BIMCHEMTIME 2005 is a standard time charter party for the shipment of liquid chemicals in bulk. The latest edition of this contract is BIMCHEMTIME 2005.
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The following Explanatory Notes are intended to highlight some of the key issues and provisions of BIMCHEMTIME 2005 and to provide background information in respect of the thinking behind some of the clauses.
Annex A contains protective clauses for incorporation into contracts of carriage issued under the charter party. Annex B is a Technical Form containing a detailed description of the vessel.
The clause also provides for the owners’ obligation to give advance notice stating the expected and later the definite date of delivery.
The well-known interpellation provisions are found in Sub-clause (b) providing for the owners, in the event of the late running of the vessel, to notify the charterers requesting them to declare if they intend to invoke their option to cancel the charter party or agree to a new cancelling date should it be obvious that the vessel, despite the exercise of due diligence by the owners, will not be able to reach the place of delivery by the canceling date.
If the vessel suffers a delay and the last voyage is prolonged beyond the redelivery date for reasons beyond charterers’ control (and which could not be reasonably calculated) the charterers are to have the full use of the vessel on the last voyage at the agreed contract rate of hire until redelivery is made.
The amount of bunkers at delivery/redelivery has to be sufficient to enable the vessel to reach the nearest recognized bunkering port.
The reference to “Institute Warranties Limits” has been replaced by “International Navigating Limits” which, subject to owners’ prior consent may be breached against payment by charterers of any additional insurance incurred as a consequence.
In Sub-clause (d) the provisions reflect the terms commonly found in tanker time charter parties that clarifies that the charterers’ liability for loss or damage not caused by their failure to exercise due diligence does not constitute a breach of their warranty to provide safe ports or places.
Clause 7(c) requires the owners to notify the charterers in the event of a failure to pay hire in time requesting them to rectify such a default within an agreed number of days failing which the owners may either suspend performance or withdraw the vessel.
Should the owners elect to suspend performance and hire is still not received by the expiration of their notice they are obliged to give a further notice of 24 hours before they can invoke their right of withdrawal. This further notice has been introduced to reflect the fact that withdrawal of a vessel under a time charter party is a serious undertaking and that the owners should fully contemplate all the potential consequences before acting.
Suspension of performance will not be construed as a waiver by owners of their right to subsequently withdraw. This is important since under English law the owners may otherwise have no right to withdraw in respect of a continuing failure to pay hire or in case of subsequent late hire payments.
During any period of suspension the vessel remains on hire and the charterers are to indemnify the owners from liability of any or all of their obligations under bills of lading, waybills or any other contract of carriage.to
The balance of the clause contains the usual provisions for the disbursement of expenses by the owners.
On a number of occasions the vetting clauses that appear in various chemical tanker charter parties have given rise to disputes. These disputes have been due primarily to a lack of clarity in the contractual language used to identify liability in the event of non-approval, failure of a vetting inspection and/or loss of an approval.
From a practical perspective the situation for owners is fraught with difficulty. Charterers expect that a vessel offered for time charter will have in place vetting approvals from all the various majors in order that they may trade the vessel. In fact, charterers are unable to offer a vessel to a major unless it has been vetted and approved, but a major will not inspect and/or vet a vessel unless it has a “commercial interest” in that vessel, i.e., it forms the basis for a contractual or potential contractual relationship with the charterers. This situation leaves the owners in a quandary as they are unable to comply with the requirements of the charter party without the direct co-operation of the majors to vet and approve the vessel.
The consequence of this situation is that adequate provisions need to be made in charter parties to establish clearly what the owners warrant by way of obtaining and/or maintaining approvals and what they will exercise due diligence to obtain and/or maintain. Liability in the event of non-compliance with vetting requirements also needs to be adequately addressed so that the vetting clause as a whole properly reflects the expected commercial outcome.
BIMCO’s Vetting and Inspection Clause for Chemical Tankers forms a cornerstone of the BIMCHEMTIME 2005 Time Charter Party and is a worthy attempt to deal in a reasonable way with a fundamentally unreasonable situation. The Vetting and Inspection Clause provides a significant improvement and a viable alternative to the vetting clauses in current use in the chemical sector.
The following notes are given as guidance on some of the thinking behind the Clause:
The opening words of the Clause establish the commercial importance of the charterers’ co-operation with the owners to assist in obtaining inspections by the major oil and chemical companies when so required. The use of the word “co-operation” is meant to convey the charterers’ active participation in the process.
As has been mentioned above, owners have often been caught in the difficult position of being obliged to obtain approvals from major oil and chemical companies to comply with the charter party, but the oil majors refusing to carry out an inspection because they have no commercial interest in the vessel. The link between the two parties in this respect is the charterer and the opening words emphasize the importance of collaborative effort. The scope of the Clause is limited to obligations which the owners can actually fulfil in today’s market.
The reference to annual inspection under the CDI scheme reflects measures that the owners are able to initiate themselves. In contrast, inspection under the SIRE scheme can only be initiated by the oil majors. It is important to note that the preamble of the Clause deals only with the obligation to have the vessel inspected - the obligations in respect of approvals/acceptances are dealt with in subsequent sub-clauses. It should also be noted that the reference to CDI is specific to the chemical industry - it is not BIMCO’s intention that this Clause should be used in any other trade as vetting requirements vary significantly from trade to trade.
The second paragraph of the Vetting Clause consists of three parts, (i), (ii) and (iii) relating to owners’ obligations under the Clause, covering all relevant scenarios. Parts (i) and (ii) are designed to be used by vessels presently trading. Part (iii) is to be used primarily for newbuildings, but also in connection with presently trading vessels entering into new trades. It should be noted that all three parts may not necessarily be filled in, but are offered as options to cover most scenarios.
This Sub-clause contains the list of acceptances valid at the time of delivery of the vessel. It provides a strict obligation on the part of the owners that the vessel has been vetted and is “acceptable” to the named major oil and chemical companies. The use of the term “acceptable” instead of the more commonly found “approved” is deliberate. Following the Erika incident it transpired that the vessel was “approved” or “partly approved” by almost all the oil majors. During the drafting of the Vetting and Inspection Clause it was agreed that while that words “approved” and “approvals” were generally acknowledged to be the generic term used throughout the industry, a number of the oil majors had deliberately removed the word from their contracts because of fears of adverse legal connotations.
On a long term charter the owners cannot be expected to know whether the major oil and chemical companies will introduce other requirements, say 4 years from the delivery of the vessel, which would result in them revoking their acceptances for the vessel. For this reason the owners’ obligation to maintain throughout the period of the charter party the acceptances in place at the time of delivery is one of due diligence.
It should be noted that the phrase “is acceptable” has been used in place of the more common “shall be accepted”. This has been done to avert concerns that the latter phrase could turn the provision into a condition precedent. The provision also distinguishes between the two processes of vetting and acceptance; vetting always preceding acceptance.
Like Sub-clause (a)(i) this provision distinguishes between the two processes of vetting and acceptance. The Sub-clause is designed to reflect situations where a specific acceptance of a vessel has not been issued following an inspection and vetting, but where the owners firmly believe that if they were to seek formal acceptance for a particular voyage during the charter period, it would be given without any further need to inspect or vet the vessel. Such case-by-case acceptances are often given by companies following OCIMF guidelines whereby they reserve the right to “retract” the nominal acceptance.
The provision reflects the policies of some major oil and chemical companies that no longer issue what used to be termed “period approvals” but instead often advise the owners simply that “the vessel does not need to be inspected by us for the next 12 months”. While this is not a positive acceptance, the assumption is that the vessel has met the required standards of the major and, should the vessel be presented to that major by the charterer, it would be accepted.
The obligation on owners to maintain such “case-by-case” acceptances, as they are commonly known, is one of due diligence - again reflecting the commercial realities of what the owners can actually warrant in today’s market.
The intention behind this Sub-clause is to cover scenarios such as newbuildings and vessels currently trading entering new trades, which do not have acceptances in place at the time of delivery. The issue of newbuildings and vettings is problematic because of the practical difficulty of warranting that the vessel has the necessary acceptances in place when delivered.
It will generally not be possible to obtain vetting and acceptance for a newbuilding until the vessel is in service and inspectors are able to see cargo discharging operations in progress. If acceptances are made a strict obligation then owners would immediately be in breach of their obligation as soon as a newbuilding was delivered into the time charter. The obligation in Sub-clause (iii) is, therefore, to exercise due diligence to obtain the listed acceptances. In part (d) of the clause, the charterers are obliged to give the owners a “reasonable time” to arrange for the vetting and CDI inspection of the vessel, if she is a newbuilding delivered directly into the charter.
Consideration was given to the issue of a possible change of management during the charter period and the subsequent need to allow the owners reasonable time to have the vessel re-vetted and inspected. However, such a provision has not been included as it is unlikely in today’s market that any major charterer would accept a change of management.
This part of the Clause allocates the responsibility for arranging and the costs of inspections with the named oil and chemical companies to the owners. However, should the charterers require inspections by companies not named in the list (a)(i)-(iii), the costs associated with the inspections must be paid for by the charterers. This is felt to be a fair allocation of costs for inspection and vetting.
The third part of the Clause deals with CDI reports and the owners’ obligation enter the details of CDI inspection Report into the CDI’s database, thus making it available for review by the charterers’ clients. CDI inspections are initiated by the owners and, being a points-based inspection system, it is common practice for owners to add their own comments to the report. Such comments may refer to the renewal of a particular certificate since the inspection or the fact that a particular aspect of the inspection could not be achieved due to the nature of the particular cargo operation.
All comments on the CDI report must be filed promptly by the owners and uploaded to the CDI database with a notification to the charterers that the report and owners’ comments are available for their review.
Sub-clause (d) ties in with Sub-clause (a)(iii) where recognition is given to the situation where the vessel is a newbuilding at the time of delivery. The owners will not be in breach by delivering the vessel without acceptances and CDI inspection in these circumstances as the provision recognizes that inspections cannot take place until the vessel discharges her first cargo. However, once the vessel has reached her first discharge port then the owners must act with due despatch to obtain the necessary acceptances and CDI inspection.
The opening sentence of Sub-clause (e) echoes the sentiments of the preamble text in Sub-clause (a) which emphasizes the need for co-operation of the charterers in getting the vessel vetted. The use of the phrase “shall assist” places an obligation on the charterers to participate actively in the process. The very real likelihood of major oil and chemical companies declining to inspect the vessel claiming a “lack of commercial interest” or lack of an available inspector is dealt with in the second sentence. Where the owners have made diligent efforts to make their vessel available for inspection by an oil major, but have been rejected for the above reasons, then by virtue of this provision they will not be held liable and hire will not be reduced.
Sub-clause (f) provides that the vessel will remain on-hire while carrying out inspections. If the vessel fails an inspection, however, then the costs of re-inspection are to be met by the owners and the vessel will be off-hire for any time lost conducting re-inspections. This also applies to the vessel’s CDI score which, if it falls below the agreed minimum percentage, will result in the vessel going off-hire until the minimum CDI score is once again reached. It should be noted that it is possible for a vessel to have all the acceptances required but to have a CDI score that has fallen below the agreed level.
The sanctions placed on the vessel for failing to obtain/retain acceptances is addressed in the opening lines which acknowledge that the consequences of failure are notwithstanding the exercise of due diligence on the part of the owners, The sanctions, however, are limited to failure to obtain or retain acceptances by the companies listed in Sub-clauses (a) (i) through (iii) and not to unnamed companies.
Sub-clause (g) contains a provision for the parties to agree a daily reduction in hire for each non-acceptance until acceptance is achieved. Similarly, if the vessel’s CDI score falls below an agreed minimum then the reduction in hire will apply until the required score is achieved.
In order to avoid the owners being unduly penalised with a reduced hire over an extended period due to the charterers being unable to arrange an inspection, Sub-clause (g) introduces a capping mechanism where-by the owners can put the charterers on notice that the vessel is in all respects ready and eligible for re-inspection. Should the vessel not be re-inspected within 30 days of that notice the reduction in hire will cease.
To ensure that the owners are not caught in a position where it is not possible to retain an acceptance or where the owners prefer for pure economic reasons not to make the vessel “fit” for new acceptance requirements, Sub-clause (g)(ii) provides that the charterers shall have the option to cancel the charter party if the missing acceptance is not gained within the agreed time span and following a grace period within which the owners must rectify the situation.
From the charterers’ point of view, the provision also covers instances where a vessel might be barred permanently by a particular oil or chemical company - thus effectively making the vessel unusable for the intended trade.
Sub-clause (h) excludes from the provisions of Sub-clause (g) the consequences of non-acceptances due to repairs to the vessel following an accident.
Although it is recognised that it has become common practice in the tanker trade to include provisions requiring the owners to deliver cargoes without presentation of original Bills of Lading against a Letter of Indemnity (LOI), BIMCHEMTIME 2005 contains no provision to that effect.
It is felt that it should be left to the owners themselves to decide on a case-by-case basis whether they are prepared to accept the commercial risk of delivery against an LOI without the Bill of Lading by satisfying themselves of the financial standing of the party offering the indemnity. This is consistent with BIMCO Policy on the issue of Letters of Indemnity.
The Clause also provides an indemnity from the charterers to protect the owners from responsibility for any loss of or damage to the cargo resulting from their compliance with the charterers’ heating instructions.
The owners’ obligation to maintain the vessel as described during the currency of the charter period is one of due diligence.
Sub-clause (c) deals with owners’ warranty regarding speed and consumption. The tanker sector has traditionally taken the approach to attempt to describe the underlying principles and spell out precisely how speed and bunker performance should be determined in any given event leading to an exhaustive list of possible events and combinations likely to affect the performance. There is little evidence to suggest that taking such a highly detailed and exhaustive approach actually leads to fewer disputes as actual events rarely match precisely those described in the Clause.
The Performance Clause in BIMCHEMTIME has therefore been drafted concisely following the same principles as found in BPTIME3 regulating the basic principles without detailing the techniques for calculating speed and bunker consumption.
The first part of Sub-clause (c) establishes the owners’ warranty that the vessel will remain capable throughout the currency of the charter period of the speeds and related bunker consumptions for propulsion as stated in the Technical Form under weather conditions up to and including Force 4 on the Beaufort Scale.
Should the vessel fail to maintain this warranted capability the charterers have the right to make deductions in hire for any time lost and any additional bunkers consumed.
The second part of the Sub-clause provides for speed and bunker calculations to be excluded from the performance review should the vessel, in accordance with charterers’ instructions, be lying idle off ports or places for more than 30 consecutive days within any 60-day period.
In such case the performance review is to be reinstated following the vessel’s next drydocking and bottom cleaning.
Sub-clause (d) provides for the vessel to be delivered with cargo tanks, pumps and pipes clean and gas-free and with last 3 cargoes consisting of clean, unleaded products “undarker” than 2.5 NPA and being ready to load water-white chemicals which is a known and acceptable standard of cleanliness in the chemical trade.
The Clause further provides for sufficient time for cleaning to be allowed to obtain the necessary cleanliness taking into account last cargo, regulatory requirements, industry standards and practices and/or cargo owners’ requirements for the cargo to be loaded all in accordance with the vessel’s cleaning capabilities as described in the Technical Form.
Cleaning is to be performed in compliance with the stainless steel/coating manufacturers’ resistance list.
In the event that after sufficient time has been used for cleaning purposes the vessel fails inspection the crew is required to resume cleaning and any time lost as a result of this additional cleaning will be for the owners’ account.
Material required for cleaning is to be supplied and paid for by the charterers and time and/or materials needed for passivation of stainless steel tanks after the carriage of Phosphoric-/Sulphuric Acid or similar cargoes is also to be for the charterers’ account and in their time.
In Sub-clause (b) a provision has been made that should last cargo require sweeping of the cargo tanks by the vessel’s crew a fee per tank is to be agreed for such work and be payable by the charterers directly to the Master.
If the vessel at time of delivery is a newbuilding or for reasons of her previous trading all such documentation has not been obtained or renewed beforehand the owners are not to be considered in breach of the charter party but the vessel will be placed off-hire for the time required until the necessary documentation is in place.
The above warranty of compliance is extended in Sub-clause (b) to cover also continued compliance with regulatory bodies as far as practically possible provided, however, that such compliance does not require major structural alteration or addition to the vessel.
For long term charter periods it is virtually impossible for the parties to visualize possible new rules and regulations coming into force during the currency of the contract period. In Sub-clause (c) it has therefore been provided for the owners and the charterers to each have an option to arrange and pay for such alterations.
Should within a 60 day period neither party elect to undertake and pay for such structural alteration or addition to the vessel or should they fail to reach an agreement on a cost sharing basis then the charterers are within 7 days to declare if they will maintain or cancel the charter party. Such cancellation can, however, only take effect earliest 30 days prior to the new regulations coming into force.
In Sub-clause (d) the expression “major structural alteration or addition” has been explained to mean structural work or addition or replacement which is required by any regulatory body applicable to the vessel to be performed within any 12-month period and that the cost and loss of time for complying with such requirements exceed an agreed amount.
Should, however, a specific cargo composition as ordered by the charterers, make it necessary for the vessel to share any part of the cargo handling system, Clause 17 requires the Master to notify the charterers accordingly. Provided such notification is given the owners will not be held liable for any consequences arising from the sharing of the cargo handling system.
Provided proper advance notice is given by the owners the charterers are to place the vessel at the owners’ disposal where suitable drydock accommodation is available, free of cargo and gas-free and where tank washings can be disposed of.
The vessel will be off-hire from arrival at the drydocking port or yard until she is again ready to resume service from that port or yard. Sub-clause (b) allows the owners to perform drydocking at an alternative port selected by them (a “special port”). In such case off-hire will include time lost and bunkers consumed during deviation calculated from her release by the charterers until she again presents for loading at her next loading port, less time and bunkers used on the notional passage from actual last discharging port till next actual loading port calculated at the guaranteed service speed and consumption.
It is also provided that by giving such consent the charterers do not prejudice any of their rights under Clause 9 (Vetting and Inspection).
Sub-clause (b) provides for the owners to be covered for P&I risks and cover for standard oil pollution that is up to the level customarily offered by the International Group of P&I Clubs. The charterers are to arrange for cover of their liability risk with insurers approved by owners.
Otherwise this Clause contains the usual option for the charterers at their own risk, and subject to owners’ approval and applicable law, to participate in the prevention of or minimization of pollution damage.
With particular reference to chemical products Sub-clause (f) stipulates that when cargoes are inhibited, due to the risk of their polymerization, the charterers are to furnish the Master with a Certificate of Inhibition with all relevant details. Such Certificate should usually specify:
Sub-clause (g) states that any material required for cargo handling purposes including nitrogen blanket of the cargo beyond the vessel’s own production is to be supplied and paid for by the charterers.
As certain products, in accordance with MARPOL 73/78 Regulations, require pre-wash before the vessel can leave the discharge port, Sub-clause (h) states that reception facilities for such pre-wash are to be arranged and paid for by the charterers.
The same Sub-clause makes flexible hoses as on board available for free use by the charterers. However if the hoses need to be replaced due to excessive wear and tear, this is to be arranged and paid for by the charterers.
In accordance with Sub-clause (b) the operation of the vessel is always be in compliance with the IMO International Bulk Chemical Code and the US Coast Guard Compatibility list. Similarly, the charterers are required to observe the provisions of the vessel’s Tank Coating and/or Stainless Steel Resistance List(s) which have been provided by the owners.
In sub-clauses (d) it should be noted that the parties must agree a maximum weight for the carriage of fresh water (for domestic purposes), lube oils and stores.
It is expressly provided that off-hire counts as part of the charter period.
The costs for preparing the vessel for lay-up and subsequent reactivation are for charterers’ account and should the period of lay-up exceed a number of days agreed by the parties and vessel’s bottom is fouled, then the owners’ speed and consumption warranty as provided for in Clause 13(c) will not apply until following the vessel’s next drydocking.
The representative is required to sign the owners’ usual indemnity form at the time of embarkation
There are two important issues to be emphasised in connection with this Clause. Firstly, this Clause deals with all claims other than cargo claims, which are dealt with in Clause 48 (Protective Clauses). Secondly, the provisions of this Clause do not in any way affect the off-hire provisions of Clause 36 (Off-Hire).
When ice breaker assistance is available the approaches to a port cannot be considered as “ice bound” and in the opening words of Sub-clause (a) it provides that the vessel may follow ice-breakers’ cut subject, however, to the owners’ approval with due regard to the vessel’s size construction and class.
Sub-clause (b) deals with circumstances where the port or area is icebound or where navigational aids are or will be withdrawn or where in the Master’s sole discretion he considers it unsafe to enter or remain at the port of loading or discharging. In such case the charterers are obliged to give alternative instructions not jeopardizing the safety of the vessel.
In Sub-clauses (c) and (d) any delay caused by ice is not considered as off-hire and any additional insurance charged by vessel’s underwriters by reason of ice is to be reimbursed by charterers.
Relevant certificates are to be made available and presented to the charterers upon request. Sub-clause (c) provides that delays, costs and expenses in relation to security measures required by the port(s) or relevant authorities are for the charterers’ account.
Mediation is a technique that is recognised as offering savings in costs and time over traditional methods of dispute resolution and is a method that is gaining use in the shipping industry. BIMCO’s mediation provision is only triggered once arbitration proceedings have commenced and then runs in parallel with those proceedings, if the parties so choose. This has been done to ensure that one party cannot invoke mediation as a delaying tactic. It also provides for the parties to mediate on all or just some of the issues being arbitrated.
This is a standard BIMCO clause dealing with the methods to be used for writing and sending notices.
It should be noted that the Clause permits the use of e-mail as an acceptable method of written communication for the purposes of giving notices under the charter party.
Copyright in the BIMCHEMTIME 2005 Time Charter Party is held by BIMCO.
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