Corruption and charter party considerations

Two issues dominated discussion at BIMCO’s Documentary Committee meeting in Edinburgh in June. The first was approval of a revised version of the New York Produce Exchange (NYPE) Time Charter Party. The second was continuing work to develop an anti-corruption clause.

It has been some twenty years since the last revision of NYPE and during this time many changes have taken place in legal, commercial and market practices together with an ever-increasing need to comply with regulatory provisions imposed by states and inter-governmental bodies in response to security demands. The current revision has been the subject of intensive discussions with copyright-holder ASBA and the Singapore Maritime Foundation. However, after three years’ work, BIMCO is satisfied that the updated content reflects user needs for modern trading conditions.

While maintaining BIMCO’s position that a NAABSA (Not Always Afloat but Safe Aground) provision must not be imposed on owners as a printed term, parties will be given flexibility to enable them to agree and insert named ports or places where NAABSA is to be permitted. If the requisite section is not completed, NAABSA will not apply.

Two important amendments have been made to the delivery obligations. Under NYPE 1993, the vessel must be ready to receive cargo “on her delivery”. In the new version, while the vessel must be seaworthy on delivery at the agreed port or place, the cargo-readiness obligation applies either at the port of delivery or, if different, at the first loading port. It is for the parties to decide which is to apply with the “on delivery” alternative as the default option in the absence of express agreement.

The second adjustment is the introduction of wording based on “final voyage” provisions whereby once delivery notices have been given, owners must ensure that there is a reasonable expectation that any further employment orders they give (or allow to be given under an existing or previous charter), will nevertheless allow delivery to charterers to occur on or before the notified date. A parallel redelivery provision imposes the same obligation on charterers to ensure that the vessel will be returned to owners by the notified date.

Cash flow

Prompt and timely payment of hire by charterers is important to owners’ cash flow needs to meet their financial commitments. Whether charterers’ obligation under NYPE to pay hire is a condition has been the subject of some controversy. In The Astra (2013), which concerned an NYPE 46 charter party, the court took the view that it was a condition. However, in Spa Shipping (2015) (this time on amended NYPE 1993 charters), the court concluded that the obligation to pay hire is not a condition.

In the light of the conflicting positions and to ensure that parties’ respective obligations are clearly stated and after taking counsel’s advice, the Hire Payment Clause has been restructured. It now provides that in the absence of punctual payment for any reason (and not, as at present, only in the event of charterers’ oversight or banking errors), charterers must be given three banking days to rectify the position. If, within that period, charterers fail to make the payment due, owners are given the express right to withdraw the vessel and, if they exercise that right, to claim damages for loss of the remainder of the charter period. In any event, owners may suspend performance while hire remains outstanding.

Many other provisions have been preserved although the opportunity has been taken to update the content and improve the drafting. At the same time, a number of clauses have been added as standard provisions including hull fouling, slow steaming, use of electronic bills of lading, regulatory requirements covering submission of cargo information, ship and port security requirements and the application of international sanctions and restrictions on prohibited persons or entities. Clauses covering piracy, war and law and arbitration have been replaced with up to date provisions.

Tackling corruption

Meanwhile, corruption is an ever-present scourge of the modern world. It must, of course, be governments that take the lead in eradicating institutional corruption and perhaps recent high level scandals will lead to concerted action to tackle the root causes of the problem.

In shipping, the symptoms of corruption are often seen when officials or service providers demand cigarettes, alcohol or cash before they will undertake or complete a task they are legally or contractually obliged to carry out. Masters who refuse to cooperate will invariably put themselves, and their crew, at risk of reprisals as manufactured deficiencies and fictitious regulatory breaches are suddenly discovered. Unfortunately, governments do not necessarily distinguish between such forced payments and unadulterated bribery where the objective is to give or receive an advantage. Shipowners are thus put in an impossible position: refusal to pay blackmail demands means delay and often intimidation whereas payment may lead to prosecution.

Individually drafted anti-corruption clauses are becoming increasingly common in shipping contracts. Invariably, however, they are an adaptation of wider zero tolerance policies developed by corporate entities with harsh termination provisions for any minor or technical breach. As such, they do not fit easily into charter parties.

BIMCO is therefore working to develop a provision which takes account of the respective interests of owners and charterers, sets out a regime to be followed when demands are made for unlawful payments and creates a high threshold so that a contract can be terminated only in certain limited and clearly defined circumstances of breach and not used as an excuse to exit an inconvenient contract. This is necessarily a complex project where discussions are continuing to devise a provision that will be seen as balancing party interests and recognised as the market standard when an anti-corruption clause is required.

Other issues

A technical revision of market stalwart, the LINERTIME Deep Sea Time Charter Party, was among the many other issues on the agenda. The underlying principles remain unchanged but the opportunity has been taken to replace outdated stevedore damage, war and dispute resolution provisions with the latest clauses.

Highly specialised trades demand contractual arrangements that respond to their particular needs. With this in mind, a new time charter party, ROPAXTIME, has been developed for ro-ro passenger vessel trades. In addition to the customary allocation of party rights and obligations, the content specifically addresses charterers’ responsibilities for the employment of on-board hotel and catering personnel; servicing of cabins, restaurants and public spaces; and passenger liabilities.

Other work currently underway includes the development of a new voyage charter party for the carriage of liquid natural gas, a standard contract for the supervision of vessel construction, novation agreements to facilitate changes of contracting parties during the currency of a time charter and revision of SUPPLYTIME 2005. As a matter of course, all existing documents are kept under constant review to ensure that the content remains in line with contemporary requirements and are put forward for revision as necessary. Recommendations are also made for new contracts and clauses to meet evolving market needs.

And finally advances in technology, coupled with the almost universal use today of computers during charter party negotiations, mean that it is often difficult to read and make on-screen corrections to older contracts originally printed with two columns of text. A reformatting programme is therefore being put in hand to bring the content of all BIMCO documents into line with the modern style of layout.