Background

TOWHIRE is the industry standard contract for ocean towage on a daily hire basis. In the latest revision, it has undergone a thorough revision to clarify ambiguities and has been restructured to make it easier to use.

TOWHIRE has been aligned with TOWCON as far as possible to ensure consistency. However, there are some fundamental differences between the two contracts that have an impact on the terminology and concepts used. TOWHIRE is similar to a single voyage trip time charter with the concept of the tug being delivered and redelivered under the contract much like a ship under a time charter party. In contrast, under TOWCON there is no concept of delivery and redelivery of the tug because it is a lumpsum contract. Under TOWCON it is the tow is being delivered and redelivered. Another difference is that under TOWCON, additional time is compensated at the delay payment rate, whereas under TOWHIRE hire continues to be payable for certain delays.

For example, definitions of Hirer’s and Tugowner’s Groups (SUPPLYTIME-style) have been added to ensure that the various entities involved in the towage operation are covered by the knock-for-knock liability regime.

The provision regarding the hirer’s responsibility to pay for the repair or replacement of damaged or lost towing gear has been made more balanced. It is only towing gear that the tug has provided specifically for the services under the agreement that the hirer should pay for. When calculating the replacement costs, due consideration should be given to the fair wear and tear of the towing gear (so it is no longer on a new for old basis as under the 2008 edition).

Responsibility for salvage costs has been allocated to the party whose property needs to be salved: the hirer pays for salvage services for the tow and the tugowner pays for salvage services for the tug. This approach is consistent with the knock for knock liability regime that governs the contract.

A new insurance clause has been added under which the parties warrant that the tug and tow are properly insured.

BIMCO is grateful to the subcommittee for their invaluable advice and expertise in bringing TOWHIRE up to date:

• Mr Dirk Kwantes, LKL Oceantrade (Chairperson)
• Ms Charo Coll, Boluda Towage (ISU)
• Mr Maurice Schreurs, Boskalis
• Mr Nick Jeffery, Ostensjo Rederi
• Mr Adrian Goodger, Clarksons
• Mr John Croucher, The Standard Club
• Mr Ivar Brynildsen, Gard

Explanatory Notes

The full name of TOWHIRE is now “Ocean Towage Agreement (Daily Hire). The prefix “international” has been deleted from the name as the contract may be used on a national basis as well.

Part I – Box layout

The box layout has been restructured to follow a more logical order. It is divided into three main sections: tow details; tug details; and commercial and operation details.

Conflicting clauses

The purpose of Box 40 for additional clauses is to identify what rider clauses the parties have agreed to. The additional clauses should be added to Part II or in a separate sheet added to the contract. In case of a conflict, Part I and any additional rider clauses added by the parties will prevail over the printed standard text in Part II and the Annexes. The information in Part I and the rider clauses will be on the same level in terms of hierarchy the rationale being that the specific governs the general and anything that the parties have specifically put their minds to should prevail over the standard terms.

Part II

The order of the clauses has been changed to follow more closely the sequence of events as they play out in practice.

Clause 1 Definitions

Several new definitions have been added and the majority of the existing ones have been expanded.

“Hirer’s Group” – applying this definition to Clause 22 (Liability and Indemnity), means that all parties involved in the towage and which might suffer loss or damage during towage will be covered by the knock for knock regime. Parties both up as well as down the hirer’s contractual chain are included and tugowners avoid liability towards the hirer’s contractual counterparties several tiers removed from them. This will assist in clarifying which indemnities the hirers must give and ensures a clear-cut knock-for-knock liability regime. If towage work is done for the oil and gas sector where the tugs will be operating in the same areas as supply ships, the parties may want to consider expanding the group definitions to include other relevant entities such as co-venturers and affiliates. The words “but always related to the towage or other services under this Agreement” puts a limit on the scope of the knock-for-knock liability regime in that the listed entities must be related to the towage or other services on which the tug is employed.

“Place of Connection” – the wording at the end: “at or within the Place of Departure” are meant to address a scenario where the tug arrives at a pilot station but only connects in the port after sailing for a number of hours.

“Place of Departure” – for clarification, a new definition for place of departure has been added meaning the first inbound pilot station or usual waiting area stated in Box 30. Under TOWHIRE, the tug will be delivered under the agreement at a place that is not necessarily the same place as the place of departure. Therefore, a new Box 19 has been added for place of delivery. For example, the tug may be delivered in Rotterdam, but the place of departure where the tow is picked up may be in Le Havre.

“Place of Destination” – for clarification, a new definition for place of destination has been added meaning the first inbound pilot station or usual waiting area stated in Box 31. Under TOWHIRE, the tug will be redelivered under the agreement at a place that is not necessarily the same place as the place of destination. Therefore, a new box has been added for place of redelivery. For example, the tow may be handed back to the hirer in Bremerhaven as the place of destination, but the tug is only redelivered in Rotterdam.

“Place of Disconnection” - a new definition for place of disconnection has been added meaning the actual place where the tow is disconnected from the tug at or within the place of destination. There is no accompanying box as this is sometimes not known at the time of signing the agreement, but should always be within the place of destination.

“Tow” – reference to the new Annex B (Tow specification) has been added to the description of the tow.

“Tug” – in this revision, reference is made to “tug or tugs” instead of “vessel or vessels” as a more appropriate terminology. The reference to “tugs” in plural covers the scenario where one contract is used for jobs that require more than one tug, and also where two tugs are substituted with one or vice versa. Reference is also included to the new Annex C (Inventory of Towing Gear) which is important to complete as this will have a bearing on how much the tugowner can claim for loss or damage to the towing gear under Clause 15 (Towing Gear and Use of Tow’s Gear).

“Tugowner’s Group” – applying this definition to Clause 22 (Liability and Indemnity), means that all parties involved in the towage and which might suffer loss or damage during towage will be covered by the knock for knock regime. Parties both up as well as down the tugowner’s contractual chain are included and hirers avoid liability towards the tugowner’s contractual counterparties several tiers removed from them.

This will assist in clarifying which indemnities the tugowners must give and ensures a clear-cut knock-for-knock liability regime. If towage work is done for the oil and gas sector where the tugs will be operating in the same areas as supply ships, the parties may want to consider expanding the group definitions to include other relevant entities such as co-venturers and affiliates. The words “but always related to the towage or other services under this Agreement” puts a limit on the scope of the knock-for-knock liability regime in that the listed entities have to be related to the towage or other services on which the tug is employed.

Clause 2 Services

Subclause 2(a) establishes the basis of the agreement for the tugowner to use its reasonable endeavours to provide the agreed services to the hirer. An obligation to use “reasonable endeavours” generally means that a party should adopt and pursue a reasonable course of action in order to achieve the desired result, bearing in mind its own commercial interests and the likelihood of success. Where there might be a number of reasonable courses which could be taken to achieve a particular aim, an obligation to use reasonable endeavours only requires a party to take one reasonable course, not all of them. The obligation is defined by reference to an objective standard of what an ordinary competent person might do in the same circumstances and implies a reasonable balance to be struck between a party’s obligation to others and its own financial interests, see, for example, Rhodia International Holdings v Huntsman International [2007] 2 All ER (Comm) 577.

Subclause 2(b) is a new provision requiring the tugowner to provide daily reports to the parties set out in Box 34. As a minimum it is recommended that the report includes the position, speed and ETA. Any additional information is up to the individual tugowner to include.

Clause 3 Price and Conditions of Payment

This clause has been restructured.

Subclause 3(a) provides for the amount of hire payable by the hirer to the tugowner and the period which the payment of hire is due. The tug will go on hire at the time of delivery under subclause 5(a) (Place of Delivery/Redelivery). Hire will run until redelivery under subclause 5(b) (Place of Delivery/Redelivery) or until the agreement is terminating earlier for some reason.

Subclause 3(b) provides that the daily rate of hire should be paid as set out in Box 25.

Subclauses 3(c) and (d) gives the parties options to agree on mobilisation and demobilisation fees. The agreed sums need to be stated in Part I of the agreement. The words “tug and/or tow lost or not lost” are meant to cover, for example, if the tow sinks during the mobilisation of the tug. The tug will still have incurred costs that the mobilisation fee should cover. Similarly, if the tug sinks during mobilisation the tugowner might have to deliver a substitute tug. The demobilisation fee should be paid before the contract comes to an end. It should be noted that the mobilisation and demobilisation fees are separate and in addition to the daily hire.

If the parties have agreed to mobilisation and demobilisation fees, hire will commence upon arrival at the place of departure and continue until departure from the place of destination.

Subclause 3(e) allows the parties to agree to a minimum hire period in Box 26. If this has been agreed, then hire for such minimum period will be payable from when the contract comes into force. However, if the parties have agreed to a mobilisation fee, then hire for the minimum period will not be earned and payable until the tug arrives at the place of departure.

Subclause 3(f) provides that hire and other sums due to the tugowner should be paid in full without any right for the hirer to deduct, set-off, counterclaim etc. and for the currency in which payments are to be made and to which bank the hirer should make payments. It has been clarified that no deduction for banking or other charges relating to each transfer is allowed.

Subclause 3(g) deals with adjustment of hire paid in advance but not earned in the event of the termination of services by the tugowner. The tugowner should refund any overpayment of hire within 7 days of the issuing of the adjustment of hire statement – this means that the hirer should receive any refund of hire due within 14 days of the termination of the services.

Fraudulent invoices In Box 28(iii) it is important to state the bank account that the payments under the contract should be paid into. This is because if the hirer pays a fraudulent invoice and no bank account is stated, the hirer can claim that they have rightfully fulfilled their payment obligations. If a bank account is stated in this box, then the hirer can only fulfil their payment obligations by paying into that specific account.

Subclause 3(h) addresses a situation where the tug is lost. Hire will cease to be payable from the date of the loss. The provision in TOWHIRE 2008 in case the date of the loss could not be ascertained has been deleted as it seems unfair that a proportion of hire should continue to be payable in such cases. Nowadays, it is fairly easy to ascertain if a tug becomes lost.

Subclause 3(i) takes into account multiple tows where a partial loss of one or more of the tows occurs but at least one part of the tow remains. Hire will continue to be payable until the tug arrives at the port of redelivery. The previous time limit of 14 days for how long hire would continue to be payable under TOWHIRE 2008 has been deleted. It will be for the parties to negotiate a cap on hire if they so wish.

Subclause 3(j) provides for the situation where there is only one tow and it is lost. Hire will be payable until the tug arrives at the port of redelivery or a nearer port or place, at the tugowner’s choice.

Clause 4 Bunkers

Clause 4 provides the parties with options in relation to the provision of bunkers. Where the hirer is providing bunkers the bunker quality provision in subclause 4(c) takes effect.

Subclause 4(a) provides the parties with the option for the cost of bunkers and lubricants to be included in the rate of hire. It is then for the tugowner to provide and pay for bunkers and lubricants.

Subclause 4(b) is the option for the parties to agree that the hirer will pay for bunkers and lubricants used during the hire period.

Subclause 4(b)(ii) requires the hirer to ensure that the tug is redelivered with sufficient bunkers for it to be able to reach the nearest bunkering port that is on the tug’s onward route.

Subclause 4(b)(iii) is new and provides that if there are any bunkers or lubricants left on board at redelivery, the tugowner should reimburse the hirer for the cost of those.

Subclause 4(c) obliges the hirer to supply fuels of an agreed specification and grade.

Subclause 4(c)(ii) deals with the bunkering procedure including sampling. The Bunker Quality Clause is a common feature of BIMCO time charter parties. This particular wording has been taken from SUPPLYTIME 2017 which is often used as an alternative agreement to TOWHIRE.

It requires representative samples to be taken during bunkering. The sampling point should be as close as possible to the tug’s bunker manifold. The representative samples should be divided into a minimum of four samples and should be labelled and sealed by the bunker suppliers. One sample should be retained on board for MARPOL purposes. The remaining samples should be divided between the Tugowner, Hirer and the bunker suppliers. In the event of a dispute about the quality of bunkers supplied by the hirer, the matter should be resolved by having the samples analysed by a qualified and independent laboratory which has been jointly selected by the Tugowner and Hirer. The cost of this analysis should be borne by the Hirer in case the samples are shown to be off-spec. However, if all samples are in compliance, then the Tugowner pays for the analysis.

Clause 5 Place of Delivery/Redelivery

This is a new clause clarifying where the tug should be delivered and redelivered under the agreement. The delivery period should be stated in Box 21 together with the number of notices the tugowner should give and to whom.

Clause 6 Place of Connection/Place of Departure

This clause provides that the place of connection and place of departure must be safe and accessible to enter, operate in and leave, etc. and is subject to the tugowner’s approval.

Clause 7 Place of Disconnection

This clause provides that the place of disconnection must be safe and accessible to enter, operate in and leave, etc. and is subject to the tugowner’s approval.

Clause 8 Extension to Cancelling Date

Subclause 8(a) allows the hirer to cancel the contract if the tug does not arrive by midnight at the place of delivery on the agreed cancelling date.

Subclause 8(b) is the so-called “interpellation” provision. This is a mechanism that benefits both parties by requiring early notification of any possible delays to the tug beyond the cancellation date. For the tugowner the mechanism avoids having to send the tug on a lengthy passage to the place of delivery not knowing if the hirer will cancel the contract on arrival. For the hirer, early notification of a delay to the tug until after the cancellation date may provide sufficient time for a replacement tug to be found or for a new cancellation date to be agreed.

Clause 9 Additional Charges and Extra Costs

Subclause 9(a) provides that the hirers should appoint agents and ensure that they are adequately funded to avoid potential delays to or claims against the tug.

Subclause 9(b) details a number of costs that the hirer must bear.

Subclause 9(b)(i) cross-references to subclause 17(b) (Necessary Deviation or Slow Steaming) to clarify that the hirer is obliged to pay for extraordinary costs relating to bunker calls, repair calls, supply calls, or landing of disabled seaman as set out in subclause 17(b).

Subclause 9(b)(v) requires the hirer to pay for additional equipment that may be required by a marine warranty surveyor in preparation of the tow.

Subclause 9(b)(vii) is new and provides that the hirers should arrange and pay for any marine warranty surveyors’ services and requirements, for example, any additional weather forecasting. The tugowner should not charge for the usual weather reporting.

Subclause 9(b)(viii) is new and requires the hirer to pay for the preparation of a non-standard towing manual. The intention is that if the hirer requires a more elaborate and detailed towing manual, beyond the tugowner’s own plan for the towage, then the hirer should pay for the costs of producing it. It is not the intention that the hirer should pay for the basic or standard towage plan that the tugowner would anyway produce. It is only the more comprehensive towage manuals, that perhaps requires additional resources for the tugowner to produce, that are covered by this provision.

Subclause 9(c) deals with payments of taxes, charges, costs and expenses incurred and places a strict obligation on the hirer to make all such payments. If for some reason the tugowner makes such a payment on behalf of the hirer, the hirer is obliged to reimburse the tugowner against the presentation of the relevant invoice.

Clause 10 Interest

No changes have been made to this clause which addresses the mutual obligation on the parties to pay interest on sums that have not been paid by their due date.

Clause 11 Tow-worthiness of the Tow

Subclause 11(a) places an obligation on the hirer to exercise due diligence to make sure that the tow is in a tow-worthy condition when presented to the tugowner at the commencement of the towage operation.

Subclause 11(b) elaborates on several key issues that the hirer needs to address in order to ensure the tow-worthiness of the tow.

Subclause 11(c) obliges the hirer to provide to the tugowner evidence of the tow-worthiness of the tow in the form of a certificate issued by a recognised firm of marine surveyors or survey organisation at the place of connection. Regardless of the issue of a tow-worthiness certificate the tugowner retains the right not to perform the towage until fully satisfied that the tow is in all respect fit and ready for the towing operation.

Subclause 11(d) is a non-waiver provision that expressly states that an inspection by the tugowner of the tow is not in any way an approval of the tow’s condition and does not relieve the hirer of its obligations under subclauses (a), (b) and (c).

Clause 12 Permits and Certification

No changes have been made to this clause. It places the obligation on the hirer to obtain and pay for the required permits and certificates.

Clause 13 Riding Crew/Hirer’s Personnel

The purpose of the clause is to allocate the cost and responsibility for riding crew placed on board the tow by either party for their own purposes. Provision is also made for people that the hirer might place on board the tug, such as a supervisor. People that the hirer puts on the tug are not riding crew as such and therefore they are referred to as hirer’s personnel. The heading of the clause has been changed to reflect that the clause now deals with both riding crew and hirer’s personnel. The riding crew and hirer’s personnel will be covered by the knock-for-knock liability regime through Clause 1 (Definitions) and the definition of “Hirer’s Group” “(iii) employees of any of the foregoing” and Clause 22 (Liability and Indemnity).

Subclause 13(a) deals with the provision of riding crew for the hirer’s purposes and which party will provide them at the hirer’s request. The parties can agree in Box 35 how many riding crew are to be provided to man the tow. If the hirer elects to provide their own riding crew then permission for this, subject to various conditions, is entirely in the tugowner’s discretion. The riding crew, whether provided by the tug or the hirer, is always at the hirer’s expense. The riding crew is under the orders of the tugmaster at all times as the tug is responsible for the control of the tow. 

Subclause 13(b) is a new provision under which the hirer can ask the tugowner to provide accommodation and victualling for the hirer’s personnel on board the tug at a daily rate stated in Box 36. The final sentence of subclause (b) deals with the common working language that the riding crew need to be able to speak and understand for their communications with the tug crew.

Subclause 13(c) relates to the tug providing riding crew for its own purposes – for example to check the towing connection or adjust the tow’s trim. In such cases the riding crew will be at the tugowner’s expense.

Clause 14 Seaworthiness of the Tug

No changes have been made to this clause which provides that the tugowner must exercise due diligence to provide the tug in a seaworthy condition, ready for the intended towage operation. The tugowner gives no other warranties in respect of the seaworthiness of the tug.

Clause 15 Towing Gear and Use of Tow’s Gear

This clause has been made more balanced compared to the TOWHIRE 2008 edition.

Subclause 15(a) deals with the use of towing-related gear and equipment on board the tug and tow. The use of such gear and equipment that is set out in Annex C (Inventory of Towing Gear) falls within the scope of the lump sum payment agreed by the parties. Because the hirer is obliged to pay for the repair or replacement of lost or damaged towing gear and accessories the tugowner needs to describe their condition in Annex C (Inventory of Towing Gear). This is to prevent that hirers end up with replacing gear on a new for old basis as could be the case under TOWHIRE 2008. Otherwise, a hirer could end up paying for several previous hirers’ wear and tear of, for example, tow wires which are generally expensive.

Subclause 15(b) provides the tug with the use of the tow’s on-board facilities such as communications equipment and machinery necessary to assist in the handling and navigation of the tow during the towage service. The word “appurtenances” has been replaced with “equipment” as more a modern language.

Subclause 15(c) obliges the hirer to pay for the repair or replacement of lost or damaged towing gear and accessories that have been specifically provided by the tugowner for the services under the agreement. The fact that it is towing gear and accessories specifically provided for the services and that the hirer should not pay for the fair wear and tear of the towing gear and accessories, considerably limits the hirer’s responsibility compared to the 2008 edition of TOWHIRE. It is also more in line with the knock for knock liability regime of the contract (as the towing gear and accessories are tugowner’s property) and was felt by the drafting team to be a fairer risk allocation, particularly when TOWHIRE is used for shorter towages.

Clause 16 Substitution of Tug

This clause establishes a right for the tugowner to use substitute tugs under the contract. The tugowner may also use substitute tugs from another owner under the provisions of the existing contract. In all cases the main particulars of the proposed substitute tug or tugs are subject to the hirer’s approval.

Clause 17 Necessary Deviation or Slow Steaming

Subclause 17(a) sets out a number of reasons in subclauses (a)(i) – (iv) for which the tugowner may deviate or slow steam without the contract coming to an end. It should be noted that hire will continue to be payable throughout such deviation or slow steaming under this subclause 17(a).

Subclause 17(b) allows the tug to leave the tow in safe place to go to the assistance of vessels in distress to save life or property or to make port calls for bunkers, repairs, supplies, etc. without the agreement coming to an end. However, hire will not be payable when the tug deviates under this subclause 17(b), unless it is for what may be considered as normal bunkering or supplies.

Subclause 17(c) protects the tugowner from the doctrine of fundamental breach under English law, i.e. that the tugowner in cases of unjustifiable deviation loses the protection of all exclusion and limitation clauses contained in the contract. Instead, the hirer might have a claim for damages and the tugowner will have access to the relevant protection and exemption clauses in the contract.

Subclause 17(d) is a new provision requiring the tugowner to inform the parties in Box 34 about the deviation or slow steaming. This has been added to make the clause more balanced and hopefully to reduce discussions by making the hirers aware of the deviation or slow steaming from the outset.

Clause 18 Ice Clause for Tug and Tow

This clause is based on BIMCO’s standard Ice Clause for Voyage Charter Parties 2005 and has been amended for use with tug operations.

Subclause 18(a) makes it clear that the tug will not under any circumstances be obliged to force ice. However, the tug may reasonably be expected to follow ice breakers where other vessels of a similar size, class and construction are doing so - always subject to the tugowner’s approval.

Subclause 18(b) provides that the tug is not required to enter any icebound port or place and is not obliged to remain in any port or place which is icebound or where navigational markers have been or are about to be removed. The subclause emphasises that the tugmaster may decide whether or not to proceed to or enter the place of departure or destination if risk of ice exists. Should the tugmaster decide that it is unsafe to proceed to the place of departure or destination then they may proceed to the nearest ice free port or safe place (which may often be much closer to the original destination that the “nearest ice free port”) and await the hirer’s instructions.

Subclauses 18(c) deal with delays, deviation and expenses due to ice – which are for the hirer’s account.

Subclause 18(d) provides that any additional insurance premiums required by the tug’s insurers will be for the hirer’s account. At the end of subclause 18(d) it has been added that if the tugowners receive a refund of the additional insurance premium or a no claims bonus for going to an ice area, they must pass it on to the hirer. Some insurers give refunds or a no claims bonus if a vessel enters, operates and leaves an ice area without any claims for damage.

Clause 19 Salvage

The tugowner and tugmaster have the full, actual authority to engage salvage services for the tow. However, they should where possible consult with the hirers on the need for such services and the terms of the salvage agreement. However, no binding agreement of the hirer to the salvage services are required.

Clause 20 Termination by the Hirer

Subclause 20(a) allows the hirer to terminate for convenience at any time, but against the termination fee and all other sums due and earned up until the time of termination. The agreement will only be terminated once the termination fee and the other sums due have been received by the tugowner.

Subclause 20(b) provides that if the hirer terminates en route to the place of destination, the hirer will be obliged to pay the sums due under Boxes 23 – 27 and any other sums due under the contract, plus any damages for breach of contract. It should be noted that the termination fee in Box 33 is not payable for termination under subclause 20(b).

Clause 21 Termination by the Tugowner

This clause sets out the various grounds on which the tugowner may terminate the agreement. The number of days has been changed to seven. The parties are free to negotiate a different number. Apart from that, no major changes have been made. “Aggregate days” means the accumulated total number of days.

Subclause 21(b) means that the right to terminate only arises after seven aggregate or running days has lapsed plus the 48 hours grace period given to the hirer to rectify the situation.

Clause 22 Liability and Indemnity

Under these provisions, each party bears responsibility for the injury or death of its own employees, servants or agents, and, with one exception, for the damage to or loss of its own equipment. This reflects standard practice in the offshore industry where liabilities between the parties are generally allocated on a so-called “knock-for-knock” basis.

Subclause 22(a)(i) provides the Hirer with an indemnity from the tugowner in respect of death and/or personal injury to anyone that falls within the tugowner’s group. The period of liability begins from the arrival of the tug at the place of departure and ends upon completion at the place of disconnection. In respect of riding crew or other personnel provided by the tugowner and placed on board the tow, the period of responsibility is extended, to whatever point such personnel are placed on board the tow until they finally disembark.

Subclause 22(a)(ii) is the reciprocal indemnity to subclause 22(a)(i) indemnifying the tugowner for any injury or death to any member of the hirer’s group.

Subclause 22(b) deals with liability for certain types of loss or damage. In subclause 22(b)(i) the tugowner agrees to bear the responsibility for the listed losses. It should be noted that in 22(b)(i)(1) towing gear and accessories used by the hirer that are lost, damaged or become unserviceable are excluded from the tugowner’s liability.

Subclause 22(b)(i)(1) contains the carve out from the knock-for-knock regime of the hirer’s obligation to pay for the repair or replacement of lost or damaged towing gear and accessories. In other words, the hirer may have to pay for lost or damaged towing gear and accessories even if such items are the tugowner’s property.

Subclause 22(b)(i), last paragraph provides for when a third-party makes a claim against the hirer for something that the tugowner is responsible for. In other words, the tugowner needs to indemnify the hirer for misdirected claims against the hirer by third parties. The reciprocal wording for misdirected claims by third parties against the tugowner is found in the last paragraph of subclause 22(b)(ii), last paragraph.

Subclause 22(b)(ii) addresses losses borne by the hirer.

Subclauses 22(b)(i)(4) and 22(b)(ii)(4) have been changed to ensure that costs for salvage services that might be required for the tug or tow respectively are covered by the knock for knock liability regime. If salvaged services are required by the tug, they will be for the tugowner’s account and if salvage services are required by the tow, they will be for the hirer’s account.

Subclause 22(c) is taken from SUPPLYTIME 2017 and excludes liability of the parties for certain direct and indirect losses as enumerated in the clause. In other words, the parties cannot make claims in respect of the listed losses. There is a carve out for subclause 15(c) to preserve the tugowner’s right to claim the hirer for payment of repair or replacement of lost or damaged towing gear or accessories.

Indirect losses, also called consequential losses, are dealt with separately in subclause 22(c)(ii), and certain specific heads of losses, whether direct or indirect, are covered in subclause 22(c)(i). Even though some of these heads of losses are quite oil industry specific due to the fact that the provision was drafted for SUPPLYTIME, the wording has been retained as the only downside of keeping it is that it will not be applicable in respect of the losses that will not occur in the towage industry.

Subclause 22(c)(i) encompasses certain losses that the parties are excluded from liability for, whether these may be direct or indirect. Direct losses under English law are losses flowing naturally from the breach without other intervening cause and independently of special circumstances. Indirect or consequential losses are losses which are not the direct and natural result of the breach. For example, loss of use, loss of profits or loss of production may be considered as direct losses under English law. 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), and the loss of financial benefit, sometimes referred to as deferral of production, are all excluded from liability.

Subclause 22(c)(ii) excludes liability for indirect or consequential losses.

Subclause 22(d) gives the tugowner the right to avail itself of all applicable statutory rights and limitations irrespective of any provisions to the contrary contained in the contract.

Clause 23 Insurance

This is a new clause under which both parties warrant that the tug and tow respectively are insured for hull and machinery, basic war risks, and P&I risks throughout the contract. To set a benchmark for the P&I cover it should be equivalent to the cover provided by members of the International Group of P&I Clubs. In Boxes 10(ii) and 15(ii) only the lead H&M insurer should be stated. This is to avoid having to list several different insurers that might be stated on the H&M slip. At the other party’s request, they must provide evidence of such insurances.

Clause 24 Lien

This clause allows the tugowner to exercise a possessory lien on the tow for any sums due under the agreement. As with all possessory liens, the lien disappears if possession is lost by the lien holder. Therefore, the clause states that the tugowner may take and keep the tow in its possession. All costs and expenses in connection with the exercise of the lien will be for the hirers account.

Clause 25 Himalaya Clause

Subclause 25(a) affords the various parties enumerated in subclauses 25(a)(i) – (ii) the same protection as afforded to the tugowner and the hirer under the agreement.

Subclause 25(b) provides the mechanism for achieving this protection by deeming the tugowner or hirer as the agents for the relevant party.

Clause 26 War Risks Clause

BIMCO has separate clauses dealing with war, piracy and infectious diseases and these have been added to the revised agreement and adapted to fit a towage context. It has been attempted to keep this clause similar to the equivalent provision in TOWCON as both agreements are generally used for shorter towages.

The purpose of the War Risks Clause is to protect the tugowner and crew from war risks. The tugowner is following the instructions of the hirer to take the tow to or through a particular place or area which might expose the tug and its crew to war risks. This clause will excuse the tugowner from following the hirer’s orders, or allow them to proceed under certain conditions.

Subclause 26(a) contains the definitions of “Tugowner” and “War Risks” for the purpose if this clause. The intention is that there should be a high level of danger to count as a war risk under the clause.

Subclause 26(b) addresses the tugowner’s right to terminate the agreement or refuse to perform parts of it that may expose the tug, tow, crew or other persons on board to war risks before the tug and tow have connected.

Subclause 26(c) addresses the situation after the tug and tow have connected. The tug does not have to continue on a voyage if it means that the tug, tow, crew or other persons on board may be exposed to war risks. The tugowner can request the hirer to nominate a safe port and if the hirer fails to do that within 48 hours the tug can leave the tow at a safe port. If that port is another port than the place of departure, the full lumpsum will be payable by the hirer to the tugowner.

Subclause 26(d) deals with when the tug takes a longer route in order to avoid war risks and requires the tugowner to notify the hirer of its choice to take a longer route.

Subclause 26(e) sets out various rights of the tug such as the liberty to comply with the requirements of the tugowner’s insurers under the terms of the tug’s insurances. This could be, for example, if the insurer requires the tugowner to comply with reporting arrangements such as United Kingdom Marine Trade Operations (UKMTO) or to follow Best Management Practices.

Subclause 26(f) provides that if additional time is used under subclauses 26(c), (d) and (e) the hirer should compensate the tugowner at the daily hire rate.

Subclause 26(g) allocates the costs for additional premiums required by the tugowner’s insurers for proceeding to or through a war risks area to the hirer.

Subclause 26(h) provides that the exercise of any rights under the clause is not a contractual or geographic deviation and will not be considered a breach of contract.

Clause 27 Piracy Clause

This clause includes elements from the BIMCO Piracy Clauses, the 2013 editions, adapted to fit a towage context. It has been attempted to keep this clause similar to the equivalent provision in TOWCON as both agreements are generally used for shorter towages.

Subclause 27(a) provides that the clause applies to piracy risks that occur after the agreement has been entered into. The reason for this is that parties should know about events that arise prior to or during negotiations and make appropriate arrangements accordingly. There should be a high level of danger due to piracy for the clause to be triggered. If that requirement is fulfilled, the tug may take an alternative route to the place of destination or leave such a place if the tug is already within it.

Subclause 27(b) sets out tugowner’s liberties to take appropriate precautions when the tug proceeds to or through an area exposed to piracy risks.

Subclause 27(b)(i) covers on-board and navigational preventative measures.

Subclause 27(b)(ii) provides that the tugowner has the liberty to comply with their insurers’ requirements under the terms of the tug’s insurances. Insurers have no authority as such to give orders or instructions about routeing or navigation. They might, however, require an assured to comply with reporting arrangements such as United Kingdom Marine Trade Operations (UKMTO) or follow Best Management Practices.

Subclause 27(c) requires the hirer to compensate the tugowner for delays incurred under subclauses 27(a), (b) or if the tug and tow are attacked by pirates at the daily hire rate.

Subclause 27(d) allocates additional costs incurred due to proceeding to through an area exposed to piracy risks on to the hirer.

Subclause 27(d)(iii) addresses additional insurance cover and obliges the hirer to pay for any additional premium (i.e. beyond tugowner’s normal war risk insurance cover) imposed by underwriters as a result of the tug navigating in an area of enhanced risk. The hirer is also liable for the cost of any additional insurances required by the tugowner with the stated, but non-exhaustive, illustrative examples of War Loss of Hire and/or maritime Kidnap and Ransom (K&R) cover.

Subclause 27(e) deals with seizure of the tug and tow by pirates and the position on subsequent release. The 90-day cap on the hirer’s exposure to hire payment does not affect the hirer’s other contractual obligations which remain in place no matter how long the period of detention. The cap represents a sharing of risk but it is a starting point and parties are free to negotiate a figure which meets their specific needs. In any event, the capping of delay payments should be viewed together with the tugowner’s option in subclause 27(d)(iii) to take out War Loss of Hire cover with the costs payable by hirer.

A tug on release is likely to require repairs to make good damage and deterioration arising from the period of detention. The hirer is liable for any additional time lost for such repairs at the daily hire rate.

Subclause 27(f) and (g) provides that the exercise of any rights under the clause is not a contractual or geographic deviation and will not be considered a breach of contract, and that this clause will prevail in case of conflict with any other express or implied provisions of the agreement.

Clause 28 Infectious or Contagious Diseases Clause

This clause is based on the BIMCO Infectious or Contagious Diseases Clause for Voyage Charter Parties 2015 and adapted to fit a towage context. It has been attempted to keep this clause similar to the equivalent provision in TOWCON as both agreements are generally used for shorter towages.

The clause was developed for use in response to any virulent disease and therefore drafted in general terms without reference to specific diseases. The provisions are intended for application only in the most severe cases. A high threshold has therefore been inserted so that the triggering mechanism will take effect only in instances of severe illness and cannot be misused for commercial purposes in relation to more commonly encountered or widespread viruses.

Subclause 28(a) sets out two interdependent definitions to trigger the clause. The first, “Disease”, is drafted with closely defined criteria to fulfil the provisions of extreme circumstances of sickness and not everyday occurrences of illness. The accompanying definition, “Affected Area”, means the location where the vessel, crew or other person on board may be at risk of exposure to Disease (as defined). It should be noted that the clause deals with infectious and contagious diseases but not on a pandemic scale.

It is important to note that exposure is not limited only to the immediate effects while the vessel is within an area of risk, but also anticipates potential future restrictions weeks or months later when the vessel calls at a port outside, and possibly remote from, the affected area but, because of the earlier trading, may be subjected to quarantine or restrictions on crew changes or movements.

Subclause 28(b) limits the application of the clause to situations arising after the date of the agreement. This is because parties should know about events that arise prior to or during negotiations and make appropriate arrangements accordingly. Events arising post-fixture may be more problematic and so the clause sets out a regime to address such changed circumstances.

It is for tugowner and tugmaster to determine, on the basis of “reasonable judgement”, whether to allow the tug to proceed to, continue to or remain at an affected area although, as with the war and piracy clauses, the level of danger must be real and significant.

Considerations to be taken into account when deciding whether to proceed would be likely to involve making background inquiries and seeking guidance from relevant sources which could be expected to include regulatory or advisory bodies in the owners’ flag state as well as reference to guidance issued by specialist intergovernmental organisations, such as the World Health Organisation (WHO). The vessel’s subsequent trading pattern might also influence the decision.

Subclause 28(c) gives the tugowner the right to terminate the agreement or refuse to perform where it would mean entering into an affected area before the tug and tow have connected.

Subclause 28(d) after the tug and to have connected and the place of destination becomes an affected area, the tugowner can ask the hirer to nominate a different safe port. If the hirer does not do that within 48 hours the tugowner may leave the tug at any safe port without being in breach of contract. If that port is another port than the Place of Departure, the daily hire will be payable for the extra distance sailed.

Subclause 28(e) addresses the position where the tug proceeds to or remains at an affected area. In such event, the tugowner does not waive its contractual rights; they must endeavour to take reasonable precautionary measures in accordance with World Health Organisation (WHO) recommendations; and the hirer is responsible for any additional cleaning, fumigation or quarantine costs.

Subclause 28(f) sets out tugowner’s liberties to comply with orders, directions, etc. of authorities and flag states that may arise due to proceeding to an affected area.

Subclause 28(g) provides that any additional time used under this clause should be compensated by the hirer at the daily hire rate.

Subclause 28(h) and (i) provides that the exercise of any rights under the clause is not a contractual or geographic deviation and will not be considered a breach of contract, and that this clause will prevail in case of conflict with any other express or implied provisions of the agreement.

Clause 29 Anti-Corruption Clause

This is BIMCO’s Anti-Corruption Clause for Charter Parties 2015 that has been adapted to fit in a towage context. It provides the parties with a regime for responding to unlawful demands for gifts in cash or kind, such as cigarettes or alcohol.

Subclause 29(a)(i) requires the parties to comply with “all applicable anti-corruption legislation”. Since the clause is designed for worldwide trading 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 counter-parties 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 29(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 29(b) provides that the clause is triggered when a request is received by the tugowner or the tugmaster, for payment or goods or other items of value (defined in the clause as a “Demand”) from any official, contractor or subcontractor either engaged by the tugowner or hirer (such as pilots, etc.) or acting on behalf of any third party (such as port or customs officers). If the Demand is viewed as an illegal payment, the tugmaster or tugowner must notify the hirer and the two parties should cooperate in taking reasonable steps to resist the Demand.

Subclause 29(c) takes the process to the next stage if the “reasonable steps” in subclause (b) have failed to resolve the position. At this point, the tugmaster or tugowner may issue a letter of protest. Under normal circumstances, a letter of protest setting out a complaint will be addressed to local interests at the port in question. However, this might not be appropriate where the illegal Demand is being made by a service provider or where it is suspected that the letter or details will be passed on leading to further difficulties for the parties, the tugmaster. It is therefore left to the tugmaster or tugowner to decide whether, and if so to whom, the letter of protest should be directed. Nevertheless, in all cases, the letter of protest must be sent or copied to the hirer.

The letter of protest will provide evidence that the vessel is being delayed because of the continuing, and as yet unresolved, Demand. In accordance with the logic that the port of call has been nominated by the hirer, it follows that they should bear the cost of any delay attributable to a Demand. Accordingly, once the letter of protest has been issued, any time lost should be compensated by the hirer at the daily hire rate.

Subclause 29(d) provides mutual indemnities whereby a party that has breached anticorruption legislation must indemnify the other party against loss or damage suffered because of the breach.

Subclause 29(e) sets out the criteria for termination. Termination can be invoked by either party 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.

The use of the provision is optional and a breach committed by one party can be disregarded by the other party. The commission of a breach is limited to the actions of those directly employed by the breaching party and not those of agents or contractors engaged to act on their behalf. If, for example, the tugowner’s port agent seeks an inducement from the hirer to expedite, or not delay, administrative processes, the port agent’s actions would not put the tugowner in breach. It is expressly provided that termination must be exercised “without delay”. This is to prevent a party using a prior incident as an excuse to bring the agreement to an end possibly weeks or months later. Termination is expressly “without prejudice” to any other rights under the charter.

Subclause 29(f) in contrast to the foregoing provisions which respond to issues of corruption during performance of the agreement, this subclause provides a self-standing regime warranting that the contract has not been procured by corrupt means. If breached, the innocent party may terminate the contract.

Clause 30 Sanctions Clause

This clause is based on the BIMCO Sanctions Clause for Voyage Charter Parties 2020 and has been adapted to fit in a towage context. It has been attempted to keep this clause similar to the equivalent provision in TOWCON as both agreements are generally used for shorter towages.

Subclause 30(a) sets out the definitions of terms used throughout the clause.

“Sanctioned Activity” is a wide definition and is intended to cover all activities contemplated by the performance of the agreement which may become the subject of sanctions restrictions imposed by a Sanctioning Authority.

“Sanctioning Authority” identifies the authorities that can impose sanctions restrictions (such as imposing prohibitions on particular trades and activities or listing persons or entities who are subject to sanctions restrictions such as freezing of assets) and who either have jurisdiction over the parties or the proposed activity or who might be able to impose penalties or other restrictions on the parties. The definition lists the principal authorities and governments that have imposed sanctions. It also includes a catch-all provision covering sanctions imposed by “any other applicable competent authority or government”, which is intended to capture any other authority that would be relevant to the agreement at issue. Parties are free to amend this definition to include the names of any other authorities or governments who might impose sanctions specific to their agreement.

The purpose of listing specific authorities and governments is to provide certainty that the clause will be effective in situations where sanctions with extra-territorial effect are imposed by a sanctioning authority that places one of the parties either in breach of such sanctions or at risk of being listed as a sanctioned party if they continue to perform their obligations under the agreement.

Likewise, the reference to “other applicable competent authority or government” is intended to ensure the clause is equally effective where sanctions are imposed by an authority or government that is not specifically listed.

“Sanctioned Party” defines the persons and entities who are the subject of sanctions. It is intended to capture persons, entities, bodies, or vessels that are specifically identified by a Sanctioning Authority on a sanctions list, such as the United States (US) list of “Specially Designated Nationals and Blocked Persons” (“SDN List”) or the European Union’s (EU) Consolidated List of Persons, Groups and Entities Subject to EU Financial Sanctions (“EU Consolidated List”). This definition is also intended to capture those persons, entities, bodies, or vessels that are effectively subject to the same restrictions because of their corporate affiliations.

Subclause 30(b) puts a continuing warranty throughout the agreement on the parties, the tug, any substitute, and the tow that they are not a Sanctioned Party, and that the performance of the agreement does not involve a sanctioned activity.

Subclause 30(c) gives the innocent party the right to terminate the agreement and/or claim damages if the other party is in breach of its warranty under subclause 29(b).

Subclause 30(d) provides that if the hirer is in breach after the tug and tow have already connected the tugowner may refuse to proceed and can leave the tow at any safe port or place.

Subclause 30(e) provides that compliance with the clause will not be considered a breach of contract.

Clause 31 Financial Security

This clause is optional and will only be triggered by filling out Box 38. No changes have been made to this clause which is designed to provide the tugowner with the possibility to ask the hirer to put up security in a form and amount specified in Box 38 to guarantee performance of the hirer’s financial obligations.

Clause 32 Warranty of Authority

No changes have been made to this clause under which the hirer named in Box 3 promises that it has actual authority to bind the owner of the tow to the agreement in cases where these are not the same entity. Both the hirer and the owner of the tow will be bound jointly and severally to the agreement.

In addition to the signatures of the persons signing the contract, their names should be spelled out in the signature boxes. In case an agent is signing, it will be easier for the other party to look up who that person is and to establish if it has authority to enter into a binding agreement.

Clause 33 Time for Suit

In order to avoid a claim under TOWHIRE being time barred, except for claims brought under Clause 22 (Liability and Indemnity), it has to be notified within six months of delivery of the tow or of termination of the services rendered and any suit must be brought within one year from when the cause of action arose.

Clause 34 BIMCO ISPS/MTSA Clause 2005

This clause is based on BIMCO’s standard ISPS/MTSA Clause for Time Charter Parties 2005 and provides for compliance with the ISPS Code and the U.S. MTSA Act. The ISPS Code aims to detect security threats to ships and port facilities, and to take preventive measures against such threats. The U.S. MTSA Act is an additional layer of security measures to the ISPS Code and is developed specifically to protect U.S. ports and waterways from terrorist attacks.

Subclause 34(a)(i) establishes that the tugowner has to comply with the requirements of the ISPS Code and, if operating within U.S. waters, with the MTSA Act.

Subclause 34(a)(ii) provides for the hirer to be able to obtain from the tugowner evidence of compliance with the Code.

Subclause 34(a)(iii) states that except as otherwise provided in the contract, any losses, apart from consequential losses, caused by the tugowner’s failure to comply with the Code or the Act will be for the tugowner’s account.

Subclause 34(b) addresses one of the measures imposed by the Code and the Act which the tugowner can only meet with the cooperation of the Hirer - such as providing the hirer’s full style contact information. The hirer will be accountable for failure to comply with this clause, and as under subclause (a)(iii) consequential losses are excluded.

Subclause 34(c) provides that delay, costs and expenses arising from compliance with the Code or Act should be for the hirer’s account unless they result from the negligence of the tugowners, tugmaster or crew.

Subclause 34(d) contains an indemnity provision that secures that payments made in respect of the clause will be covered by the responsible party under the clause.

Clause 35 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. When using SmartCon, the option chosen by the parties in Box 39 will appear automatically in the body of this clause. If the parties fail to make a choice, English law and London arbitration will be the default position.

Subclause 35(a) determines the governing law; the place of arbitration; the applicable arbitration legislation; and the seat of arbitration (where the arbitration takes place in a jurisdiction other than the agreed place of arbitration). It is an “exclusive” arbitration agreement. This is emphasised by the addition of the phrase “referred exclusively to arbitration”.

Subclause 35(b) requires the parties to appoint three arbitrators but allows for a different number of arbitrators to be agreed.

Subclause 35(c) applies the terms (or rules) of the chosen arbitration association to the conduct of the arbitration. An appointment procedure is no longer included in the clause because the terms of the named arbitration venue contain a procedure to which parties should refer when making appointments of arbitrators.

Subclause 35(d) provides for the small claims procedures offered by the named arbitration association. Parties are free to decide on the maximum applicable sum for small claims, but otherwise the clause will display the default amount used by each of the named venues. If the London arbitration version of the clause is chosen then an additional “intermediate claims procedure” provision will apply optionally.

Subclause 35(e) applies the terms, rules procedures of the chosen arbitration association current at the time that arbitration proceedings are commenced. This is the common approach for arbitration in London, Singapore and Hong Kong. In New York the rules are different and it is those current at the time the contract was concluded that will apply.

Subclause 35(f) addresses the correct service of arbitration notices and communications. Parties are free to serve notices by whatever effective means they choose, but if they choose email then they must provide the email address of someone authorised to receive arbitration notices (and advise the other party of any change of address during the period of the agreement). Notices are considered effectively served immediately on sending by email.

Clause 36 General

Subclause 36(a) states that in case a provision under TOWHIRE is held invalid, that should not affect the other provisions of the agreement.

Subclause 36(b) clarifies that any words in singular in TOWHIRE include the plural and any plurals include the singular.

Clause 37 BIMCO Notices Clause

All notices given by either party must be in writing in a readable and understandable way capable of being a record. References to “cable” and “telex” have been deleted as outdated means of communication.

Annex A Tug specification

Tugowners will generally have their own brochures or specification sheets for their tugs and not use the detailed tug specification in TOWHIRE 2008. The tug specification has therefore been deleted and Annex A is now blank so that tugowners can attach the brochure or specification sheet for the tug or tugs under the contract.

Annex B Tow specification

A new annex for the tow has been included for the hirer to describe the tow.

Annex C Inventory of towing gear

It is very important to fill out Annex C and the condition of the towing gear as this will have a bearing on how much the tugowner can claim for loss or damage to the towing gear under Clause 15 (Towing Gear and Use of Tow’s Gear).

Note on General Average

BIMCO’s ocean towage agreements TOWCON 2021 and TOWHIRE 2021, as well as earlier editions of these agreements, do not contain General Average and New Jason Clauses. The absence of such clauses may not prohibit the parties from bringing claims in the nature of general average against one another. Accordingly, although general average claims appear to be very rare under these contract forms, the parties may wish to consider resolving any uncertainty as to, amongst other things, the place of adjustment and applicable rules, by including such clauses, or they may wish to expressly exclude any rights to claim general average altogether. Parties should contact their insurers to seek advice on the implications of their insurances of expressly excluding the right to claim contributions to general average sacrifices/expenditure including to ascertain whether any additional cover is needed. More information on the General Average and New Jason Clauses can be found here.