely that the provisions of Part I and Annexes A to E shall prevail in case of conflict with Part II.

 

A novel feature of BIMCO standard contracts, Part I also incorporates the BIMCO Authenticity Clause above the signature boxes. The purpose of the clause is to decrease the incidence of – often unknowing – use of counterfeit and/or altered BIMCO contract forms. If the party providing the contract template for negotiation is reluctant to include this clause, then it should serve as a warning that the offered contract is not a genuine BIMCO standard agreement.

 

Part I - Box Layout

The box layout has been updated to reflect changes in SHIPMAN, including provisions on emission trading scheme allowances and predelivery management fees.

 

A new box at the top of the box layout enables the parties to state the vessel’s name and IMO number as it is considered useful to have this information at the beginning of the agreement. Further particulars of the vessel can be stated in Annex A (Details of vessel or vessels).

 

Part II

Clause 1 (Definitions)

This clause includes defined terms that appear several times throughout the contract. As per usual practice in BIMCO contracts, defined terms which only appear in a single clause are included in the clause in question.

 

As compared with SHIPMAN 2009, definitions have been introduced to reflect new provisions on managers’ use of affiliates when providing services ancillary to the management services, predelivery services and change of control.

 

The term “shipwreck unemployment indemnity” has been removed from the definition of “Crew Insurances” as it was deemed outdated because such indemnity is no longer included in crew insurances.

 

A new definition of “Delivery” has been included as a result of the division of management fees into two categories, namely predelivery management fees and annual management fees in Clause 13.

 

Clause 2 (Commencement and Appointment)

This clause establishes the start date of the agreement and the roles and responsibilities of the Owners and Managers. Whereas the 2009 edition referred to the commencement of the management services, the clause now refers to the commencement of the agreement in line with the terminology used in Box 2.

 

Clause 3 (Authority of Managers)

The provisions in the clause establish the fundamental principle of SHIPMAN that it is an agency agreement with the managers carrying out the functions specified in the agreement as agents for and on behalf of the owners.

 

It is worth noting that although SHIPMAN is designed as a multi-functional management agreement, it is more appropriately used as a full management or technical management agreement. If only crew management services are to be provided by the managers, then it is recommended that the specialist crew management agreement CREWMAN A or CREWMAN B is used by the parties, as appropriate to their needs.

 

The provisions of the second sentence of Clause 3 provide the managers with a right to take such action or actions as they may in their absolute discretion consider necessary from time to time to enable them to perform the agreed management services. The original sentence has been revised for clarity to highlight that managers are required to adhere to "applicable" laws and regulations, rather than “relevant” ones. This change was made because a regulation might be relevant but not necessarily applicable to the respective parties.

 

Clause 4 (Technical Management)

This clause specifies the technical management services that the managers will provide if agreed upon according to Box 6.

 

Subclause (d) on the operation of a drug and alcohol policy has been re-instated – it appeared in SHIPMAN 1998, but was removed in SHIPMAN 2009 – reflecting current day practice that such provision will typically be included in the agreement.

 

The wording of subclause (i) has been updated, replacing “bunkers” with “fuels, as applicable”. This change clarifies that the technical managers are responsible for arranging the sampling and testing of fuels. The addition of “as applicable” is to provide for alternative fuels coming into use. The responsibility for arranging the supply of fuels for the vessel, if to be undertaken by the managers, is addressed in subclause 6(b) under Commercial Management.

 

Clause 5 (Crew Management and Crew Insurances)

This clause specifies the crew management and crew insurance services that the managers will provide if agreed upon according to Box 7 and Box 10, respectively. The crew insurance services can only apply if crew management services have been agreed, with one exception for “persons proceeding to sea onboard” (see subclause (b)(i) and Box 10).

 

BIMCO recognises that some parties prefer to use SHIPMAN even when the agreement is only for crew management purposes, even though BIMCO recommends the use of its specialist standard CREWMAN A agreement. To facilitate this, the crewing provisions in SHIPMAN and CREWMAN A are kept closely aligned.

 

As compared with the 2009 edition of the agreement, subclause (a)(vi) on the arranging of supply of provisions has been moved from Clause 4 to Clause 5 as it is considered a crew management service, rather than technical management.

 

Clause 6 (Commercial Management)

This clause specifies the commercial management services that the managers will provide if agreed upon according to Box 8.

 

The managers are required to provide commercial management services in line with the owners' instructions. The services listed in Clause 6 are not exhaustive, the specific services to be rendered by the managers will be determined by the owners' instructions within the framework of the agreed provisions.

 

As compared with the 2009 edition of the agreement, subclause (c) caters for the managers’ collection of emission allowances due from charterers to owners. The wording “assisting in the collection” is intended to cater for circumstances where managers, as part of their commercial management services, can reach out to the charterers and ask them to transfer a particular quantity of emission allowances to the account nominated by the owners.

 

The reference to "Management Fee” has been amended to “annual management fee” to reflect the distinction introduced between the predelivery management fee and the annual management fee.

 

Clause 7 (Insurance Arrangements)

This clause provides the owners with the option for the managers to arrange insurances on behalf of the owners in accordance with the insurance provisions of Clause 11 (Insurance Policies). The insurances will be arranged according to the terms instructed or agreed upon by the Owners, including conditions, insured values, deductibles, franchises, and limits of liability. The clause, which will only apply if the parties specifically state this in Box 11, has been carried over unamended from SHIPMAN 2009.

 

Clause 8 (Managers’ Obligations)

The provisions of this clause define the managers’ obligations in carrying out the agreed services as managers. The managers are obliged to use “their best endeavours” to provide management services to the owners in accordance with “sound management practice” and to protect and promote the interests of the owners in all matters related to the provision of the services under the agreement.

 

The managers’ general obligation to use “their best endeavours” should not be taken lightly. Courts take a fairly strict view as to what constitutes “best endeavours” – the phrase should be taken literally and does not mean “second best endeavours”.

 

“Sound management practice” does not depend on what a particular manager may regard as sound. In the event of a dispute, acceptable standards of best management practice may well be heard by the testimony of each party’s industry expert.

 

Managers may simultaneously act as managers for other vessels on behalf of other owners. The second paragraph of subclause 8(a) defines the overall responsibility of the managers in relation to all vessels entrusted to their management. This important provision permits managers who are acting on behalf of a number of different owners to allocate personnel and services in a fair and reasonable manner. In the absence of such provisions the managers would be faced with the impracticability of trying to give priority to all owners. In the 2024 edition of the contract, the clause was amended by replacing the reference to “available supplies, manpower and services” with “available personnel and resources” to update and simplify the wording.

 

According to subclause (b) the managers are obliged to comply with applicable flag state laws in the provision of services and, if they are providing technical management services, they must also agree to being designated as the “Company” for ISM/ISPS purposes. The subclause has been amended to reflect that the managers’ nominee, as identified in Box 5, may be the one appointed as the company responsible for ISM/ISPS compliance.

 

Clause 9 (Owners’ Obligations)

The aim of this clause is to outline the specific obligations and responsibilities of the owners concerning the management and operation of the vessel. It includes provisions related to timely payment of sums due to the managers, compliance with international maritime regulations (such as the ISM, ISPS, and STCW Codes), reporting requirements to the flag state administration, crew management, insurance matters, and ensuring crew familiarity with safety management systems.

 

Subclauses (b) and (c) list a number of obligations on the owners depending on whether the managers are providing technical management services or not.

 

In circumstances where the managers are providing crew management services in accordance with Clause 5, subclause (d) stipulates that owners must inform the managers prior to ordering the vessel to any excluded or additional premium area and bear any additional costs incurred by the managers as a result. Similarly, owners must agree with the managers prior to any change of flag of the vessel and cover any additional costs incurred by the managers due to such change.

 

Overall, the clause aims to ensure efficient and safe operation of the vessel while delineating the duties of the owners in this regard.

 

Clause 10 (Emission Trading Scheme Allowances)

This is BIMCO’s ETS – SHIPMAN Emission Trading Scheme Allowances Clause 2023. The parties are strongly encouraged to read the explanatory notes to the clause and a health warning has been included at the top of the clause to this effect. The explanatory notes can be accessed here.

 

The clause is accompanied by Box 14 for the parties to fill in relevant information required in respect of subclauses (a), (b) and (c). In the freestanding version of the clause, meant for bolt-on use with SHIPMAN 2009, the relevant information has to be inserted in subclauses (a), (b) and (c) directly as no accompanying box is available.

 

Clause 11 (Insurance Policies)

The insurance provisions are central to the whole operation of the SHIPMAN agreement and great care has been taken in reviewing the existing wording. The clause specifies that the owners are responsible for procuring insurance for the vessel, either by instructing the managers under Clause 7 or otherwise. The insurance must cover hull and machinery marine risks, protection and indemnity risks, war risks, and any optional insurances agreed upon. The owners are also responsible for ensuring that all premiums and calls on the insurance are paid by their due date, and for providing written evidence of their compliance with these obligations. 

 

Subclause (a)(ii) qualifies the owners’ requirement to provide crew insurances. The owners may make use of the managers’ P&I type cover for crew liabilities, if in place, when the manager is providing crew management services. However, the crew liability cover that the manager can obtain may not be as wide in scope and limits of liability as the crew liability cover that owners can obtain through their P&I club entry. If the managers are not providing crew and crew insurances in accordance with subclause 5(a) (Crew Management) and subclause 5(b) (Crew Insurances) then the owners need to provide cover for crew liabilities through their P&I club cover. A note is included under subclause (a)(ii) to clarify that crew insurances cannot be agreed separately unless crew management services have been agreed.

 

The only substantial amendment made to the clause was to include “piracy” under subclause (a)(iii) relating to war risks according to current marine insurance market practice, by which it is a required insurance instead of being an optional cover as it was under subclause (a)(iv) in the 2009 edition of the contract. The corresponding reference to piracy has been removed from the optional insurances in Box 12.

 

Subclause (a)(iv) is intended to deal with additional optional insurances that the owners may want included, such as kidnap and ransom insurance and FD&D (Freight, Demurrage and Defence) cover. If the parties wish to benefit from such insurances, they should agree them and clearly state their choice in Box 12.

 

Clause 12 (Owners' Receivables and Expenses)

This clause, in subclause (a), specifies that all monies collected by the managers under the terms of the agreement, and any interest thereon, shall be held to the credit of the owners in the bank account stated in Box 17. It is now specified that the bank account should be the one “nominated” by the owners (the 2009 edition of the form referred to a “separate bank account”.

 

According to subclause (b), all expenses incurred by the managers on behalf of the owners may be debited against the owners in the account but shall remain payable by the owners to the managers on demand. All monies collected by the managers under Clause 6 shall be paid into a bank account in the name of the owners or as advised by the owners in writing further to subclause (c). 

 

In the 2024 edition of the form, a new subclause (d) has been incorporated to address the situation where the managers provide assistance in collecting emission allowances. In such cases, which will be subject to the parties’ agreement under Clause 6, it is specified that emission allowances collected shall be deposited into the account advised by the owners. The title of the clause has been broadened to reflect this amendment.

 

Clause 13 (Management Fees and Expenses)

This clause specifies the fees that the owners must pay to the managers for their services under the agreement.

 

As a new feature in SHIPMAN 2024, the owners must pay a predelivery management fee to the managers in accordance with subclause (a)(i). This reflects that managers often start work before the date of commencement of the agreement, which is typically taken as the date when the vessel is delivered under the management of the managers. According to subclause (a)(iii), the predelivery management fee remains payable if delivery of the ship does not take place for any reason (other than default by the managers). The intention is to cover scenarios particularly where non-delivery due to a force majeure event as the manager would have performed the predelivery services and should therefore be compensated accordingly.

 

The annual management fee payable in accordance with subclause (a)(ii) is subject to an annual review and is payable in equal monthly instalments in advance. It is clarified that if the first instalment under the management agreement is not for a full month, then a pro rata payment may be required.

 

The managers must in accordance with subclause (c) provide their own office accommodation, office staff, facilities, and stationery, and the owners must reimburse the managers for postage and communication expenses, traveling expenses, and other out-of-pocket expenses properly incurred by the managers in the performance of the management services. The subclause and the corresponding Box 16 have been amended to enable the parties to set out the daily rate chargeable for vessel attendance in excess of an agreed number of days without linking it to the annual budget.

 

Subclause (d) addresses the situation where the owners decide to lay up the vessel. The parties must agree on a number of months for the layup period and enter it into Box 18.

 

A gross-up clause has been introduced as a new subclause (f) in SHIPMAN 2024. The clause is based on subclause 15(d) of BARECON 2017.

A new subclause (g) has been included to address the verification of bank account details with a secondary verification method other than email. It is specified that email alone will not be sufficient means of communication for changes to the bank account.

 

Clause 14 (Budgets and Management of Funds)

This clause specifies the requirements for the preparation and presentation of budgets by the managers. A careful study of this clause is strongly recommended as the successful and smooth operation of the management agreement is closely linked to the strict adherence by both the owners and the managers to the provisions contained in Clause 14.

 

The managers must prepare an initial budget and present it to the owners, and subsequent budgets must be prepared for 12-month periods and presented to the owners not less than three months before the end of the budget year. Compared with SHIPMAN 2009, subclause (a) now specifies that the managers’ initial budget should include applicable predelivery costs and expenses.

 

The owners must state whether or not they agree to each proposed annual budget, and if the parties fail to agree on the annual budget, either party may terminate the agreement.

 

The managers must also prepare and present estimates of the working capital requirement for the vessel and request the owners to pay the funds required to run the vessel for the ensuing month. Compared with SHIPMAN 2009, it is now specified that funds paid by the owners shall be held to the credit of the owners in a nominated bank account, as opposed to a separate bank account, stated in Box 17.

 

The managers must maintain and keep true and correct accounts in respect of the management services and make them available for inspection and auditing by the owners. 

 

Clause 15 (Trading Restrictions)

This clause specifies that if the managers are providing crew management services in accordance with subclause 5(a), the parties must agree on any trading restrictions for the vessel.

 

As compared with SHIPMAN 2009, it has been found useful to add wording to reflect that it may be necessary to review the trading restrictions during the duration of the agreement.

 

Clause 16 (Replacement)

This clause, which only applies if the managers are providing crew management services in accordance with subclause 5(a), specifies that the owners may require the replacement of any member of the crew unsuitable for service. Such a replacement may only take place at the next reasonable opportunity and will be at the owners’ expense unless the managers have failed to provide qualified crew.

Clause 17 (Managers’ Right to Subcontract)

This clause specifies that the managers have the right to subcontract any of their obligations under the agreement, subject to the owners’ written consent which shall not be unreasonably withheld. It is specified that the managers shall remain fully liable for the performance of their obligations under the agreement.

 

New wording has been included in the 2024 edition of the agreement to clarify that use of affiliated companies of the managers, such as subsidiaries, will not require written consent from the owners, but with the proviso that the managers remain liable for performance.

 

Clause 18 (Change of Control)

This clause has been included in SHIPMAN 2024 to address any proposed change of control of either party and regulate the situation in case the other party is not content with the change of control. It has been included also from the perspective of sanctions compliance.

Importantly, the clause includes a right for a party that objects to such change of control to terminate the agreement by giving the other party not less than one month’s notice, the result of which will be the termination of the agreement.

Clause 19 (Responsibilities)

This clause is absolutely central to the successful operation of SHIPMAN and great efforts were made in SHIPMAN 98 to provide equitable solutions which strike a fair balance between the owners and the managers. This clause is not known to have caused problems in practice and BIMCO has therefore, with the exception of the force majeure provisions, made very few and then only modest amendments to the texts so that the fundamental principles of the responsibilities are maintained in full. As compared with earlier versions of the clause, the 2024 edition also refers to affiliates in subclauses (b), (c) and (d) in line with changes made elsewhere in the agreement.

 

The force majeure provision in subclause (a) is more extensive but is based on the ICC (International Chamber of Commerce) model Force Majeure Clause 2003 that BIMCO has previously used to create a “standard” force majeure provision for other contracts such as the SUPPLYTIME 2005 Time Charter Party for Offshore Service Vessels. The provision in subclause (a) was considered more appropriate in a ship management context than the original BIMCO Force Majeure Clause 2022 and has therefore been maintained in SHIPMAN 2024 although it has been updated to take account of relevant elements of the 2022 BIMCO Clause notably in relation to the inclusion of references to plague and pandemics in subclause (a)(v), natural disasters or extreme natural events in subclause (a)(vi) and radiation or contamination in a new subclause (a)(viii).

 

The thinking behind the liability to owners provision in subclause (b) is that the managers should be able to limit their liability, so that they can insure it, except in particularly culpable situations. The limit of liability has been related to the level of the annual management fee in order to strike a reasonable balance between the fees earned by the managers on the one hand, and their exposure for insurance purposes (and therefore level of insurance premiums) on the other.

 

Accordingly, the managers’ liability is limited to a total of ten times the annual management fee, except where the loss, damage, delay or expense has resulted from the managers’ personal act or omission, etc. (in accordance with the concept underlying the 1976 Convention). In practical terms, therefore, the managers will carry unlimited liability in circumstances where they have deliberately or recklessly acted contrary to the owners’ interests, although this is restricted to the managers’ personal acts or omissions. In other words, acts or omissions of this nature by employees, agents or subcontractors are still subject to a limitation of ten times the annual management fee.

 

The liability provision in subclause (b) was extensively discussed during the 2024 revision process, with particular attention given to the wording regarding the managers’ liability “for each incident or series of incidents”. It was made clear that this clause is intended to function as an aggregate limit, highlighting the importance of ensuring managers' ability to obtain insurance in the market. It was eventually decided to leave the liability cap in subclause (b) unamended, as altering the wording may not necessarily enhance legal certainty.

 

The circumstances in which the managers should have unlimited liability have been related to the wording in the 1976 Convention on Limitation of Liability for Maritime Claims, which is an internationally recognised formula.

 

Where crew management services are provided by the managers, in the event of negligent action by the crew the managers shall not be responsible for any loss, damage, delay or expenses incurred as a result thereof unless the managers have acted negligently in selecting a competent crew for the vessel in accordance with Clause 5. The selection of a competent crew always remains the responsibility of the managers.

 

Subclause (c) is an indemnity clause which is intended to make the reciprocal provision to subclause (b). Under Scandinavian and Continental systems of law, subclause (c) is probably unnecessary because the courts will imply an obligation on the part of the owners to indemnify the managers for anything for which the managers are not liable under subclause (b). Under the English and United States of America systems, this is not the case and it is necessary to incorporate a specific indemnity setting out the extent to which owners will have to indemnify the managers. Subclause (c) sets out the extent of that indemnity by excluding from it any claim for which the managers would themselves be liable under subclause (b).

 

Subclause (d) contains the so-called “Himalaya” clause which protects the interests of employees, agents or subcontractors of the managers. The clause is designed to afford such employees, agents or subcontractors at least the same protection as the managers have under the management agreement and will thus remove the necessity to ensure the contractual chain of indemnities from subcontractors, etc., to the managers.

 

Clause 20 (General Administration)

The purpose of this clause is to outline the general administrative duties of the managers overseeing vessel operations on behalf of the owners. These responsibilities include keeping the owners informed of any incidents, delays, claims, or disputes related to the vessel, handling and settling claims and disputes, and providing necessary documentation and information to the owners upon request.  Additionally, managers have the authority to obtain expert advice, and owners must reimburse incurred costs.

 

In the 2024 edition of the agreement, the wording of subclause (d) has been amended to reflect that the authority to settle disputes should not solely lie with the managers but should be a consultative process with the owners. In particular, this is intended to enable owner input when appointing outside experts, particularly regarding claims. The managers still wield overriding authority “in their absolute discretion” under Clause 3 to take necessary actions in accordance with sound ship management.

 

Clause 21 (Managers’ Information System)

This clause, which has been introduced in SHIPMAN 2024, has been added to allow owners access to ship-related data via the managers’ information platform, including position and voyage performance reports, as well as maintenance and inspection reports. The aim of this clause is to ensure the safeguarding of managers’ IP rights and owners’ rights to access managers’ digital platform, while also preventing managers from unilaterally deleting data or withholding it from owners.

 

The rights of the parties to such data upon termination of the agreement are dealt under Clause 22 (Vessel’s Information and Data).

 

Clause 22 (Vessel’s Information and Data)

This new clause was introduced to address the necessity for owners to retain data ownership and have it provided in digital, transferable formats for easy system compatibility, without specifying current standards due to the evolving nature of technology. Furthermore, ownership of all accounts, documents, and vessel-specific electronic data was determined to belong to the owners. The vessel information, where possible, shall be furnished to the owners in originals or certified copies, with electronic data in a mutually agreed format, allowing the managers to retain copies of the vessel information.

 

The clause is based on subclause 22(i) of SHIPMAN 2009 which has consequently been deleted.

 

Clause 23 (Inspection of Vessel)

This clause enables the owners to inspect the vessel for any reason considered necessary. Although the owners have such right, to ensure the smooth and uninterrupted management services as agreed, there should be an element of professional courtesy extended by the owners in providing the managers with prior warning of any intended inspection or visit unless special circumstances require otherwise. The clause has been carried over from the previous edition of SHIPMAN in an unamended form.

 

Clause 24 (Compliance with Laws and Regulations)

The aim of the clause is to ensure parties’ compliance with laws and regulations of the flag state and areas where the Vessel operates.

 

Clause 25 (MLC)

This is the MLC Clause for SHIPMAN 2009. The explanatory notes for the clause are available here.

 

Clause 26 (Personal Data Protection)

This is the Personal Data Protection Clause for SHIPMAN 2009. The explanatory notes for the clause are available here.

 

Clause 27 (Cyber Security)

This newly introduced clause is the BIMCO Cyber Security Clause 2019 with a few adjustments to align it with SHIPMAN 2024. The most notable adjustment is that the liability cap in subclause (d) of the Cyber Security Clause 2019 has not been included in SHIPMAN 2024 as this issue is considered sufficiently covered in Clause 19 (Responsibilities).

 

The clause has been incorporated to ensure that both parties implement appropriate measures to protect digital environments from cyber security incidents. It also mandates the parties to have plans in place for responding to such incidents efficiently, to regularly review their cyber security arrangements, and to promptly notify each other in the event of a cyber security incident, with provisions for cooperation and information sharing to mitigate and prevent the effects of such incidents.

The explanatory notes to the 2019 clause can be found here.

 

Clause 28 (Sanctions)

This updated clause, based on the Designated Entities Clause for SHIPMAN 2009, has been refined to better suit the specific needs of ship management, presenting a more appropriate framework than the Sanctions Clause for Time Charter Parties 2020. The clause incorporates the definitions from the 2020 Time Charter Clause in subclause (a) for consistency with the other BIMCO Sanctions Clauses.

The clause is designed to ensure that all parties involved, specifically owners and managers, comply with international sanctions laws and do not engage in or support any activities, services, trade, or voyages subject to sanctions imposed by sanctioning authorities such as the UN, EU, UK, USA, or other competent bodies. The clause provides warranties, stipulates the right to terminate the agreement if these warranties are breached, and mandates indemnification for any losses incurred due to such a breach. Essentially, it safeguards parties from legal consequences stemming from involvement in sanctioned activities or associations with sanctioned entities.

There may be situations where countries impose sanctions which directly conflict with those of other countries and consequently both parties have the right to operate this clause. BIMCO recommends seeking legal advice before exercising any rights under this clause in such a situation.

BIMCO also recommends that parties should seek legal advice on whether they are obliged to comply with specific or extra-territorial sanctions before operating the clause to avoid the risk of wrongfully withdrawing from contractual obligations.

Subclause (a) sets out the definitions of terms used throughout the clause.

Subclause (b) contains the owners’ and managers’ warranties. Under this subclause the owners and managers give a continuing warranty throughout the duration of the agreement for themselves, the vessel and the subcontractors that they are not a sanctioned party. This protects the charterers during the agreement as owners are best placed to know whether there have been any changes in their ownership structure and the situation of the vessel, and managers are in the best position to obtain information about the parties and carry out due diligence to ensure that no sanctioned persons or entities are involved as subcontractors which might result in sanctions.

Subclause (c) addresses the consequences of a breach of warranty and gives the party not in breach the right to terminate the agreement with immediate effect if the other party is in breach of its warranty under subclause (b).

Subclause (d) is designed to ensure compliance with international sanctions laws and to avoid any potential legal repercussions. The provision specifies that regardless of any other terms or conditions in the agreement, neither the owners nor the managers are obligated to participate in, or facilitate, any activity that is considered a sanctioned activity.

Subclause (e) is the indemnity provision setting out that, regardless of any other terms in the agreement, the owners and managers are obliged to compensate the other party for any claims, losses, damages, costs, and fines that result from a breach of the warranties specified in subclause (b). This clause ensures that the responsible party is held financially accountable for any breach of the agreement related to sanctioned activities or parties.

Thorough consideration was given to potentially introducing the term “beneficial owners” into the clause. However, it was ultimately considered that the term “managers” adequately encompasses these entities and taking industry practices into account.

 

Clause 29 (Anti-Corruption)

This is an amended version of the BIMCO Anti-Corruption Clause for Charter Parties 2015 adapted to fit a ship management context. The explanatory notes to the charter party clause are available here.

 

Subclause (a) of the SHIPMAN clause sets out the scope of the clause.

 

Subclause (b) sets out the rights and obligations of the parties in case of non-compliance. The mutual indemnity in subclause (b)(i) imposes an obligation on a party that has breached anticorruption legislation to which it is subject to indemnify the other party against any loss or damage suffered as a result by the latter. This provision is likely to be of assistance in response to incidents of non-compliance where the termination provision in subclause (b)(ii) cannot be or is not invoked. 

 

Subclause (b)(ii) sets out the criteria for termination. The provision cannot be invoked simply as an excuse to exit an inconvenient management agreement or used where the actions of the party seeking to rely on it have previously compromised the position of the other party. Termination can be invoked either by owners or managers but only where the other party has breached applicable legislation and that breach has put the other, non-breaching, party in breach of anti-corruption legislation to which it is subject. The non-breaching party’s right to terminate is optional and any breach committed by one party can be disregarded by the other party.

 

Clause 30 (Duration of the Agreement)

SHIPMAN is intended to be an evergreen agreement that runs until one party brings it to an end by giving notice. To avoid the potential scenario of the owners terminating an agreement within a very short period of time after commencement the clause, as the 2009 edition, contains in subclause (a) a minimum period requirement of an agreed number of months or until two months after one party has given notice to terminate, whichever is the later.

 

Subclause (b) addresses what should happen if at the date of termination of the agreement the vessel is at sea or in a port where handover is not possible. In such circumstances, termination will take effect “at the next mutually convenient port or place”.

 

Clause 31 (Termination)

The termination clause outlines various conditions under which the agreement can be terminated. Subclause (a) allows either party to terminate the agreement if the other party fails to meet their obligations and does not remedy it within a reasonable time.

 

According to subclause (b), the managers can terminate the agreement immediately in certain circumstances, such as unpaid monies by the owners and unlawful use of the vessel. The reference in the 2009 edition of the form to “if the Vessel is repossessed by the Mortgagee(s)” has been amended by removing the reference to mortgagees. In practice, including a mortgagee in an agreement would require a separate contract between the lender and the owner, which would contradict with the SHIPMAN framework.

 

Subclause (b)(iii) now imposes an obligation on a party in default of their obligations regarding crew insurances and insurance policies to remedy it immediately to ensure swift action in case of non-payment. In case such remedy does not take place, the other party may terminate the agreement with immediate effect. In the 2009 edition of the agreement, termination was allowed if payments from the owners were not received within ten days of the managers’ request.

Subclause (c) specifies that the agreement automatically terminates in the event of the sale of the vessel, total loss, or end of the bareboat charter.

Under subclause (d), reference is made to “competent court or tribunal”. The addition of the reference to courts aims to cover the scenarios such as determining the vessel’s constructive total loss (CTL) status under an insurance policy, which may be resolved through either a court or tribunal. It was considered necessary adding a reference to the court, arising from concerns that “tribunal” might not adequately cover “court”.

 

Subclause (e) gives a right of termination in case of disagreement over the annual budget or a reduction in the annual management fee.

 

As compared with the 2009 edition of the form, a new subclause (f) has been included under this clause to cater for the new change of control provision.

 

According to subclause (h), the management fee continues to be payable for the period to be specified in Box 20 if the agreement is terminated for reasons other than the managers’ default.

 

Subclause (i) specifies that the owners may also be liable for severance costs for the crew.  Compared to the 2009 edition of the form, the subclause no longer uses the defined term “Crew Support Costs” as such costs will typically be covered within severance costs in practice. The definition of “Crew Support Costs” has consequently been deleted from Clause 1 (Definitions).

 

Subclause (j) specifies that the termination does not affect rights accrued prior to termination.

 

Clause 32 (BIMCO Law and Arbitration Clause 2020)

This is BIMCO’s 2020 edition of the law and arbitration clause which offers four named arbitration venues and a free choice of law and forum. The explanatory notes to the clause are available here (the link is to the London version of the clause – versions with the other named arbitration venues can be found on the BIMCO website but the explanatory notes are identical to all versions).

Clause 33 (BIMCO Mediation/Alternative Dispute Resolution Clause 2021)

This is BIMCO’s Mediation/Alternative Dispute Resolution Clause 2021. The explanatory notes to the clause are available here.

 

Clause 34 (Notices)

The clause refers to Boxes 25 and 26 in Part I where the parties can include names and addresses for notifications by owners and managers, respectively. As compared with SHIPMAN 2009, the clause has been updated to reflect current means of communication.

 

Clause 35 (Entire Agreement)

The purpose of the clause is to limit the rights of the parties to the written terms of the contract. As such it is intended to exclude representations, written and oral, not intended to be part of the final concluded charter party. The clause is identical to the Entire Agreement Clause in SHIPMAN 2009.

 

Clause 36 (Third Party Rights)

This clause clarifies that only third parties who are expressly identified in the contract can benefit from it.

 

Clause 37 (Partial Validity)

The purpose of this clause is an attempt to avoid a potential situation where the entire agreement is adjudged to be invalid simply because a particular provision in the agreement is deemed by an arbitrator or other competent authority to be illegal, unenforceable or invalid.

 

Clause 38 (Waiver)

This is a standard waiver clause outlining the conditions for effective waivers of breaches or provisions in the agreement. Any waiver requires written consent signed by an authorised signatory.

 

Clause 39 (Warranty of Authority)

This clause, which has been introduced in the 2024 edition of the agreement, is intended to ensure that the individuals signing the agreement on behalf of the owners and managers are duly authorised representatives, binding their respective parties to the agreement.

 

Clause 40 (Confidentiality)

This clause is new as compared with SHIPMAN 2009. It is designed to protect the parties from the disclosure of confidential information or data to third parties. The owners and managers are bound by confidentiality in respect of all information and data that they receive about the performance of the agreement.

 

Both parties must try to ensure that any affiliates, subcontractors, employees or agents also abide by this confidentiality undertaking. The clause provides certain exceptions where the confidentiality undertaking does not apply, for example regarding information that has already been published in the public domain or which is required for legal purposes.

 

This clause is derived from the Confidentiality Clause of SUPPLYTIME 2017, with modifications tailored to better suit the requirements of a ship management context.

 

Clause 41 (BIMCO Electronic Signature Clause 2021)

This is BIMCO’s Electronic Signature Clause 2021. Explanatory notes to the clause can be found here.

 

Clause 42 (Interpretation)

This clause has been included to make the interpretation of the text easier and to avoid having to include plurals and singulars throughout the text.

 

Annexes

As for its predecessors, five annexes are part of SHIPMAN 2024 which enable the parties to include more detailed information about the vessels covered by the agreement (Annex A), crew (Annex B), budget (Annex C), associated vessels (Annex D) and fee schedule (Annex E).

 

Annex A – This annex is to provide specific details of the vessel(s) covered under the agreement, including the names and particulars of the vessel(s), serving as a comprehensive reference within the agreement.

 

Annex B – This annex is to outline the details of the crew members associated with the agreement, including their numbers, ranks, and nationalities, serving as a comprehensive reference for crew management within the agreement.

 

Annex C – The aim of this annex is to detail the budget agreed within the agreement, providing the initial budget set by the managers from the agreement's commencement date, with reference to Box 2, serving as a financial reference within the agreement.

 

Annex D – This annex provides details of any associated vessels related to the agreement. By filling in the annex, the parties should be aware that they are subjecting themselves to the termination provision of subclause 31(b)(i).

 

Annex E – This annex is to outline the fee schedule associated with the agreement, providing a structured breakdown of the fees applicable within the agreement, facilitating clarity and transparency in financial arrangements.

                                   

Copyright and availability

Copyright in SHIPMAN 2024 is held by BIMCO.