Explanatory notes

This clause is applicable to oil, gas, dry bulk and container trades.

Background

There is an increasing trend by terminals around the world to impose onerous obligations on vessels using their facilities. This typically includes detention penalties for delay and “no fault” liability where owners are forced to surrender limitation rights even if the incident is the result of terminal employees’ or pilot negligence.

Owners’ refusal to agree such terms can result in a vessel being denied access to a berth. However, by accepting the conditions, owners might prejudice their P&I cover. Club advice to owners faced with this dilemma is to use “best endeavours” to try to secure better terms. In practice, the urgent need to berth, lack of time to engage in negotiations and terminals’ refusal to concede any points, mean that exchanges are often a formality without any realistic prospect of a successful outcome for owners.

This can lead to uncertainty with doubts about whether P&I cover will respond to an incident if owners have conceded any of their contractual or limitation rights. If cover is preserved, the cost of a claim under a voyage charter will be set against the owners’ P&I record. If, alternatively, owners purchase additional insurance outside their club cover, without clear charter party wording, the cost will be for owners’ account.

In order to address the practical issues and create contractual protection for owners, INTERTANKO has produced a “Terminals Conditions of Use Clause” for incorporation in voyage and time charter parties.

Far-reaching demands by terminals are not confined to oil trades. Similar issues arise in dry bulk shipping and the container trades and require the same response by owners to protect their interests. In order to avoid duplicating many of the points in a parallel provision, BIMCO has agreed with INTERTANKO that their clause will be made available for industry-wide use.

Detailed provisions

Sub-clause (a). Sets out in wide terms the different types of “Conditions of Use” (CoU) agreement within the scope of the clause;

Sub-clause (b). States owners’ obligation to comply with any CoU;

Sub-clause (c). Gives owners a “breathing space” to consider and try to negotiate, amend or resist unacceptable terms which might prejudice limitation rights, endanger the vessel or commit owners to additional liabilities;

Sub-clause (d). States that if forced to agree to unacceptable terms, the Master may issue a statement or letter of protest which is to be copied to charterers;

Sub-clause (e). Provides alternative arrangements whereby in the event of delay due to negotiations, time lost under a voyage charter will count as laytime or time on demurrage while under a time charter the vessel will not be considered off-hire. In either case, all resulting additional port costs will be for charterers’ account;

Sub-clause (f). Contains a wide-ranging indemnity by charterers in respect of all liabilities, costs and expenses beyond owners’ P&I cover and in excess of LLMC limitation rights; and

Sub-clause (g). Sets out owners’ express right to purchase additional insurance for any extra cover required with the premium payable by charterers.