Newsletter - New edition of BIMCO SUPPLYTIME 2017

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Shipping

1. Introduction

On 6 June 2017, the BIMCO Documentary Committee adopted a new edition of the standardised time charterparty for chartering of offshore support vessels in the oil and gas sector - SUPPLYTIME.

The SUPPLYTIME format was first introduced in 1975 to meet the demand for a specialised contract for chartering of offshore support vessels. It has later been revised three times to reflect current industry practice and developments; first in 1989, then in 2005, and now in 2017.

The previous edition, SUPPLYTIME 2005, has been very popular and is widely used in the market. It has also been adopted by other sectors in need of a thorough knock-for-knock liability regime, such as offshore wind.

BIMCO Documentary Committee states that SUPPLYTIME 2017 mainly has been updated to reflect current shipping practice and legal developments. At first glance, the 2017 version is very similar to the 2005 edition. The box layout in Part I is more or less identical to the 2005 edition, and the main features, structure and terms of Part II has in all material respects been maintained.

There are however some important changes that should be duly noted by users of the contract. 

2. Liabilities and indemnities

The cornerstone of the SUPPLYTIME contract is the knock-for-knock liability regime. This has been amended in the 2017 edition.

In SUPPLYTIME 2005, the definition of "Charterers' Group" and thereby the knock-for-knock regime included the Charterers' clients, but not the contractors and sub-contractors of Charterers' client. In practice, this meant that every time a shipowner where to charter a vessel to an offshore contractor, as opposed to an operator/oil major, Owners would be exposed to liability towards the contractors and sub-contractors of Charterers' end client.  

In SUPPLYTIME 2017, the definition of "Charterers' Group" has been extended to include contractors and subcontractors of Charterers' client. Consequently, this implies that all parties operating on the relevant field should be covered by the knock-for-knock regime.

Further clarity has also been added to the liability regulation by removing some of the previous exceptions from the knock-for-knock regime; inter alia (i) the indemnity in favour of Owners if damage is caused to the Vessel due to the carriage of explosives, dangerous, toxic and noxious cargo, and (ii) the indemnity in favour of Owners for off-spec fuel.

Further, the clause regulating exclusion of liability for consequential and certain direct losses has been amended, and more detailed language have been added. This is meant to reflect the position under English law, where loss of use, loss of profits, and loss of production are considered as direct losses, and therefore must be explicitly listed to be excluded.

Clause 15 (a) governing Owners' liability for pollution has also been amended. The Owners are still only liable for pollution emanating from the Vessel, but it is no longer a condition that pollution has arisen from the acts or omissions of the Owners or their personnel. It is explicitly stated that the Owners' liability for pollution applies even if such liability is caused wholly or partially by the Charterers. This is in line with the BIMCO Documentary Committee's intention to achieve a clear cut liability regime, without to many exceptions.

3. Other relevant changes

In addition to the changes to the liability regulations, a number of other amendments have also been introduced.

Clause 10 governing bunkers, now renamed "Fuel" has undergone a complete overhaul to reflect changes in current marked practice. Under SUPPLYTIME 2005, the system was that Charterers where to purchase the fuels on board at delivery and the Owners where to purchase the fuels on board at redelivery, at the price prevailing at the port of delivery/redelivery. In the 2017 edition, the parties are given two alternatives: (i) the parties purchase the fuels on board at delivery/redelivery, similar to the SUPPLYTIME 2005 regulation, but at the price paid by the other at the last fuelling, and (ii) a final settlement option where the Charterers pays to the Owners, or vice versa, for fuel used by calculating the difference between the quantity of fuel on board at delivery and redelivery.   

Clause 13 (c) governing maintenance and dry-docking has in all material respects been maintained in SUPPLYTIME 2017. Two important changes have however been made: First, the Owners are no longer entitled to payment for unused maintenance days at the end of the charter period, unless the Charterers have specifically asked the Owners not to use these. This is meant to constitute a more balanced solution which may encourage Owners to use the maintenance days within the charter period, and at the same time discourage the Charterers from being reluctant in making the Vessel available for maintenance. Second, SUPPLYTIME 2017 has included a reservation stating that Owners' choice of dry-docking location must be reasonable as to time and cost. This means that the Owners are no longer free to choose a remote and cheap yard for dry-docking without taking into account the interests of the Charterers.   

SUPPLYTIME 2017 includes several new BIMCO standard clauses, which typically has been included as additional clauses in charterparties based on the 2005 edition, i.e. Infections or Contagious Diseases Clause (Clause 25), Anti-Corruption Clause (Clause 28), the Maritime Labour Convention 2006 Clause for time charterparties (Clause 29), and the Sanctions Clause (Clause 30). 

A new clause regulating lay-up of the Vessel is included in Clause 33 of SUPPLYTIME 2017. The Clause is based on the same principle as Clause 6 (d) in SUPPLYTIME 2005. The Charterers may require the Owners to lay-up the Vessel, and will be credited with the thereto related reasonable daily savings. However, a more detailed regulation of the procedure for lay-up has been included, and the Owners are given an explicit right to coverage of reasonable expenses incurred in placing the Vessel in lay-up and reactivating it, as well as compensation if redelivery or early termination occurs during lay-up.

In SUPPLYTIME 2005, Clause 31 (b) (now Clause 34 (b)) regulating termination for cause was ambiguous. It was not clear which of the grounds for termination that could be invoked by both parties, and which that could only be invoked by the Charterers. These ambiguities have been remedied in SUPPLYTIME 2017. It is now clear that requisition, confiscation, loss of Vessel and Force Majeure gives both parties the right to terminate for cause, whereas only the Charterers are entitled to terminate for cause in cases where the Owners have failed to procure the required insurances in time for delivery.

Further, the right for either party to terminate in case of repudiatory breach by the other, has been moved to a new Clause 34 (c). As opposed to SUPPLYTIME 2005, termination for repudiatory breach will in accordance with the updated regulation occur with immediate effect.

Finally, Clause 31 (b) (v) (now Clause 34 (d)), allowing the Charterers to terminate for cause in circumstances where a breakdown persists for a period exceeding that which is stated in Box 33 of Part I, has been replaced by a corresponding clause where the right to termination is tied to prolonged off-hire periods, either a single consecutive period or combined periods. 

4. Summary

In summary, we take the view that SUPPLYTIME 2017 does not represent a significant change from the very successful SUPPLYTIME 2005 format. The revisions made mainly reflect developments in shipping practices, lessons learned and relevant legal developments.  We find that SUPPLYTIME 2017 has remedied much of the ambiguity experienced with the previous edition.

The changes to the liability regulation have added clarity and predictability. In our view, this should benefit both Owners and Charterers.

SUPPLYTIME 2017 does not include any specific requirements relevant for chartering of more complex tonnage, such as offshore construction and/or subsea vessels. In such cases, the Charterers and Owners will still need to draft and negotiate additional clauses to ensure that their interests are properly safeguarded.

Should you require more information or assistance with the new standard form, please do not hesitate to contact us. 

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 © 2017 KVALE Advokatfirma DA