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Simon Tatham of Tatham & Co reviews the rising use of the 2021 updates to BIMCO's TOWCON and TOWHIRE standard contracts.
The following article is reproduced by kind permission of Riviera Maritime Media and was originally published on 3 November 2021
It is now nine months since BIMCO published its updated towing contracts, the third edition since they were first introduced in the 1980s. This pair have since become the industry standard for deepwater towage, and with the market gradually getting familiar with the new wordings, it is a good moment to take stock.
TOWCON is more widely used as it lends itself to project tows where there is time for lump-sum terms to be negotiated in advance. Over the past five years, the take-up has averaged almost 1,250, dropping off somewhat in 2020 on account of the global Covid-19 pandemic and market conditions.
TOWHIRE has a lower utilisation, around 450 per annum over the same period. Likewise, its use was notably lower last year. It is used more frequently for rescue tows, standby or escort services or where short-term subcontracted services are sought.
For example, by salvors who may require fire-fighting services or crane barges to be moved to and from site. The daily hire element lends itself to tasks that are uncertain in duration.
To put these numbers in context, they are roughly half that of the SUPPLYTIME contract, although that may be explained to some extent by the spot fixture market that prevails offshore. Many SUPPLYTIME contracts are long term, and much longer term than any typical towage contract.
In terms of the take-up of the 2021 forms so far this year over the 2008 forms, as at the end of October and after eight months, BIMCO advised TOWCON had been used 1,040 times, of which almost 90% were on the old form.
The TOWHIRE numbers are lower, some 335, of which 60 were on the new form. In both instances, however, the utilisation of the new forms is accelerating quickly. Is that to be expected?
Doubtless there is a degree of conservatism behind these figures, operators being inclined to stick with what they know. Companies also add their standard amendments and additional clauses.
It takes time and care to transpose those into the new contracts, explain this to clients, check with legal departments and think through the ramifications of any changes.
One would expect hirers, for example, to wish to take advantage of the new regime, under which the cost of a damaged wire is no longer automatically payable, as an allowance for wear and tear now applies.
Hirers, on the other hand, need to be aware that the tug owner’s rights to cancel in relation to non-payment arise now after seven rather than 14 days, unless otherwise agreed, and that they must now pay for the cost of the tug owner having to prepare a non-standard towing manual for the job in hand.
If one was to consult insurers, a similar preference would prevail in the knowledge that the knock-for-knock or liability and indemnity provisions have been carefully updated and brought in line with other BIMCO forms, notably SUPPLYTIME 2017, and London Commercial Court case law on what is a highly complex field of law. The update also includes a revised allocation of salvage costs; tug and tow now bearing separate responsibility for claims on their property.
Given that the war and other risks clause in the 2008 forms did not cope well with Covid, being a poor attempt to shoehorn too many issues into one provision, both tug owners and hirers alike must surely prefer the more comprehensive nature of the now separate war risk, piracy and infectious or contagious disease clauses.
From the perspective of compliance officers, the ground covered by the new anti-corruption clause and sanctions clause is here to stay, whereas the 2008 forms were silent on these issues.
From an operational standpoint, there are several small but useful new provisions that bring clarity, in addition to a more logical layout.
There is a new provision covering free-time in port, clarifying the period of time spent in port, moving between actual place of connection and last outbound pilot station, and between the in-bound pilot station and place of disconnection. This is particularly relevant in large ports.
In the same vein, under TOWHIRE there is a now the ability to identify the place where the tug is delivered, which may be different to the place of departure of the tow, and free time for bunkering stops is now to be agreed.
There is a requirement for daily reports from the tug owner and an obligation to advise when slow steaming or deviations occur. There is a single delay rate, dispensing with complications arising around at-sea and in-port rates.
A modern bunker-quality clause has been added in line with SUPPPLYTIME, and the inclusion of an estimated towing speed designed to facilitate the calculation of extra time used on the voyage, which is useful under TOWCON in particular.
In conclusion, there is no good reason not to adopt the new forms and good number of reasons why they are an improvement upon the old.
Simon Tatham is a partner of Tatham & Co – awarded Small Firm of the Year 2021 by the Law Society - and founder member of the firm’s TugAdvise.com legal service.
He is a speaker at the upcoming BIMCO Towage and Salvage masterclass which takes place in Rotterdam, 29-30 November. Read more and register here.