Dry Bulk Marine Risk Assessment Clause for Time Charter Parties 2013

BIMCO Dry Bulk Marine Risk Assessment Clause for Time Charter Parties 2013

(a) The Charterers may, at their time, risk, cost and expense, conduct a marine risk assessment of the Vessel in accordance with this Clause. However, the Owners do not warrant or represent that the Vessel is or will be acceptable or recommended as a result of any such marine risk assessment.

(b) The Owners shall assist the Charterers in the marine risk assessment process by submitting such documentation as is in the possession of the Owners and readily available. There shall be no obligation to provide confidential information.

(c) Inspections

(i) The Charterers shall not be entitled to physically inspect the Vessel unless there are particular grounds under the marine risk assessment process and that those grounds are specified to the Owners. The Charterers shall provide the owners with a checklist for the inspection in advance. The above shall be subject to the Owners’ express approval, which shall not be unreasonably withheld. The time and place of all inspections shall be mutually agreed by the parties.

(ii) The Charterers shall indemnify and hold harmless the Owners against any consequences of the inspection including any costs, expense, risk, delay, loss or damage occasioned thereby.

(iii) The Master shall endeavour to co-operate with the inspector to facilitate such inspection. The inspection shall be planned and carried out in a manner that does not interfere with the safe operation or working of the Vessel or other inspections.

(iv) A copy of the inspection report shall be given to the Master on completion of the inspection.

(d) The Charterers shall provide the Owners with a copy of the marine risk assessment report, if any, without delay.

(e) The Owners shall exercise due diligence to comply with recommendations arising out of the assessment provided that they are consistent with and do not exceed the Owners’ obligations under this Charter Party including the rules, requirements, guidelines, directives or any other relevant regulations of the Vessel’s Classification Society and/or Flag State administration, which shall always prevail.

(f) Nothing in this Clause shall create any right to place the vessel off-hire and its provisions shall be without prejudice to all other rights, exceptions, obligations and defences of the parties under this Charter Party.

Explanatory notes

The objective of this project has been to develop a standard clause to limit contractually the excesses of marine risk assessments in the dry cargo sector and discourage the continued use of ill-conceived market provisions such as “the Vessel shall be Rightship approved throughout the charter period”.

BIMCO’s chief concern is that in the absence of a standard clause to regulate the application of vessel risk assessment by charterers, many owners will continue to be put under pressure by charterers to warrant “Rightship approval” for the period of a time charter party. This is a serious issue for owners as it is simply not possible to attain and maintain such a period approval from Rightship who offer only a “snapshot” assessment of the suitability of a vessel immediately prior to an employment. The dynamic nature of Rightship’s assessment system means that a vessel’s rating can change at short notice due to external influences of which the owners may not immediately be aware. If a “Rightship approved throughout” type wording has been agreed in the charter party the owners run the risk that a charterer, in a worst case scenario, could use a change in the vessel’s status as an excuse to terminate the charter party.

The following notes set out the intention behind each of the six Sub-clauses that make up the Dry Bulk Marine Risk Assessment Clause for Time Charter Parties.

Sub-clause (a)
The starting point for the risk assessment process is set out in Sub-clause (a). The marine risk assessment that the charterers have a right to conduct under the Clause refers to desk-top based assessments of the vessel. Physical inspections are only permitted under strict conditions set out in Sub-clause (c).

While charterers may conduct desk-top assessments at any time, provision is made in Sub-clause (d) to ensure that the results of any assessment conducted post-fixture are shared with the owners. 

An important feature of Sub-clause (a) is that the owners do not warrant the outcome of any risk assessment in terms of the acceptability of the vessel for prospective employment by the charterers. This assumes that the owners in all other respects have met all their obligations under the time charter party.

Sub-clause (b)
This Sub-clause provides a balance to the restrictions imposed on charterers in conducting risk assessments by requiring the owners to assist the process by the submission of non-confidential documentation. However, to avoid the risk of “fishing expeditions” by the charterers, the provision of such documentation is limited to what the owners have in their possession and ready to hand. In this context “confidential information” would for example include information relating to ISPS such as the Ship’s Security Plan.

Sub-clause (c)
This provision deals comprehensively with physical inspections of the vessel. It is important to note that under the Clause the charterers do not have an automatic right to physically inspect the vessel. In accordance with Sub-clause (c)(i) there must be specific grounds (based on the outcome of the desk-top assessment) that warrant a physical inspection and the owners have to be advised about these grounds beforehand. In order to regulate the inspection process the charterers are required to work from an inspection checklist that will have been sent to the owners in advance and to agree with the owners as to the time and location of the inspection.

Any physical inspections conducted by the charterers will be at their risk and in their time and they are required by Sub-clause (c)(ii) to indemnify the owners against any consequences of the inspection.

The conduct of physical inspections of the vessel requires the co-operation and assistance of the Master and officers. Sub-clause (c)(iii) establishes the level of co-operation that applies – namely that the Master must try to assist where it is safe, practical and convenient to the commercial operation of the ship.

Finally, in Sub-clause (c)(iv) provision is made to ensure that the Master is given a copy of the inspector’s report to which he is entitled.

Sub-clause (d)
This provision is distinct from Sub-clause (c)(iv) in that it is a copy of the overall assessment of the ship, whether as a result of a desk top or physical inspection, that is given by the charterers to the owners. In BIMCO’s view it is essential that charterers and owners work together and communicate freely to ensure that any issues arising out of the assessment can be resolved quickly and efficiently through open dialogue.

Sub-clause (e)
The wording of this important provision makes it clear that the owners’ obligations to comply with recommendations from the risk assessment are limited to what is consistent with and not in excess of their obligations under the time charter party and with Classification Society and Flag State rules and regulations. This simply means that the owners cannot be expected to comply with any recommendations issued by a risk assessment body that would require the owners to take any steps or meet any obligations that would go beyond those agreed and stated in the charter party. This provision also ensures that the charterers are prevented from using non-compliance with a recommendation that is outside owners’ agreed charter party obligations as leverage against the owners – for example in the form of off-hire or even termination.

Sub-clause (f)
This final provision clarifies that the assessment process set out in the Clause does not provide the charterers with a means of placing the vessel off-hire.

Originally published in BIMCO Special Circular No. 10, 29 November 2013 - Dry Bulk Marine Risk Assessment Clause for Time Charter Parties

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