Ship arrest clauses focus on “sphere of responsibility”
Overview
BIMCO has published two clauses that take a balanced approach to termination risk following ship arrest, in response to cases seen in recent years when some dry cargo charterers have tightened procedures to arrest under a charter party.
BIMCO has seen examples of clauses that entitle charterers to terminate the charter party if the ship has not been released within a few days of its arrest or detention, even if the owners are not to blame for the arrest.
The two Arrest Clauses are designed to be used in voyage and time charterers in a chain of contracts to ensure consistent application. Risk allocation is based on the “sphere of responsibilities” approach taken by the Court of Appeal of England and Wales in The Global Santosh[1]. Under this approach, a distinction is drawn between issues such as the management of the vessel and its crew, which fall within the owners’ sphere of responsibility, and employment for use of the vessel which falls within the charterers’ sphere of responsibility.
BIMCO has decided not to follow the UK Supreme Court judgment in The Global Santosh where it was held that there must be some connection between the cause of the arrest and the function that the agents perform under the charter party in their capacity as agents.
“The “sphere of responsibilities” test has been chosen because it provides a less complex and therefore more practical way of allocating responsibility,”says Per Zerman, Chairman of the Arrest Clauses Subcommittee.
“This approach was felt to be more in line with market expectations. The “sphere of responsibilities” test will not always be entirely fair but is intended to minimise disputes and reduce the number of claims,”Zerman adds.
The clauses are available to download from BIMCO’s website along with guidance notes, which should be read carefully.
[1] NYK Bulkship (Atlantic) NV v. Cargill International SA (The Global Santosh) [2014] EWCA Civ 403.
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Posted:
14 June 2019
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