Legal Issues Relating to Time Charterparties

Rhidian Thomas, Rhidian Thomas

• Publisher: Informa Law from Routledge
• Year: 2020
• ISBN:
  9781000341461
• Edition: 1
• Topic: Law
• Subtopic: Maritime Law
• Index: Law

Legal Issues Relating to Time Charterparties addresses all the major questions and issues that arise in connection with time charterparties, examining them in a logical manner, progressively tracing the subject from the creation to the termination of the contract. All the salient legal aspects of time charterparties are examined, with the law analysed in its commercial context, particularly in relation to the various ways in which time charterparties may be used in shipping and international trade.

CHAPTER 1

Standard forms – the BIMCO experience

GRANT HUNTER^*

INTRODUCTION

1.1 BIMCO is the world’s principal organisation responsible for the development of standard forms of contract and free-standing clauses for the shipping industry. For the majority of people around the world their knowledge of the name BIMCO is almost always associated with documents. The documents cover a huge variety of trades and circumstances ranging from conventional general cargo to specialised offshore work. With the recent adoption of a standard shipbuilding contract BIMCO now has a standard form of agreement available for every aspect of a ship’s lifespan from construction to recycling.

1.2 The organisation views its documentary work as a cornerstone of its trade facilitation activities. The production of standard forms and clauses remains one of BIMCO’s most successful and well-known activities. Documentary work has been at the forefront of BIMCO’s activities for its entire history – over a century.

1.3 One of the first documents produced by BIMCO shortly after the organisation was established in 1905 was the BALTIME Uniform Time Charter. Originally developed for the Baltic trades this form eventually found a much wider global audience. The form was most famously revised in 1939 and is still referred to as BALTIME 1939 despite a series of revisions in 1950, 1974 (when the Box Layout was added) and 2001.

1.4 Today, BIMCO’s catalogue of standard time charterparties still includes the BALTIME 39 form but also provides modern trade-specific time charterparties for the offshore industry, the container trade and the chemical/tanker sector.

OBJECTIVES

1.5 One of the primary aims of BIMCO’s documentary work is to produce charter-parties and other shipping documents and clauses that strike a fair and equitable balance between the parties in legally sound language readily understood by both. It is BIMCO’s belief that such a consistent approach to the development of shipping documentation serves to minimise the likelihood of charterparty and other contractual disputes arising in the first instance. Indeed, it is quite rare for any BIMCO document to be the subject of dispute regarding the interpretation of terms and conditions.

1.6 BIMCO’s documentary objectives can perhaps be summarised by what we refer to as the “3 Cs”:

• clarity;

• consistency;

• certainty.

1.7 The objective of clarity is to write standard forms and clauses in clear and unambiguous language and to structure documents so that the sequence of clauses follows a logical order. BIMCO forms are written to take into account, wherever possible, the possibility that the end-user is unlikely to have English as their mother tongue. BIMCO documents are also designed with the emphasis on being commercial agreements entered into by commercial parties who should not need to rely on legal advice to understand the implications of the contract.

1.8 The objective of consistency is to ensure that the same wording is used in clauses covering the same subject areas across the whole range of BIMCO charterparties. These “standard” clauses provide the building blocks upon which all BIMCO forms are built. Bearing in mind that each document is developed by separate drafting teams, many of the members of which may not have worked on a BIMCO document before, the style of writing is also important in terms of consistency. Ensuring the consistency between documents makes it much easier for users to employ new BIMCO forms because many of the core clauses will be identical to those found in other BIMCO forms.

1.9 The objective of certainty relates to the outcome of any commercial transaction based on a BIMCO document. We believe that the clarity of language and consistency of terms that BIMCO uses across its range of standard forms brings to the parties the comfort of knowing, from the outset of the agreement, the extent of their responsibilities and liabilities. The certainty of outcome plays an important role in risk management and insurance cover and this is reflected in the policies of a number of P&I Clubs who recommend to their members certain BIMCO documents which afford full International Group P&I Club cover.

1.10 If the measure of success of a frequently used standard time charterparty is for it to be rarely, if ever, mentioned in the pages of legal reports, then BIMCO’s time charterparties can be judged a success.

THE DOCUMENTARY PROCESS

1.11 The development of a new time charterparty, or the revision of an existing one, follows the same procedure that all BIMCO standard forms and clauses follow. The main body responsible for overseeing all documentary activities that BIMCO undertakes is the Documentary Committee. It is responsible for giving the final approval to all documents adopted by BIMCO.

1.12 The members of the Documentary Committee reflect the wide spectrum of shipping, legal, commercial, shipbroking and insurance opinion and expertise among BIMCO’s global membership. The Committee consists of a chairman (currently Mr John Tsatsas); two vice-chairmen; the members of the BIMCO Executive Committee; up to 30 owner-members representing different countries; P&I, Defence Club and shipping trade association representatives; a number of observers from various shipping bodies such as the International Chamber of Shipping and FONASBA; and representatives from the BIMCO Secretariat.

1.13 BIMCO’s documentary work programme has always adapted to and been driven by industry demands for standard documentation. The Documentary Committee carefully considers any proposals for new documents that it may receive from members and other shipping-related bodies. If the Committee feels that a proposed new document should be developed, the project will be added to the existing work programme to be taken forward by a specialist subcommittee at the earliest opportunity.

Market research

1.14 Part of the evaluation process includes market research conducted by the Secretariat to establish from those involved in a particular trade the level of demand for a new or revised form. Questionnaires are sent to a representative cross-section of the trade identified from the list of users that subscribe to BIMCO’s online charterparty editing system, idea.

1.15 The questionnaires not only provide an indication of the likely receptiveness by the particular trade to a new document but also give essential feedback with regard to problematical elements of an existing document which they would like to see addressed in a revision. Through this market research BIMCO is also raising awareness in the trade of new documents and involving in the development process those most likely to use the new form.

Types of form

1.16 BIMCO produces a wide variety of standard forms, which are published in the Forms of Approved Documents (FAD) – this annually updated portfolio of documents contains over a hundred separate charterparties, bills of lading and other forms issued or supported by BIMCO.

1.17 BIMCO also produces a number of standalone and specialist clauses which can be incorporated into any charterparty or agreement as appropriate. Such clauses are often developed in response to specific events, such as the implementation of the ISM Code or new regulations relating to maritime security or fuel standards.

1.18 New developments in maritime services have created demands for specially created agreements where no specific form of contract existed before. BIMCO has been at the forefront of developing such specialist documents for many years. Chief among these forms are the ship and crew management agreements that were first drafted in the late 1980s and have proved very successful. BIMCO has also developed special forms for, among others, the ship repair and shipbuilding industry, the bunker trade and the offshore sector.

THE DRAFTING PROCESS

1.19 The actual drafting work for each new and revised form is not done by the Documentary Committee but by small specialist subcommittees. A BIMCO Subcommittee normally consists of three to five experts drawn from various shipping disciplines relevant to the document being developed. Remarkably, everyone who joins a BIMCO subcommittee agrees to work on a “pro bono” basis, voluntarily contributing their time and expertise. This reflects very positively on an industry that wishes to be seen to be raising standards and harmonising trade terms and conditions.

1.20 All BIMCO documents, where possible, are drafted in broad consultation with the industry or relevant sector. When a document is close to completion, copies are often circulated to selected correspondents who are invited to comment on the draft and provide feedback to the subcommittee. This has, on many occasions, proved a very useful exercise in ensuring that potential users feel part of the process and are therefore more receptive to the final product when launched.

Subcommittee composition

1.21 The subcommittees are generally composed of ship-owning/operating and ship-broking interests, wherever possible drawn from among BIMCO’s membership, providing invaluable practical and commercial input. Subcommittees also benefit from legal expertise provided by a P&I Club representative or legal counsel. This means that contractual provisions are checked to take account of contemporary law and practice and are consistent with the basis and extent of P&I Club cover.

1.22 In addition, in order to ensure that the specialist needs of particular commodities or services are properly reflected in each form and that the correct balance is struck, the subcommittee will often include a charterers’ representative and/or trade organisation.

Drafting work

1.23 The drafting work begins with the appointed Subcommittee initially identifying the specific requirements of the project and then producing a first draft of the document. The Documentary Committee meets twice a year and the initial stages of document development are normally reviewed at these meetings. The Documentary Committee will actively debate and provide comment and guidance on the proposed document to the Subcommittee as it continues its work. Eventually a final draft of the document will be put forward to the Documentary Committee for formal approval.

Project timescale

1.24 The length of time it takes to develop a new document or revise an existing one varies subject to the frequency that each subcommittee can meet and with the complexity of the trade. On average, a BIMCO subcommittee will meet for a full day meeting perhaps four or five times a year. Because of the requirement to present a full draft to the Documentary Committee on two separate occasions before approval can ...