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Gard News 198, May/July 2010

BIMCO amends the piracy clause for time charterers and publishes two new voyage charter clauses.

The article "Piracy charter party clauses - Risk shifting or risk sharing?", which appeared in Gard News issue No. 195,  reported the publication of the BIMCO piracy clause for  time charters.  This article considers amendments to the BIMCO time charter clause and introduces two new BIMCO voyage charter clauses.

BIMCO time charter clause
Gard News pointed out previously that the BIMCO time charter clause was particularly "owner-friendly", in part because it provided for an open-ended obligation for charterers to pay hire while the vessel was detained by pirates.  Apparently Gard News was not alone in this assessment.  BIMCO recognised that "the reaction to the Clause from the industry was that it was perceived as being slanted in favour of the owners. The perception stemmed from the express provision in the Clause that if the vessel were to be detained by pirates then it remained on hire  throughout the period of detention".1  

BIMCO addressed charterers' concerns by introducing an amended version of the clause, in which the period that the vessel remains on hire is capped at 90 days. This is a positive step toward making the clause more balanced between the interests of charterer and owner.2 

BIMCO voyage charter clauses
BIMCO also published two clauses for voyage charterparties.  One is for consecutive voyages and contracts of affreightment (COAs) and the other is for single voyages. 

The clause for consecutive voyages and COAs is designed for long-term agreements rather than spot fixtures.   Like the time charter clause, the owner is entitled to take an alternative route if he reasonably believes the intended route is unsafe due to piracy in the area.  In the event the vessel uses an alternative route the clause provides a formula to adjust the freight.   If the decision is to proceed then the owner is entitled to take preventive measures and additional costs including insurance premiums3 are to be shared by the parties.  In the event the vessel is seized and detained by pirates, the charterer is liable for one half of the demurrage for the period of detention.

The BIMCO clause for single voyage charter provides:
"If, after the date of the fixture, and in the reasonable judgment of the master and/or the owners, any port, place, area or zone, or any waterway or canal on any part of the route which is normally and customarily used on a voyage of the nature contracted for becomes dangerous, or the level of danger increases to the vessel, her cargo, crew or to the persons on board the vessel due to any actual, threatened or reported acts of piracy and/or violent robbery and/or capture/seizure, the owners shall be entitled to take a reasonable alternative route."

The key difference between the single voyage charter clause and the others is that owners are not entitled to choose an alternative route if the piracy risk existed at the time of the fixture.  This reflects the short time horizon for spot fixtures and the information as to risk equally available to both parties to the fixture.  Owners are, however, entitled to alter the route if the situation has changed and danger increased after the fixture. However, the costs of using the alternative route are for the owner. 

Both voyage charter clauses provide that the clause "shall be incorporated" in the bills of lading issued pursuant to the charterparty and if not incorporated the owner is provided with an indemnity from the charterer for claims arising from the failure to do so.4

Broad scope
All three clauses include wording broadening their scope to include "violent robbery" within the definition of piracy.  This addition is meant to address the attacks for example in Nigerian waters and ports.

While all charter terms are subject to negotiation, the BIMCO clauses provide clarity and an important starting point with respect to the allocation of risks and costs between owner and charterer when the customary routing takes the vessel through pirate-infested waters.

1 BIMCO Special Circular No. 2, November 2009.
2 The full text of the three clauses can be downloaded from the BIMCO website at www.bimco.org.
3 According to the BIMCO explanatory notes, the reference to insurance does not include Kidnap and Ransom insurance. See BIMCO Special Circular No. 2, November 2009.
4 "The Charterers shall indemnify the Owners against all consequences or liabilities that may arise from the Master signing bills of lading as presented to the extent that the terms of such bills of lading impose or result in the imposition of more onerous liability upon the Owners than those assumed by the  Owners under this Clause."    

Any comments to this article can be e-mailed to the Gard News Editor.