Offshore Contracts and Liabilities

Baris Soyer, Andrew Tettenborn, Baris Soyer, Andrew Tettenborn

• Publisher: Informa Law from Routledge
• Year: 2014
• ISBN:
  9781317746119
• Edition: 1
• Topic: Jura
• Subtopic: Seerecht

Written by a team of top academics and highly-experienced legal practitioners, this is a very complex area of law. It provides both a critical analysis on contemporary legal issues concerning offshore contracts, and an in-depth account of the numerous liability regimes inherently connected to offshore operations.Key features of Offshore Contracts and Liabilities:

• Detailed insight into contemporary legal issues concerning offshore contracts, including Supplytime and Heavycon
• In-depth analysis of the current liability regimes with clear reference to contemporary industry practice
• Thorough examination of the current state of the law from national, regional and international perspectives
• Up-to-date coverage of hot topics such as liability for offshore installations, knock-for knock agreements in offshore contracts and recently-developed new standard forms, such as Windtime.

This book is an indispensable guide for legal practitioners, academics and industry professionals worldwide

PART 1

OFFSHORE CONTRACTS

CHAPTER 1

BIMCO’S OFFSHORE CONTRACTS

Grant Hunter*

I. Introduction

II. Main characteristics of BIMCO standard contracts

III. Specialisation and offshore expansion

IV. New strategy, new documents

V. Offshore contracts: content, contractual structure and methodology

VI. Winds of change

VII. A new SUPPLYTIME

I. INTRODUCTION

The BIMCO¹ is renowned worldwide for its work on developing standard forms of contract for the shipping industry. Sitting alongside the multitude of conventional cargo charterparties is a suite of offshore standard contracts, most notably SUPPLYTIME, which is one of the organisation’s most widely used contracts. The offshore sector has become a major focus for BIMCO’s documentary work. The wide range of specialised offshore-related contracts represent a significant and important part of BIMCO’s portfolio of standard forms. Sales of SUPPLYTIME outstrip even that of conventional dry cargo voyage charter parties such as the GENCON form.

The involvement of BIMCO in the offshore sector dates back to the nascent beginnings of North Sea oil and gas exploration. But BIMCO’s involvement in the development of standard forms of charterparty goes back much further. The historical aspect of BIMCO’s work has played a major role in building the organisation’s reputation and establishing trust from non-traditional sectors of the shipping industry in BIMCO’s documentary products.

In 2013, BIMCO’s Documentary Committee, which is responsible for reviewing and approving all new and revised BIMCO clauses and contracts, celebrated its centenary in Paris where the first meeting took place. The inaugural meeting in the spring of 1913 brought together the so-called ‘Copenhagen Committee’ (a small group of BIMCO members who drafted the organisation’s first ever charterparty, BALTCON, in 1908), members of the UK Chamber of Shipping’s own Documentary Committee, and lastly, but most significantly, representatives of the major P&I clubs.

In 1913 BIMCO’s documentary aspirations were to create the first truly international standard forms of charterparty. The objective was to draw up contracts that were fair, balanced and acceptable to each party and couched in terms that could be readily understood by laymen. Changing market fortunes with roller-coaster freight rates were as much a feature of shipping in the early years of the twentieth century as they are in present times. Recognising that a charterparty written to address only the current status of the market would have a short shelf-life, BIMCO resolved to prepare contracts that were ‘market neutral’ – suitable for use by shipowners in both good and bad times.

The involvement of the major P&I clubs from the very outset was critical to the success of the venture. By inviting the major P&I clubs to participate in its documentary work, BIMCO aimed to create charterparties that shipowners could use without the need for modification, safe in the knowledge that their P&I cover would not be prejudiced by their use. While the shipping industry has seen some dramatic developments during the last 100 years, these basic principles continue to form the bedrock of BIMCO’s documentary activities today.

The shipowners and P&I club representatives that gathered in Paris in 1913 to discuss uniform terms for charterparties would be much heartened to learn that their ambition to create harmonised internationally acceptable contracts and clauses has continued to resonate through the decades to the present time. To the highly risk-aware offshore oil and gas sector, the ‘risk-management’ philosophy instilled into BIMCO’s documentary work from earliest times is an important factor in the appeal of using BIMCO contracts.

II. MAIN CHARACTERISTICS OF BIMCO STANDARD CONTRACTS

A. Uniformity

One of the key features of BIMCO’s diverse range of standard forms of contract is uniform terms. Back in 1913, voyage charterparties for the coal, grain and timber trades were the predominant contract in use in the industry and were commonly issued by individual merchants incorporating terms generally favourable to themselves. The concept of developing ‘uniform terms of charter’ to make it less easy for the advantaged to impose unreasonable terms upon the disadvantaged in a freight rate negotiation was proposed by Adolf Carl, the first President of BIMCO, in 1905. In 1908, the Baltic and White Sea Conference (as BIMCO was then known) adopted its very first charterparty, BALTCON.

B. Ethical dimension

BALTCON succeeded because it introduced an ‘ethical dimension’ to charterparties of ‘fairness’ and ‘balance’ – characteristics sadly lacking in the charterparties prevalent at the time. Although there was initial scepticism about BIMCO’s objectives, it was soon realised that balanced documents conferred a long-term benefit on an industry which, even in those days, was exposed to the same turbulent freight market conditions that we have today. Uniformity of charterparty terms also brought with it the prospect of reducing the risk of potential disputes by the consistent use of clear and comprehensible language. BIMCO takes pride in the fact that its standard forms of contract are rarely the subject of court cases or arbitration solely on the basis of the interpretation of their terms alone.

III. SPECIALISATION AND OFFSHORE EXPANSION

In the years that followed the Second World War new specialised shipping activities emerged. Containerisation, reefers, liquefied gas and chemical carriers, and cement carriers all required the use of specialised charterparties.

In the mid-1970s, BIMCO expanded its range of charterparties to include an offshore support vessel time charterparty – SUPPLYTIME – its first foray into the offshore world. Although BIMCO has subsequently developed a comprehensive portfolio of offshore industry-related standard forms, the ‘mother’ of all these contracts is undoubtedly the SUPPLYTIME form, first published in 1975 and subsequently amended in 1989 and 2005.

SUPPLYTIME was born out of the rapid expansion of oil and gas exploration and production into the deeper waters of the North Sea and other areas of the world in the 1970s, and the need for a uniform set of contractual terms to govern the provision of services by the specialist vessels needed to support these activities. Prior to the development of SUPPLYTIME, many support vessels were chartered using in-house contracts or adapted standard time charter forms, neither of which were ideally suited to address the peculiarities and hazards of this special trade. The publication of SUPPLYTIME created a relationship between BIMCO and the offshore industry that has continued for nearly forty years. The offshore sector has become the most supportive user of BIMCO standard forms of contract and regularly approaches the organisation with requests for revisions of well-used forms to reflect changes in commercial practice or legal developments as well as with requests for new types of contract.

SUPPLYTIME has for many years been among the top-ten BIMCO forms sold to the industry. It has stood shoulder-to-shoulder next to other BIMCO contract stalwarts such as GENCON, BARECON and SHIPMAN. In 2013, SUPPLYTIME 2005 became BIMCO’s number-one best-selling document – reflecting not only the continuing growth in this sector, but also the importance that the offshore industry places on the availability and use of BIMCO standard contracts. However, the original SUPPLYTIME from 1975 was highly favourable towards owners and encountered resistance in the industry. Its development was further evidence of a general malaise that had worked its way into BIMCO’s approach to standard charterparties at that time.

By the 1970s many in the shipping industry felt that BIMCO had in some way lost sight of its original objective to produce ‘balanced’ charterparties and felt that many of its products had become too owner-friendly and favourable towards certain shipping nations.

IV. NEW STRATEGY, NEW DOCUMENTS

In the mid-1980s, under the presidency of Dr Helmut Sohmen and Documentary Chairmanship of Nils-Gustaf Palmgren, BIMCO developed a new documentary strategy to reaffirm its position as the leading producer of standard forms of contract for the shipping industry.

It was decided that the organisation should focus on developing one document for each niche of shipping and to establish a thorough and consistent process to govern the review and adoption of new and revised documents by the Documentary Committee. Most importantly, the strategy re-introduced the need for balance in BIMCO forms – to ensure that the interests of both parties were fairly represented. In addition, the new strategy recognised the need to broaden the scope of BIMCO charterparties to encompass other jurisdictions such as the United States. It was at this point that BIMCO also introduced what has become its trademark box-layout that has featured in the majority of its contracts ever since.

A. TOWCON and TOWHIRE

With the new strategy to develop a contract for each shipping niche, BIMCO embarked on a campaign to increase its range of specialised documents for the growing offshore oil and gas sector. International ocean towage was one key area lacking uniform charter terms. The International Salvage Union and the European Tug Association approached BIMCO in the 1980s with a request for assistance in drawing up two standard ocean towing agreements: TOWCON and TOWHIRE. These ground-breaking contracts introduced a mutual allocation of risk for international towage whereby each party bore the risks to their own vessel and obtained insurance to cover those specific risks. This so-called ‘knock-for-knock’ regime helped to avoid duplicate insurance and reduced claims. In line with the documentary strategy the towage agreements also brought a greater degree of balance between the parties than previously used contracts, which heavily favoured tug owners.

Published in 1985, TOWCON and TOWHIRE quickly gained widespread acceptance in the ocean towage sector and remain the predominant form used for this activity today. The forms were revised in 2008 to reflect changes in commercial practice, law and regulations and to bring greater clarity to some of the provisions which had, over the course of time, been the subject of disputes.

B. HEAVYCON

With the need to develop offshore infrastructure in ever deeper waters came a new type of ship designed to carry very large, heavy and voluminous ‘cargo’: the super-heavylift float-on/float-off ship used to transport very large offshore structures from fabrication yards to offshore sites. BIMCO responded to industry demand for a standard charterparty for this type of ship with the pu...