New age of ship management


In April, BIMCO published a revised ship management agreement, SHIPMAN 2024, following a two-year review process involving input from shipowners, managers, P&I clubs and insurance and legal experts.

BIMCO has included a number of clauses in SHIPMAN 2024 relating to emission trading schemes, sanctions, cyber security and anti-corruption. The aim is to reflect current market ship management practices in order to reduce the need for parties to heavily amend standard form agreements and include rider clauses.

This article focusses on the main differences between SHIPMAN 2024 and its predecessor SHIPMAN 2009. The below is not an exhaustive list of the amendments to SHIPMAN 2024, but what we believe are the key changes.

Authenticity Warranty: In SHIPMAN 2024, BIMCO has inserted language at the end of Part I requiring the party responsible for issuing SHIPMAN 2024 to warrant that the execution version of the agreement uses the authentic BIMCO SHIPMAN 2024 template properly sourced from BIMCO. This is BIMCO’s attempt to prevent parties from using counterfeit copies of SHIPMAN 2024.

EU ETS Clause (Clause 10): BIMCO incorporated into SHIPMAN 2024 its ETS SHIPMAN Emission Trading Scheme Allowances Clause 2023 (ETS Clause), which was introduced in 2023. In April 2023, the European Parliament voted in favour of legislative amendments to the EU Emissions Trading Directive to include the maritime sector in the EU’s Emissions Trading Scheme. This has had a profound effect on how shipowners, ship managers and charterers interact with each other in respect of emissions trading.

The ETS Clause sets out the Emission Scheme Management Services which managers will provide and a separate fee in this respect will be paid by owners. This EU ETS fee is set out in Box 14 of Part I.

Management Fees (Clause 13): The management fee structure has been updated in SHIPMAN 2024. Instead of only having an annual management fee payable from the commencement date of the SHIPMAN agreement, management fees are split into an annual management fee (set out in Box 15 of Part I) payable from the delivery of the vessel from the owner to the manager and a predelivery management fee (set out in Box 15 of Part I). The pre-delivery fee is intended to cover predelivery services provided by the manager, while the annual management fee covers usual management fees from the commencement of the management period. If the owner and manager do not include a figure into Box 15 Part I for the predelivery fee, it will automatically be calculated as a twelfth of the annual management fee. Until now, parties had to amend SHIPMAN 2009 themselves to clarify their position in respect of any predelivery services and the relevant fee. This therefore addresses a previously common issue.

The revised management fee clause also provides that all management fees paid will be without set-off and free of any withholding for tax. Owners will have to increase the payment so that managers receive the amount due to them on the basis that no withholding of tax been necessary.

Roles and responsibilities
Change Of Control (Clause 18): BIMCO introduced a new change of control provision allowing parties to terminate a contract by serving no less than one month’s notice to the party that had a change of control. This clause has been introduced mainly for sanctions reasons, allowing a party to terminate if the other party has been acquired by a sanctioned entity. This clause complements the new sanctions clause BIMCO also introduced.

Responsibilities (Clause 19): The majority of the responsibilities clause remains as per SHIPMAN 2009 but there have been some subtle changes in the wording in SHIPMAN 2024 including:

· Clause 19 (a) – scope of force majeure events expanded to include plagues, pandemics, other disasters, extreme natural events, radiation and contamination;

· Clause 19(b) – managers will now be liable to owners for the negligence, gross negligence and wilful default of any of the manager’s affiliates;

· Clause 19(c) – owners’ indemnity to the managers will also include the manager’s affiliates; and

· Clause 19(d) – manager’s affiliates are now included as agents of the managers.

Managers’ Information System (Clause 21) And Vessel’s Information And Data (Clause 22): Two new clauses have been introduced in SHIPMAN 2024 that deal with the way vessel information is handled and all parties’ intellectual property rights. Clause 21 provides that managers must provide owners with access to their digital platform containing the vessel information but that said digital platform, including intellectual property rights relating to it, remain the managers’ property. Clause 22 makes it clear that all vessel information is the owners’ property and that once the ship management agreement is terminated all the vessel information will be released by the managers to the owners. With the shift to digitalisation and managers increasingly using digital platforms to store vessel information, these clauses are necessary in order to add clarity to the way vessel information is handled and each party’s intellectual property rights.

MLC (Clause 25)
BIMCO introduced a new clause dealing with the regulations imposed by the Maritime Labour Convention (MLC 2006). Under MLC 2006, owners have certain financial security obligations they must ensure compliance with when hiring crew members. This new MLC clause provides that managers, to the extent provided by management services, will assume the duties and responsibilities imposed by MLC 2006 on owners. This provision obliges managers to be aware of MLC 2006 requirements imposed on owners when hiring crew as compliance with these provisions will be shifted on them.

Security concerns
Personal Data Protection (Clause 26): A new Personal Data Protection clause was introduced requiring owners and managers to comply with any applicable data protection regulation including the European Union General Data Protection Regulation (GDPR). This provision deals with the collection, use, safeguarding, transfer and retention of personal data and the protection of Data Subject’s rights. This clause ties in with the Managers’ Information System (Clause 21) and Vessel’s Information and Data (Clause 22), which BIMCO introduced in SHIPMAN 2024.

Cyber Security (Clause 27): An amended version of BIMCO’s Cyber Security Clause 2019 has been included in Shipman 2024. This amended clause does not include a liability cap as this is already covered in Clause 19 (Responsibilities). The Cyber Security clause was introduced to help managers and owners appropriately implement measures to protect digital environments and provide a procedure for responding to cyber security incidents. The key aspect of this provision is the requirement to promptly notify the other party of the occurrence of a cyber security incident to help mitigate its effect.

Sanctions (Clause 28): A revised version of the BIMCO Sanctions clause used for the Time Charter Parties 2020 with logical amendments to reflect the nature of a ship management agreement has been introduced in SHIPMAN 2024. Owners and managers had to introduce their own sanctions clauses in SHIPMAN 2009 to deal with various sanctions regimes. The need for a sanctions clause in SHIPMAN became even more necessary following Russian sanctions by the EU, UK and US.

Under the new Sanctions clause, owners warrant that neither themselves nor the vessel are a sanctioned party and managers warrant that neither themselves nor any entity which they subcontract services to are a sanctioned party. If during the term of the SHIPMAN, either party breaches the warranty they have given, the other party may terminate the SHIPMAN and the party in breach must indemnify the other party for all claims, losses, damages, costs and fines incurred.

Termination (Clause 31): SHIPMAN 2024 has amended the following provisions of the Termination clause:
· Clause 31(b)(iii) – if either party (the Defaulting Party) fails to meet their obligations under Crew Insurances or insurance policies, the other party may give notice to the Defaulting Party requiring them to immediately remedy the default compared to the previous 10-day period under SHIPMAN 2009;

· Clause 31(f) – if the parties fail to agree on a change of flag or change of control, either may terminate the SHIPMAN with 1 month’s notice, the result of which will be the termination of the agreement upon the change of flag or change of control or on expiry of the notice period, whichever is earlier; and

· Clause 31(i) – if the managers provide crew services in respect of the vessel, the owners shall pay “any severance costs which may be incurred”, not to exceed an agreed amount, whilst in SHIPMAN 2009, the owner’s liability in respect of severance costs was limited to “an equitable proportion of any severance costs incurred”.

Miscellaneous: Finally, there are various more boilerplate provisions that have now been added to SHIPMAN 2024, including anti-corruption, waiver, confidentiality and an electronic signature clause.

SHIPMAN 2024 introduces necessary updates to the ship management agreement, and it makes it a more solid starting point for the discussions between ship owners and ship managers. It will be the maritime industry that will determine whether SHIPMAN 2024 has enough practical benefits for ship owners and ship managers to move away from SHIPMAN 2009 and adopt SHIPMAN 2024.
Source: Watson Farley & Williams

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