The following explanatory notes are intended to provide some background to the thinking behind the BIMCO Russian Oil Price Cap Scheme Clause 2023. If you have any questions about the clause that we have not answered in the explanatory notes, please contact us at contracts@bimco.org and we will be happy to help.

There may be situations where countries impose sanctions that directly conflict with those of other countries. BIMCO recommends seeking legal advice before incorporating it into contracts and exercising any rights under this clause and checking the obligation to comply with specific or extra-territorial sanctions to avoid the risk of wrongfully withdrawing from contractual obligations.

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

“Price Cap Coalition”- The definition is widely cast and is intended to identify the authorities that can impose regulations, restrictions, and measures that are currently part of the EU/G7 coalition or may adopt the measures of the EU/G7 coalition as a coalition partner. This also aims to be a catch-all provision covering other authorities that are not specifically mentioned in the clause with “and other nations that may from time to time adopt the EU/G7 Price Cap Scheme” which may have the authority to impose restrictions.

“Price Cap Measures” - The definition specifies the regulations, measures, and restrictions that are enacted and enforced by the relevant authorities in the EU/G7 coalition. 

“Price Cap Cargo(es)” - The definition shows which products are subject to the Price Cap Measures. Although only the products under CN Code 2709 00 and 2710 are currently included in the Price Cap Measures implemented by the EU/G7 coalition, a part in brackets “including but not limited to Russian origin cargoes falling under CN Code 2709 00 and 2710” has been added to demonstrate that the clause would apply to other cargoes that may be brought within the scope of the Price Cap Measures. The clause aims to cover only the products carried onboard as cargo and does not intend to cover bunkers.

Subclause (b) – This subclause stipulates the obligation of charterers to provide attestation(s) to the owners.  The part which reads as “Prior to each loading of any Price Cap Cargo during the Charter Party” acknowledges that during a time charter party, there could be more than one loading. 

Whereas subclause (a) is an ongoing warranty from charterers, subclause (b) provides for a specific warranty applicable to each individual cargo loaded on the vessel. 

Subclause (c) – Under this subclause, the charterers undertake to provide evidence of compliance with the Price Cap Measures within three business days to any member of the Price Cap Coalition and/or Owners upon request. “Business days” have been subject to interpretation in case law and it was therefore decided to refrain from defining this term, as this may not be looked at in the same manner in different jurisdictions.

Subclause (d) – This subclause stipulates the obligation to notify the other party if there is a breach or if the relevant party has reasonable grounds to suspect that there is a breach.

Subclause (e) – This subclause aims to stipulate the owners’ rights without prejudice to any of the owners’ other rights under the charter party, in case there is a breach, or the owners have reasonable grounds to suspect that there is or may be a breach by the charterers. It was considered that the owners’ burden of proof should be framed as “reasonable grounds” in this context as the owners should not be able to invoke this part of the clause unless they have sufficient information to raise this suspicion.  

The main reasons why this term was chosen were that (i) the term is included in the relevant guidelines of the Price Cap Coalition as they currently stand and (ii) a certain level of suspicion is required for owners to exercise the rights stated in the clause.  It was considered that this would minimise the risk of abuse of this clause.

Subparagraph (i) of the subclause states that the owners have the right to terminate the charter party based on having reasonable grounds to suspect a breach, while subparagraph (ii) stipulates the charterers' obligation to indemnify and hold the owners harmless against the listed consequences due to a breach. Subparagraph (iii) of the subclause aims to provide a ground for a dialogue with the authorities and where guidance would be required in respect of the discharge of the cargo without prejudice to or any other provision of the charter party. A time limit of 48 hours was determined for the charterers to give orders under this subparagraph, aligning with the time period applied in the BIMCO Sanctions Clause for Time Charter Parties 2020.

Subclause (f) – This subclause stipulates the obligation of charterers to incorporate this clause into their contracts of carriage.

Annex 1 – This attestation was developed as an annex to the Russian Oil Price Cap Scheme Clause, and it was decided to have one umbrella attestation which follows the wording of the Price Cap Coalition’s guidelines. A section is reserved for the details of the charter party and cargo at the beginning of the annex for the parties to fill in. The wording of the attestation reflects the charterers’ obligation to provide an attestation prior to each loading to ensure compliance with the Price Cap Measures. 

Under the charterers’ warranties, the first three bullet points were drafted as options and parties may strike out the options that are not warranted by the charterers. 

The first bullet point includes a requirement on charterers to “retain price information”, which extends to charterers being obliged to keep themselves updated as to price information throughout the course of the particular voyage. That information must be kept by charterers for a minimum of 5 years, to ensure that they and others involved with a carriage can comply with the information requirements of the Price Cap Measures.