DISMANTLECON

DISMANTLECON

Overview

DISMANTLECON is marine services contract for offshore structure dismantling work and transport to a designated place of delivery. The agreement can be used for the removal of any offshore structure ranging from field architecture to entire structures and is intended for use in jurisdictions world-wide. It does not cover the disposal of the dismantled structures onshore and this will require a separate agreement with an onshore disposal contractor. DISMANTLECON operates on a knock for knock liability regime, which means that each party is responsible for and should indemnify the other in respect of loss of or damage to their own property, and injury to or death of their own personnel, regardless of fault.

Copyright in DISMANTLECON is held by BIMCO.

Supporting documents

The below explanatory notes are also available as an e-book from Witherbys.

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Explanatory notes for Offshore Heavylift and Project Cargo Contracts are available as an e-book from Witherbys.

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Explanatory notes

Objective

BIMCO’s objective for developing DISMANTLECON is to create a global, industry standard, scalable contract for offshore structure dismantling work and the subsequent transport to a designated place of delivery. It is a marine services contract designed to appeal equally to the party requiring removal of the structure and the marine contractors whose services they use.

The agreement aims to fairly represent the interests of both parties with a balanced and clearly worded set of terms and conditions. In doing so, DISMANTLECON allocates responsibilities and risks to the party that is or was best placed to prevent, manage, mitigate, avoid or insure such liability. The contract price should reflect the apportionment of risk between the parties and represent a fair reward for the services performed.

Scope and nature of the contract

The agreement provides for specified services with estimated time schedules and pricing with stage payments determined by key agreed milestones as part of the project. The agreement can be used for the removal of any offshore structure ranging from field architecture to entire structures and is intended for use in jurisdictions world-wide.  It will be appreciated by those using the agreement that decommissioning is not the same as ‘reverse construction’ and there are many different known and unknown risks involved in the removal of these structures.

The agreement does not deal with the disposal of the dismantled structures onshore and this will require a separate agreement with an onshore disposal contractor who holds the appropriate disposal licences.  It should also be noted that the transportation and disposal of waste from dismantled structures or parts thereof may be subject to various other laws, rules and regulations which will determine if the structure can be imported, exported, recycled or disposed of.  In view of the issues above, title in the dismantled structure remains with the company and is not transferred to the contractor during or after the contract.

The agreement also assumes that the structure is 'cold' and that any P&A (plug and abandonment) work has been performed prior to the commencement of the services under the agreement.  P&A, cleaning and disconnection of wells is a highly specialist activity requiring a significantly different skill and capability set with a very different risk profile that falls outside the terms of this agreement.

Length and style of contract

The DISMANTLECON agreement consists of a relatively simple “boilerplate” contract that can be amended and adapted to meet the needs of contracting parties.  It is scalable, so it can be used for small to medium sized projects and for larger and more complex ones.  It follows the pattern used for other BIMCO contracts with a Part I “box style” section where the variable information for the agreement is added; a Part II containing the terms and conditions; and annexes containing operational and other contract-specific matters.

Key stakeholder involvement

BIMCO gathered together a group of key stakeholders to help write DISMANTLECON. The agreement is loosely based around BIMCO's wreck removal contracts but has been extensively modified with input from representatives in the offshore industry including operators, contractors, suppliers, insurers and those in the legal profession who regularly advise on such projects.  IMCA and the ISU were also represented during the preparation and drafting of the agreement.

The development of new standard contracts like DISMANTLECON is made possible only with the help, guidance and enthusiasm of the industry professionals who gave their time freely to assist BIMCO. This is BIMCO's first ever international decommissioning contract and it has taken over three years to complete the project.

We would like to thank the drafting team for their commitment to the project and their considerable efforts in producing DISMANTLECON:

  • Mr Kees de Looff, Van Oord (Chairperson)
  • Mr Benjamin Minnee, Heerema & IMCA
  • Ms Nicky Etherson, Rever Offshore
  • Ms Gea Smid, IMCA
  • Mr Jens Klit Thomsen, Maersk Decom
  • Ms Sarah Wallace, The Standard Club
  • Mr John Brown, Marsh
  • Mr Paul Dean, HFW
  • Mr Tom Walters, HFW

We would also like to express our thanks to Mr Callum Sim from Shell in Aberdeen who was co-opted on to the project to contribute to the process through sharing some of Shell’s decommissioning experiences.

Applicability

The use of DISMANTLECON is not limited to one particular type of structure, facility or operation; it can be used for the removal of any offshore field architecture in the energy sector such as (but not limited to) pipelines, mattresses, manifolds, jackets, topsides, platforms, (subsea) storage facilities and monopile structures and structures used in the renewables sector.

The contract may, in certain circumstances be adapted for use with wreck removal.  Note, however, that the contract has yet to be approved by the International Group of P&I Clubs when used for wreck removals and so the parties entering into the agreement should consider submitting the contract to their H&M and P&I insurers before agreeing the terms.

The contract is designed for global use in contrast to other standard contracts that are available in other jurisdictions.

Explanatory Notes

The following notes are intended to provide a background to the development of DISMANTLECON and share some of the thinking behind the key clauses.  The notes do not form part of the agreement and are not to be taken as a legal interpretation of any of the terms and conditions set out in the agreement.

Part I – box layout

BIMCO contracts use a box layout that provides a useful means of summarising the key variable information of the agreement – such as the name, address and contact details of the parties; details of the facility and the scope of the services; contract price and payment information; and liability limits.

Clause 1 - Definitions

This section includes defined terms that appear several times in the contract. Where a defined term is used only in the context of a single clause, such as “Third Party” in Clause 22 (Liabilities and Indemnities), the definition forms part of that clause.

“Company Group”/ “Contractor Group” – The definitions of Company Group and Contractor Group define the entities that each of the parties are responsible for under DISMANTLECON in the context of Liabilities and Indemnities. All parties operating in the field who may suffer loss or damage when working at the site are covered by the so-called ‘knock-for-knock’  regime (see Clause 22 (Liabilities and Indemnities) below). Its scope is limited by the requirement of the listed entities having to be related to the dismantling services.

“Worksite”/ “Worksite Area” – DISMANTLECON is not limited to dismantling work performed at a ‘single location’ involving one fixed structure such as a platform but can also be used for the removal of pipelines, mattresses and subsea infrastructure. For this reason, the definition of “worksite” applies to any place where the services are carried out. Similarly, “worksite area” is defined in the context of a 500m radius around a fixed structure or a 100m “corridor” either side of a pipeline.

Clause 2 – Contractor’s performance of the Services

This clause sets out the obligations of the contractor to perform the services with “due care” – that is, to act in a reasonable manner that may be expected from a professional contractor. The standard to which “due care” is to be exercised is qualified by the words before it i.e “in accordance with good industry practice”. At the time the agreement was drafted there was no internationally agreed "good industry practice" for decommissioning, dismantling and removing offshore structures.

Clause 3 – Access to the Facility

The contractor is afforded the opportunity to be provided with timely unimpeded access to the facility to perform the dismantling services.  This right of access is granted by the company which also retains an unfettered right of access for its own personnel, provided advance notice is given to the contractor.

Clause 4 – Technical Information, Rely Upon Information and Assumptions

The concepts of “rely upon information” and "assumptions” are unique to offshore dismantling projects. The Contract Price, the work methods and planning are based on the technical information and rely upon information provided to the contractor by the company.  The contractor is also entitled to make certain assumptions that the parties should agree upon as part of the agreement.  Such assumptions may be made on key characteristics in relation to the structure to be removed.

In certain circumstances the company cannot or may not be willing to guarantee these assumptions to be true and complete and therefore the contractor has no way of assessing the risks to the project without significant cost.  They may however be relevant for the contractor in its planning and engineering which will in turn have an impact on the contract price.  Examples may be assumptions made in relation to certain weights of the structure to be removed, the integrity of the structure or that the structure is free from, or assumed to be free from, hydrocarbons, a build-up of Naturally Occurring Radioactive Material (NORM), other pollutants or hazardous substances.

If any of the rely upon information or assumptions are found by the contractor to be incorrect, inadequate or insufficient to perform the agreed services at the agreed price and within any agreed timeframe, then a variation order needs to be agreed.

Technical information not classed as rely upon information is given without warranty by the company prior to signing the agreement. If this technical information is subsequently found to be incorrect or inadequate, the contractor is not entitled to a variation order.

Clause 5 – Company and Contractor Representatives

This clause requires both parties to appoint a representative.  Information, instructions and decisions from either representative shall be in writing and such instructions are deemed to be binding on the parties.  The representatives do not have the right to change the terms of the agreement beyond changes to the scope, planning and pricing through variations.

In subclause (d), it is possible for the Company to allow their insurers to appoint a marine warranty surveyor. This surveyor must communicate any instructions and recommendations to the Company Representative who, in turn, will let the contractor know. Under subclause (e), the contractor is required to assist and cooperate with the marine warranty surveyor in its work.

Clause 6 – Variations

This clause is fundamental to the operation of DISMANTLECON given the uncertain nature of dismantling offshore structures. It provides the necessary flexibility required for this type of project by permitting either party to request changes to the agreed services. This may, in turn, result in an increase or a decrease in the contract price and – if applicable – an extension of time to perform the services. A request for a variation must not fall outside the contractor’s capabilities or impact on their other commitments.

To avoid disputes the parties should reach an agreement on a variation by means of a variation order within 14 days of the original request in writing. It’s recognised that it may not always be possible to reach an agreement on a variation request. Rather than resorting to a potentially time consuming and costly arbitration process, DISMANTLECON provides an adjudication process under Clause 25 (Applicable Law and Dispute Resolution). This scheme provides an escalation mechanism where a disputed or denied variation unresolved within 14 days by the representatives of the parties is passed to the executive directors of the parties to resolve within a further 28 days. Failing resolution by the executive directors the dispute is passed to an expert adjudicator. Clause 25 provides a nominations procedure and binds the parties to the written decision of the adjudicator.  This procedure is common in the construction industry and allows the parties to expedite any disputes to keep projects on track.

Clause 7 – Inspections and Testing

Some of the projects for which DISMANTLECON can be used may involve only a partial removal of a structure, such as cutting away a topside from platform legs. This clause provides for any necessary testing and inspection procedures and notification to the company to witness tests and inspections where the contractor is required to carry out work that adds to the structure.

Clause 8 – Defects and Corrections

“Defect” is a reference to the contractor’s engineering, materials and workmanship or other non-compliance with the agreement by the contractor. The clause obliges the contractor to resolve the defect promptly – failing which the company can resolve the defect at the contractor’s cost and risk. Defects that could not have reasonably been discovered by the contractor, latent defects, are excluded.

Clause 9 – Changes in Applicable Law

An important aspect of long-term projects is the potential impact of changes in law that may occur after the contract has been signed which affect the performance and or cost of the agreed services. The clause addresses this risk by requiring the parties to agree a variation order if a change to the services are required as a result of some amendment or addition to the applicable law.

Clause 10 – Right to substitute Craft, Equipment or Personnel

The contractor should have discretion to manage its own craft, equipment and personnel during the project as it deems effective and efficient without undue interference of the company. This clause allows the contractor (amongst others) to rotate personnel e.g. for fatigue-relief as well as swapping/rotating craft, equipment for maintenance or other purposes, but always subject to any personnel, craft and equipment meeting the contract’s requirements.

In addition, the company is entitled to require the contractor to remove any personnel who, in their opinion, are not conforming to the requirements of the agreement or who are acting illegally or whose conduct or actions may damage the reputation of the company.

Clause 11 – Use of and Title to the Facility

At no stage during the performance of the services do the contractors assume title in or to the facility.  The company may pass title to another entity for the re-use, recycling or disposal of the facility but this will be undertaken under a separate commercial contract with the waste disposal company.  There is often a legal obligation for the company to decide upon and to take responsibility for the disposal of any waste which falls outside of the terms of this agreement such as compliance with the Basel Convention.

The contractor may be reasonably expected to cooperate with the company to facilitate the disposal of any waste and to ensure that the onshore disposal contractor selected by the company can process the waste as efficiently as possible.  The extent to which the contractor is expected to coordinate its planning with the onshore disposal contractor should be clearly set out in the agreement.

The company will have the use of machinery and other equipment on the facility during the performance of the services free of charge.

Clause 12 – Permits

This clause deals with the obligations of the parties for obtaining the relevant licences, approvals, authorisations and permits for the removal of the structure. It recognises that some permits, licences and authorisations can only be obtained by one or other of the parties, but that the assistance of the other party may be required (providing information, etc). No reference is made to what permits are required by name as this will vary from jurisdiction to jurisdiction.

Clause 13 – Health, Safety and Environment

Health, Safety and Environment (HSE) requirements are of paramount importance in the offshore sector. The applicable health, safety and environment requirements are attached in Annex L (HSE) to DISMANTLECON. It is recommended – in the interest of effective HSE management – that HSE requirements and policies are based on the HSE certified policies and procedures of vessels engaged in the work, since the vessel’s ship managers, master, officers and crew will be educated, trained and certified in accordance with those. Ultimately, offshore the master of the vessel has the statutory right and obligation to intervene with operations if he/she deems that safety of people, vessel, cargo or environment is in jeopardy.

Clause 14 – Force Majeure

The force majeure clause is based on standard wording found in other BIMCO standard forms. Although “extraordinary weather conditions” are covered in the clause, the risk of bad weather causing delays lies with the contractor. Maximum environmental conditions should be stated in Annex B (Technical Information, Rely Upon Information and Assumptions). This is important because the weather conditions may have an impact on the use of heavy-lift ships as part of the services provided by the contractors.

Delays in performance of the services due to force majeure events trigger a process that may require an adjustment of the contract price and the programme. Subclause (d) sets out a procedure whereby the parties must meet and discuss how best to minimise the delay. The company can decide whether to retain the contractors on standby until the force majeure event is resolved, or to release them after an agreed period so that they can fulfil other contractual commitments. It is important to note that the contractor, once released by the company, will not be obliged to return to the worksite until a revised programme has been agreed to cover the rescheduling of the work and a new completion date.

Clause 15 – Suspension

The ability of either party to suspend the performance of the contract under certain circumstances can be a useful commercial tool. For the company, suspension provides a means of halting work on the project if the contractor is not acting in accordance with the agreement, or if a delay is required by the company. If the company suspends performance for its own purposes, then this clause provides for a variation to be agreed along with a revision of the programme.

Fundamental to the contractor is (timely) payment by the company. If payment is not made, then the most effective response is for the contractor to suspend some, or all, of the performance until the payment is made by the company.

If the period of suspension by the company exceeds a pre-determined number of days, then the contractors will have the right to demobilise its equipment so that it can fulfil other commitments it may have. A new programme and mobilisation will then have to be agreed for work on the project to resume.

Clause 16 – Termination

There are two means by which the contract can be terminated. In subclause (a), the company can decide that it no longer wishes to continue the project and can simply terminate the agreement for its own convenience by giving the contractors notice.  The company must pay the contractors all sums due and earned, plus any reasonable and unavoidable termination costs and an agreed early termination fee to address the contractor’s lost opportunity to make a profit. This would qualify as an exception to the industry standard mutual indemnification relative to consequential damages.

Subclause (b) sets out a regime for termination of the contract by either party for certain listed “termination events” if the other party fails to remedy the situation within an agreed period. The termination events that give rise to a right to trigger the termination procedure are insolvency; force majeure; and material breach.

In the event of termination under this clause, subclause (c) places an obligation on the contractor to secure the worksite and give full access to the company’s personnel to permit a safe “handover” of the facility.

Clause 17 – Completion and delivery

The DISMANTLECON agreement does not require the parties to agree a completion and delivery date. The nature of decommissioning projects is such that a very precise completion date is often not a major factor for the company, unlike in (re)construction or IRM (Inspection, Repair, Maintenance) projects, where delayed completion often leads to significant (increase of) loss of production and pertaining revenue. Consequently, no liquidated damages (LD) for delay have been anticipated in DISMANTLECON.  If a completion date or LD’s would be required, then the parties should amend the contract to include such a date and any LD amounts and limits. 

This clause sets out when and where the agreement will come to an end and the obligations of the parties cease.

Subclause (a) obliges the company to provide a lawful place of delivery for the facility that is safe and accessible to the contractor. But the parties are free to decide the most convenient place. Box 9 provides four options for a place of delivery. Once delivery has taken place the company must issue the contractor with a completion certificate as per Annex J (Completion Certificate).

If there is a delay in delivering the facility outside the control of the contractor, then the company will be liable to the contractor for any additional costs the contractor incurs and for adequate extension of the completion date (if any).

Clause 18 – Payment

The timely payment of sums due to the contractor by the company, i.e. as and when due, is fundamental to the proper working of the DISMANTLECON agreement. Subclauses (a), (b) and (c) deal with the payment of the agreed Contract Price in instalments earned when due along with any other payments. Payment terms should reflect the nature of the work and contract, namely the performance of an agreed scope of work, at the end of a life cycle of the company’s income generating asset. 

Subclause (e) deals with disputed invoices. It requires the company to pay the undisputed portion of any invoice without delay or additional administrative requirements, but it may withhold the balance pending resolution. If the dispute is resolved in favour of the contractor, then late payment interest on the amount will be payable by the company.

The percentage of late payment interest should reflect its purpose: compensation for damages and costs caused by late (thus unprovided for) payment. Most jurisdictions provide for statutory, adequate, commercial late payment interest rates.

The timely payment of instalments is essential for the contractor’s cash flow and so, subclause (f) provides the contractors with a mechanism to apply pressure to the company in the event of a non-payment by the due date. It gives the contractor the right to suspend services 5 days after giving notice to the company that the payment date has elapsed, and no payment is made. If the company fails to make payment within a further 14 days, the contractor can terminate the agreement even if they have not suspended performance, but they must terminate promptly. Importantly, the right to suspend/terminate continues throughout the contract period even if the contractor chooses not to exercise it for every late payment that occurs.

Clause 19 – Taxes

Each party is liable for the payment of direct taxes that they are subject to and responsible for ensuring that taxes owed by subcontractors are also paid.

Subclause (b) deals with indirect taxes such as value added tax and sales tax for which the contractor is entitled to invoice the company. It is the contractor’s responsibility to apply for tax exemptions with the assistance of the company where necessary.

The right to withhold taxes in accordance with applicable law is dealt with in subclause (c). The company can withhold or deduct taxes from the contractor for payment to the authorities unless the contractor can show an entitlement to an exemption.

Clause 20 – Programme

The programme for the services (if any) is set out in an annex to the contract. The contractor is obliged to keep the programme up to date to reflect any changes and to provide the company with monthly updates.

Clause 21 – Security

Security should always be provided immediately upon or just after signing the agreement. Security for the company should not expire earlier than 30 days after the anticipated completion date and for the contractor not earlier than 30 days after the final milestone payment. If the programme (completion date and/or date of final payment) are extended, then the security should also be extended or renewed for a similar period of time.

Each party must provide a performance bond, or a parent company guarantee as security, if requested. Security wording should be in a format agreed between the parties. 

Failure to extend or renew securities when required is a breach and will give the other party the right to terminate the agreement.

Clause 22 – Liabilities and Indemnities

The liability regime in DISMANTLECON is based on knock-for-knock terms (KFK) which are typically used in offshore contracts. This clause sets out that each party is liable for loss of or damage to their own property and personnel, regardless of any fault or negligence of any other party. The key benefit of KFK is that it provides a clear-cut method of allocating and quantifying risk and responsibility so that exposure can be covered by insurance. It avoids parties duplicating insurance which saves on costs. Liability claims and disputes are also minimized which helps to avoid costly and time-consuming litigation. The practical consequence of KFK is that it increases operational safety as each party will take extra care to prevent any loss or damage. KFK does not impact contractor’s obligation to perform and complete the work.

Subclause (a) describes the losses that the contractors must indemnify the company from, namely loss or damage to any property belonging to the Contractor Group (see definitions) and personal injury and death of anyone in that group. The company will not be responsible for these head of losses even if they were caused by, for example, neglect or default on the part of a member of the Company Group (see definitions). Furthermore, the contractor is obliged to indemnify the company if any claims should arise from the losses described in this subclause. This reflects the KFK liability regime where the loss lies where it falls, at its purest. Subclause (b) is the reciprocal of (a) setting out the company’s responsibilities.

Subclause (d) excludes the liability of the parties for certain direct and indirect losses. Subclause (b)(i) covers losses from which the parties are excluded from liability, whether these are direct or indirect. Direct losses have been defined in English law as meaning losses “which flows naturally from the breach without other intervening cause and independently of special circumstances”, while indirect or consequential losses have been described as “losses which are not the direct and natural result of the breach”1 . Under English law, loss of use, loss of profits, loss of production will be considered as direct losses because these are losses that will flow naturally from a breach of contract. Marine spread costs (cost of use of property, equipment, materials and services including without limitation, those provided by contractors or subcontractors of any tier or by third parties) have been made part of the exclusion clause. Similarly, the loss of financial benefit (sometimes referred to as deferral of production) has been excluded.

Liability for indirect or consequential losses is also excluded save for the termination fee set out in Clause 16 and any liquidated damages for delay that the parties may have agreed upon.

Under subclause (c) the parties retain their rights to limit their liability afforded by applicable law, statute or convention. Where the company or contractor seek an indemnity under the agreement or against each other for claims from third parties, they are required to try to limit their liability against such third parties.

1 Saint Line Ltd v Richardsons, Westgarth & Co Ltd [1940] 67 Lloyd’s Rep. 62, at p. 103-104

Clause 23 – Debris and Wreck Removal

The contractor is liable for debris removal caused by negligence of any member of the Contractor Group and must indemnify the company against any claims. Debris means anything lost overboard or separated from the facility structure. The obligation to remove such debris only arises if an order is given to remove it by a lawful authority or if the company reasonably determines that the debris will interfere with its operations.

It is important to note that the contractor is not exposed to an unlimited liability to remove debris from the seabed at any cost. A limitation amount should be agreed by the parties during negotiations. If no figure is agreed, then USD 250,000 per occurrence will apply. This does not apply to property belonging to the contractor that becomes debris – all such costs related to this will be for the contractor if it must be removed.

Clause 24 – Time for Suit

It is important to establish time bars for claims under the agreement. This clause requires claims to be notified within 12 months of completion of the project or early termination and then for suit to be brought within 12 months of that notice.  Shorter than 12 months periods would be needlessly burdensome if not unreasonable for the contractor.

Clause 25 – Applicable Law and Dispute Resolution

Although the use of adjudication is a new concept for a decommissioning contract, it works well in other areas of construction by providing a speedier and cheaper means of resolving contractual disputes.

Adjudication was designed to produce a cash-flow remedy during the progress of a construction project. It was intended to avoid the problem that previously beset the construction industry of long-running arbitration or court litigation keeping one party out of its money, while having to fund expensive legal costs to recover that money. Many sub-contractors and small construction companies, unable to afford this expensive and lengthy process, were simply unable to enforce payment or contractual entitlements.

During the preparation of DISMANTLECON it was generally considered that the expert evaluation procedure used in the BIMCO contracts for wreck removal was too narrow and unfamiliar for many of the contracting parties who were likely to make use of DISMANTLECON.  Instead, it was decided that the parties should have the option to use adjudication if they are unable to reach an amicable settlement in relation to a dispute.

Adjudication provides a mechanism for resolving disputes on an interim basis and the adjudicators' decisions are binding on the parties until the dispute is finally determined by legal proceedings, by arbitration or by agreement.  The policy of adjudication has been described as "pay first, argue later".

The adjudication process provides for a speedy and cost-effective means of resolving disputes (the UK Construction Act 1996 provides for 28 days between the referral to the adjudicator and the adjudicator's decision) although that period may be extended by agreement.

Adjudication is widely accepted as a successful way in maintaining cash-flow during the course of projects and is appropriate for resolving financial disputes relating to: delay and disruption claims, extension of time claims and final account disputes and is flexible enough to also deal with claims for breach of contract and termination/determination issues, often arising after practical completion. 

The second part of the dispute resolution clause offers four options for arbitration: London (which applies by default in the absence of a stated alternative in Box 20); New York; Singapore; or an open choice for parties to agree the governing contractual law and seat of arbitration. Mediation procedures are set out for London, Singapore and the open forum. However, mediation has a different position in the United States and it is left to the parties to agree their own procedures.

Clause 26 – Notices and Instructions

This is a general notice provision with reference to the contact details that should be used for giving notice to the respective parties and that notices should be given effectively. The words “effectively given” should encompass different methods of giving notices and in that sense, be “future proof”.

Clause 27 – Insurance

The parties are required to obtain and maintain insurance with “reputable insurers” which is intended to provide a benchmark guide indicating that the chosen insurers should be financially sound and have a good market reputation. Each party must verify to the other party that they have met the insurance requirements. Adequate insurance is an essential aspect for the proper functioning of the KFK regime. 

The contractor must name the company as co-insured on their policies and require their insurers to waive rights of subrogation against the Company Group. Similarly, the company must name the Contractor Group as additional assured on their policy and have their insurers to waive subrogation rights.

Clause 28 – Intellectual Property Rights

Intellectual property (IP) rights rest with the party responsible for their development for the specific purpose of performing the agreed services, although they can be licensed to the other party.

Both parties warrant that they will not infringe any IP rights related to the performance of the services – this would include the IP rights of third parties.

Clause 29 – Document and Data Management

Documents and data related to the project should be maintained by the contractor in a database which should be made accessible to the company for two years after the completion date.  The database must be kept in multiple locations for backup and security purposes.

Clause 30 – Confidentiality

This clause is designed to protect the parties from the disclosure of confidential information or data to third parties. The parties are bound by confidentiality in respect of all information and data that they receive about the performance of the services. Both parties must try to ensure that any affiliates, sub-contractors, 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.

The confidentiality obligation survives the agreement for a period of three years after the date of completion or the date of termination.

Clause 31 – Anti-Corruption

This clause is based on a standard BIMCO wording and provides users with a regime for responding to unlawful demands for gifts in cash or kind, such as cigarettes or alcohol. The clause sets out a series of steps with the contracting parties working together to resist such demands. Termination, by either party, is the ultimate sanction but a high threshold has been set so that it cannot be easily used as an exit from an “inconvenient” agreement.

It is important to note that the clause addresses criminal law issues and is therefore distinct from the governing law of the agreement. By way of example, the United Kingdom Bribery Act applies to any party based in or with a “close connection to” the United Kingdom. However, if parties that do not fall within the scope of the United Kingdom Bribery Act elect to apply English law as the governing law of the agreement, the United Kingdom Bribery Act will not be applicable. They will, nevertheless, be subject to provisions imposed under their own or other applicable national legislation.

Subclause (a)(i) requires the parties to comply with “all applicable anti-corruption legislation”. Since the clause is designed for worldwide use and is not linked to any specific legal system, this provision aims to encompass any laws or regulations to which the parties are subject under their own national legislation or legislation in the country or jurisdiction where they are operating.

Each party must have in place procedures to ensure that their commercial dealings with counterparties and cargo interests are designed to prevent any offence being committed by their employees or agents. This is likely to be based on a company’s internal anti-corruption rules and guidance published by industry organisations. While there is no expectation that such procedures will be effective in every case, a certain and high threshold is set and parties should ensure they have robust systems in place for making appropriate background checks and undertaking due diligence in the appointment of agents and other third parties. Company procedures must also set, and enforce, high standards of conduct.

Subclause (a)(ii) makes an express provision for record keeping that reflects customary company practice and statutory obligations for keeping and maintaining accounting information. Proper recording of any payments made, or gifts provided, along with the circumstances in which they were made or provided, is an essential part of a company’s procedures with regards to unwarranted facilitation payments.

Subclause (b) is triggered when a request is received by the contractor or member of the Contractor Group, for payment or goods or other items of value (defined in the clause as a “Demand”) from any official, contractor or sub-contractor either engaged by the company or Company Group or acting on behalf of any third party. If the Demand is viewed as an illegal payment, the contractor must notify the company and the two parties are to cooperate in taking reasonable steps to resist the Demand.

The parties have a mutual interest in resolving the issue as quickly as possible while avoiding any breach of their legal obligations. Parties should, therefore, use whatever influence they can bring to bear.

Subclause (c) provides mutual indemnities whereby a party that has breached anticorruption legislation to which it is subject, must indemnify the other party against any loss or damage suffered as a result by the latter.

Subclause (d) sets out the criteria for termination. Termination can be invoked by either party but only where the other party has breached applicable legislation in connection with the agreement and that breach has put the other, non-breaching, party in breach of anti-corruption legislation to which it is subject.

Subclause (f) provides a self-standing regime warranting that the agreement has not been procured by corrupt means. If breached, the innocent party may terminate the contract.

Clause 32 – Status of the Company

This clause sets out that the agreement is exclusively between the named contractor and named company and that the contractor cannot commence proceedings against any other member of the Company Group.

Clause 33 – Limitation of liability

The contractor is permitted to limit its liability to perform the work under the agreement for breach of contract or negligence. The parties should insert the agreed limitation figure in Box 19. A limited number of areas of liability may be excluded from such limitation: KFK liabilities and indemnities, consequences of failing to insure as agreed, tax liabilities and – within reason – liability for breach of anti-corruption provisions. Exclusions relative to gross negligence or wilful misconduct – if any - are recommended to relate only to concerted efforts, acts or omissions of the controlling minds (executive officers and vessels masters) of a party.

Clause 34 – General Provisions

The general provisions are clauses commonly found in standard forms of contract covering issues including the validity and enforceability of provisions; assignment of the agreement; permission to subcontract; entire agreement; and third-party rights.

ANNEX A (DETAILS OF FACILITY)

Technical description of the facility.

ANNEX B (TECHNICAL INFORMATION, RELY UPON INFORMATION AND ASSUMPTIONS)

Maximum environmental conditions at the worksite should be agreed and stated in Annex B (Technical Information, Rely Upon Information and Assumptions). This is particularly important if there has been a delay and the Services must now be performed in more difficult weather conditions. If there has been very bad weather for a long period, the time schedule should be adjusted.

ANNEX C (SERVICES)

Description, scope and method of services; agreed testing standards.

ANNEX D (MILESTONE PAYMENTS)

Total contract price, payment milestones and schedule.

ANNEX E (DAILY PROGRESS REPORTS)

Proforma daily progress reports.

ANNEX F (VARIATION ORDER)

Proforma Variation Order form.

ANNEX G (SECURITY)

Proforma security undertaking letters and parent company guarantee.

ANNEX H (INSURANCE)

Details of insurance arrangements by both parties.

ANNEX I (PROGRAMME)

Programme of services.

ANNEX J (COMPLETION CERTIFICATE)

Proforma Certificate of Completion.

ANNEX K (KEY SUBCONTRACTS)

List of key subcontracts, if any. The transfer of key sub-contracts (‘step-in right’) is generally important for the company.

ANNEX L (HSE)

Details of Health, Safety and Environment regime.

 

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