Australia - It's High Time For A New SUPPLYTIME.
Legal News & Analysis - Asia Pacific - Australia - Dispute Resolution - Shipping Maritime & Aviation
14 September, 2017
What you need to know
BIMCO has released SUPPLYTIME 2017, the fourth edition of its widely used standard form charterparty for offshore service and support vessels.
The revision creates a changed apportionment of liabilities and indemnities between Owners and Charterers by removing almost all of the exceptions to the knock-for-knock liability regime.
New or re-worded clauses have been incorporated to cover critical issues such as suspension and termination, maintenance days, common fuel systems, surveys and audits, and lay-up.
What you need to do
Offshore industry participants should familiarise themselves with the revised SUPPLYTIME 2017 form and carefully consider whether the alteration to the apportionment of liability and the changes to the terms and conditions are suitable for specific projects and align with the parties intended commercial and operational outcomes.
Background to SUPPLYTIME 2017
Over the past forty years, SUPPLYTIME has become the benchmark for offshore support vessel time charterparties. In particular, the knock-for-knock liability and indemnity regime in the SUPPLYTIME charterparty form ('knock-for-knock') provides offshore industry participants with a clear-cut allocation of risk and responsibility with the aim of minimising the number of claims and disputes.
Twelve years after its last revision in 2005, BIMCO's Documentary Committee has adopted the revised SUPPLYTIME 2017. The revision is the result of a two-year development process where BIMCO invited industry to provide feedback on what end-users wanted to see incorporated into the new charterparty. In particular, some of the provisions in the 2005 edition had a reputation for being too favourable to Owners, and the main focus for the revision was to create a better balance of liabilities and indemnities between Owners and Charterers under its knock-for-knock liability regime.
SUPPLYTIME has also been reviewed and updated to clarify its use of overly complex and ambiguous language, and take account of recent case law on issues relevant to the SUPPLYTIME standard form.
Key changes to SUPPLYTIME 2017
The 2017 revision is set to become the new benchmark for offshore charters and industry participants should note the following key changes:
Knock-for-knock (Clause 14 – Liabilities and Indemnities)
At the heart of SUPPLYTIME is its knock-for-knock liability regime, which means that each party agrees to bear responsibility and indemnify the other in respect of loss or damage to their own property, and injury to or death of their own personnel, regardless of fault. Overtime, the knock-for-knock framework has been diluted by the introduction of various exceptions. In the 2017 edition, there are now only three exceptions where the Charterers may be responsible for loss or damage to property belonging to members of the Owner's Group.
The remaining exceptions are:
- subclause 9(e) (Charterers to Provide) where the Charterers have to pay for replacing the Owners' anchor handling, towing or lifting wires and accessories;
- subclause 14(c) (Limitations) under which the parties may limit their legal liability; and
- subclause 18(c) (Saving of Life and Salvage) in respect of salvage services.
The removal of the exceptions is balanced by the expansion of the definitions of the Charterers' Group and Owners' Group. These definitions now appear in the Definitions section at the beginning of the charterparty, and encompass all those entities that may suffer loss and which the Owners and the Charterers will be liable to indemnify each other in respect of.
Additionally, the knock-for-knock regime has been reinforced by expanding the description of the included causes of loss. Now, in light of recent case law since SUPPLYTIME 2005, the loss must be one "arising out of or in any way connected with the performance or non-performance of this Charter Party…". This addition protects the parties under the knock-for-knock regime for events and losses arising from actual performance, as well as events and losses arising from a failure by either party to perform the charterparty.
In the 2017 edition, consequential losses are dealt with separately in subclause 14(b)(ii), and certain specific heads of losses, whether direct or indirect, are covered in subclause 14(b)(i). This is to ensure that the consequential loss provision remains effective in light of recent English case law.
Pollution (Clause 15)
In SUPPLYTIME 2017, the indemnities that were contained in the 2005 form are no longer excluded from the knock-for-knock regime. Therefore, parties will be liable towards each other in relation to their respective property damage or death and personal injury caused by pollution.
Suspension and Termination (Subclause 12(f))
Under subclause 12(f), the wording regarding the right to suspend and/or terminate the charterparty for non-payment of any money owed to the Owners has been clarified. Under this provision, the Owners retain the right to terminate the charterparty if the Charterers have not made due payment within five days after the required notice of failure to pay has been given. However, if the Charterers pay after the five day grace period has lapsed, but before the Owners have sent a written termination notice, the Owners lose the right to terminate.
Off-hire (Clause 13)
In SUPPLYTIME 2017, maintenance days are still earned by the Owners and accumulated as they were in the previous edition. However, the Owners will not be able to claim the value of their maintenance days at the end of the charter period, as was the case in SUPPLYTIME 2005. An exception to this is where the Charterers have specifically asked the Owners not to use any accrued maintenance allowance. In such cases, hire will be payable for unused maintenance days on redelivery or at the earlier termination of the charterparty.
Various issues in relation to dry-docking have also been clarified. For example, the 2017 edition now provides that the Owners' choice of dry dock location should always be reasonable, to both parties, when it comes to time and cost.
Fuel (Clause 10)
Subclause 10(d) (Liability) of the 2005 form has been deleted and replaced with subclause 10(e). In line with the updated knock-for-knock regime, the Owners now accept responsibility for the risk of engine damage caused by the use of unsuitable fuel. The Owners are entitled to additional time and the vessel remains on hire to check the fuel for compliance, and may stop fuelling operations if there is reason to believe that the fuel is not compliant.
Subclause 10(c) has also been revised to provide the parties with two options for the payment of fuel. Previously, the payment regime involved Charterers purchasing the fuels on board at delivery at the price prevailing at the delivery port, and the Owners buying back the fuels on board at redelivery, at the price prevailing at the delivery port. An additional option is now included for there to be a balancing payment or credit for the difference in the quantity of fuel onboard between the delivery and redelivery of the vessel.
Surveys, Audits and Inspections (Clause 5)
This provision has been updated and expanded to reflect current practice. In the 2017 form, the Charterers now have the right to survey, audit or inspect the ship prior to delivery, or during the charter period upon giving notice to the Owners.
Lay-up (Clause 33)
A completely new lay-up clause has been incorporated to identify the key elements that the parties need to address and agree on before a vessel can enter warm lay-up. One additional factor is that maintenance days will no longer continue to accrue during any period spent in lay-up.
Early termination (Clause 34)
Clause 34 of the 2017 form replaces Clause 31 in the 2005 form. The Charterers' right to terminate for convenience remains unchanged, however, the termination procedure for when the parties may terminate for cause has been clarified and improved. The revised clause operates with two notices and makes clear in which circumstances the parties may terminate; how much time the defaulting party has in which to remedy; and the time frame within which the termination may take effect.
Additionally, the ability for either party to terminate for a repudiatory breach is exercisable immediately by giving notice in the 2017 form. The terminating party no longer has to provide a grace period as was required under the 2005 form.
Standard BIMCO clauses
The latest editions of BIMCO’s standard clauses have been incorporated into the 2017 form and three more have been added namely, Sanctions, Designated Entities and the Maritime Labour Convention clause. The Both-to-Blame collision clause and the General Average clause have been removed. This is because they deal with cargo-related matters and are typically not relevant in an offshore support vessel context.
Key points for industry participants
SUPPLYTIME 2017 attempts to be more neutrally balanced than its predecessor to remain the charterparty of choice for both Owners and Charterers. However, although the 2017 form is a marked improvement in many respects by providing industry with a clearer knock-for-knock regime, industry participants should still carefully consider whether the revised conditions are suitable for the project in question, and align properly with the commercial and operational needs of the parties.
SUPPLYTIME 2017 is available to use by subscribers to BIMCO's charterparty editing system, IDEA. Industry participants should also note that BIMCO is conducting a series of seminars specifically designed to present SUPPLYTIME 2017 to the industry, details of which are available on the BIMCO website.
For further information, please contact:
Shane Bosma, Ashurst