Explanatory notes

• Part I
• Part II
• Clause 1 - Definitions
• Clause 2 - Appointment of  Managers
• Clause 3 - Basis of Agreement
• Sub-clause 3.1 - Crew Management
• Sub-clause 3.2 - Technical Management
• Sub-clause 3. 3 - Commercial Management
• Sub-clauses 3.4 - 3.8
• Clause 4 - Managers’ Obligations
• Clause 5 - Owners’ Obligations
• Clause 6 - Insurance Policies
• Clause 7 - Income Collected and Expenses Paid on Behalf of Owners
• Clause 8 - Management Fee
• Clause 9 - Budgets and Managements of  Funds
• Clause 10 - Managers’ Right to Sub-Contract
• Clause 11 - Responsibilities
• Clause 12 - Documentation
• Clause 13  - General Administration
• Clause 14 - Auditing
• Clause 15 - Inspection of Vessel
• Clause 16 - Compliance with Law and Regulations
• Clause 17 - Duration of the Agreement
• Clause 18 - Termination
• Sub-clause 18.1 - Owners’ Default
• Sub-clause 18.2 - Managers’ Default 
• Sub-clause 18.3 - Extraordinary Termination
• Clause 19 - Law and Arbitration
• Clause 20 - Notices

 

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The SHIPMAN 98 Agreement follows the traditional layout used by BIMCO in the preparation of modern charter parties and other contract forms for various trades. The Agreement is divided into two parts with Part I, in box-layout format, providing a means of entering the variable elements of SHIPMAN 98 such as names, dates and descriptions.  Part II contains the standard terms, conditions and other clauses of the Agreement with the intention that these are left unaltered by the parties - unless they specifically wish to alter the careful balance of provisions.

Part I

As far as Part I is concerned, all variable items to be agreed for the particular Agreement and to be filled in by electronic means or by typewriter have been conveniently arranged in boxes. The Boxes contain a brief description of the particular item and a reference to the relevant clauses in the body of Part II.

Part II

Clause 1 - Definitions

The number of definitions used has been expanded to give a more detailed explanation of some of the terms used in the Agreement. In contrast to the original SHIPMAN, the Definitions found in SHIPMAN 98 take the form of an actual clause.

Clause 2 - Appointment of  Managers

This clause is self-explanatory and is taken directly from the text used in sub-clause 2.1 of the original SHIPMAN.

Clause 3 - Basis of Agreement

In the previous edition of SHIPMAN the provisions of this clause formed part of the clause headed “Appointment of  Managers”. However, given the fact that this clause provides very important provisions regarding the capacity in which the managers are acting in carrying out the various management functions contracted for, the sub-committee felt that the relevant provisions should form a new clause headed “Basis of Agreement”.

The provisions of the first sentence of Clause 3 makes it clear that in carrying out any of the functions specified in the Agreement the managers act as the agents for and on behalf of the owners. This provision affords the managers some protection from claims made by third parties. An underlying concern during the development of SHIPMAN was the extent to which the managers could obtain insurance. One of the insurance experts that was involved in the drafting of the original SHIPMAN Agreement expressed the view that the managers would be well advised to structure their agreements so that they are acting as agents. A claim made against the managers by a third party can then normally be defended on the basis that they were only acting as agents to the owners, who would then be able to rely upon their insurances.  

While it is common practice for the managers to act as agents for the owners in respect of various services to be provided on the behalf of the owners, there are situations when the managers may act as principals. This may often be the case in specialised crew management centres like Cyprus and the Far East where crew management is carried out on a large scale and where experienced sea-going staff, such as senior officers who have served the same manager for a number of years, may prefer to see themselves as being employees of the managers and not of the owners on whose vessels they serve.

It must be borne in mind, however, that although SHIPMAN 98 is designed as a multi-functional management agreement, it is more appropriately used as a full management agreement or a technical management agreement. The SHIPMAN 98 crewing provisions are not intended to compete with the more elaborate specialist crew-management agreements that are used by managers heavily involved in crewing.  For those managers who require more detailed crewing provisions than those found in SHIPMAN 98, BIMCO recommends the use of the CREWMAN Standard Crew Management Agreement (a Cost Plus and a Lump Sum version of which should be issued during the early part of 1999).

For the sole purpose of avoiding confusion, the crewing element of SHIPMAN 98 has been expressly maintained as a service where the managers are acting as agents to the owners. SHIPMAN 98 remains an agency type agreement with a consistent approach taken to the relationship between the managers and the owners for all of the services offered.

From a purely practical perspective, it was recognised that it was impossible to provide an exhaustive list in a standard management agreement of each and every action to be taken by the managers to cover the multifarious functions involved in operating a vessel. However, the provisions of the second sentence of Clause 3 provide the managers with a right to take such action or actions as they may in their absolute discretion consider necessary from time to time to enable them to perform their duties as ship managers.

Sub-clause 3.1 - Crew Management

The revised SHIPMAN 98 Agreement no longer contains a catalogue of management services (as previously found in sub-clause 2.3 (i) to (x) of the original SHIPMAN). It was felt unnecessary to maintain this catalogue of provisions in view of the fact that the commercial parties will, in any case, have to refer to the individual boxes in Part I to negotiate and agree on the Management Services to be provided by the managers.

As a general observation it may worthwhile to draw attention to the fact that the obligations of the managers listed in connection with each of the services in sub-clauses 3.1 through to 3.8 are non-exhaustive. It is strongly recommended that a careful study of the provisions of the relevant clauses is made at the negotiation stage. This should avoid potentially long-winded and time-consuming discussions afterwards as regards what the managers were supposed to do in connection with each of the agreed services. (See “Crew Support Costs” in Clause 1 - Definitions).

According to sub-clause 3.1 (i) the managers shall provide suitably qualified crew for the vessel. “Suitably qualified” is a recognised standard in accordance with STCW 95 and is found in many individual private forms of crew management agreement. It is important to note that the standard of “suitably qualified” should not only be adhered to by the managers at the time of the employment of the crew but throughout the duration of the agreement. The continuing training of crew members is an essential element of good ship management practice to ensure that the crew’s qualifications are maintained, particularly in long term arrangements.

The intention behind sub-clause 3.1.(iii) is to ensure that the crew member has passed a medical examination as recently as is practical and that the medical certificate is renewed whenever necessary during the crew member’s service on board. In this respect it should be borne in mind, that crew members may be transferred between vessels in the same fleet and that such a transfer does not necessarily require a new medical examination.

It has to be recognised that language problems do sometimes occur on board vessels which have mixed nationality crews and that such problems can be critical if emergency situations occur. Sub-clause 3.1 (iv) addresses this problem by requiring the crew to have a command of the English language of sufficient standard to enable them to perform their duties safely. While the standard applies to all crew members, it is modified in the sense that the command of the English language has only to be of a sufficient standard for the particular crew member’s specific duties. However, under all circumstances the minimum language requirement onboard must enable the vessel to meet international safety requirements. The standard of English required of a deck officer, who will have to stand watch and communicate with other ships, pilots, tugs and emergency services will be higher than the standard required for a cook or a deck hand. In accordance with STCW 95, the officers and crew must be able to communicate effectively amongst themselves in a common language, but this language need not be English.

During the past few years, most shipping companies and ship management companies have implemented a company drug and alcohol policy in compliance with the requirements of STCW 95. Sub-clause 3.1(viii) deals with potential policy duplications and allows the managers to implement their own drug and alcohol policy.

Sub-clause 3.2 - Technical Management

Sub-clause 3.2(v) of this part requires that the Managers develop, implement and maintain a Safety Management System (SMS) in accordance with the ISM Code.(For further comments on the ISM Code, see comments made under Sub-clauses 4.2 and 5.3).

Sub-clause 3. 3 - Commercial Management

In order to reflect the terms normally used in the ship management industry the provisions of this sub-clause (previously Clause 6 (Freight Management), Clause 8 (Chartering) and Clause 12 (Operation)) have now collectively been referred to as “Commercial Management”. Apart from minor editorial amendments no changes have been made to the substance of the original sub-clause.

Sub-clauses 3.4 - 3.8

These sub-clauses are self-explanatory and are basically the same as those found in the previous edition of SHIPMAN.

Clause 4 - Managers’ Obligations

The provisions of sub-clause 4.1 define the managers’ obligations in carrying out their services as managers. The sub-clause specifies that the managers shall use “their best endeavours” to provide management services to the owners in accordance with “sound management practice” and to protect and promote the interests of the owners in all matters related to the provision of the services under the agreement.

First of all, the managers’ general obligation to use “their best endeavours” ought not to be taken lightly. Courts would seem to have taken a fairly strict view as to what constitutes “best endeavours” and it can generally be said that the phrase means exactly what it says and does not encompass any lesser degree of endeavour by the managers.

“Sound management practice” does not depend on what a particular manager may regard as sound. In the event of a dispute, acceptable standards of management practice may well be determined by the testimony of an independent industry expert.

In recognition of the fact that the managers may simultaneously act as managers for other vessels on the behalf of other owners, the provisions in the second paragraph of sub-clause 4.1 (lines 159-167) define the overall responsibility of the managers in relation to all vessels entrusted to their management. These important provisions allow managers acting for a number of different owners to allocate manpower and services in a fair and reasonable manner. In the absence of such provisions the managers would be faced with the impracticability of trying to give priority to all owners.

As mentioned in the introductory notes, the sub-committee considered in detail the ISM Code and the impact it  might have on the contractual relationship as between the owners and the managers. Although both the owners and the managers might face increased responsibilities as a result of the ISM Code, the Code was perceived to have no significant bearing on the balance of liabilities as between the two parties. Therefore, in the absence of a clear and justified need for a change as a result of the ISM Code it was agreed to make no changes in respect of liabilities as between the parties. However, it was considered important to clarify which party should assume direct responsibilities under the ISM Code. Therefore, sub-clause 4.2, in line with the ISM Code, makes it clear that when the managers undertake the technical management of the vessel in accordance with sub-clause 3.2 they shall be considered “the Company” as defined in the Code and thus assume all duties and responsibilities in accordance therewith.

The managers, in undertaking technical management, should observe that it is also their obligation to make sure that the vessel is operated in accordance with flag state requirements (see Clause 16 - Compliance with Law and Regulations).
    

It will be noted that the technical managers are only obliged to comply with flag state requirements or ISM Code requirements when applicable. In the context of the ISM Code this means that if they are managing a vessel that does not have to comply with the ISM Code until the 1 July 2002, the agreement does not attempt to impose upon the managers ISM obligations in respect of that vessel before that date. The same reasoning applies to the reciprocal provisions under sub-clause 5.3.

Clause 5 - Owners’ Obligations

Although it would seem fairly obvious that the owners should provide timely and adequate funding to the managers in accordance with the agreed services, it was felt that this obligation could not be overemphasized - in particular where the managers undertake the technical management and therefore have taken over the duties and responsibilities of the ISM Code. Thus sub-clause 5.1 clearly specifies that the owners shall pay all sums due to the managers punctually in accordance with the terms of the agreement.

Sub-clause 5.2 (i) is intended to make it clear that even where the managers are only undertaking the technical management of the vessel, it is still the owners’ obligation to make sure that any officers or ratings supplied by themselves or, for instance, by a third party crew manager on their behalf, comply with the requirements of STCW 95.

Furthermore, given the fact that under SHIPMAN 98 the managers are not the employers of the Crew, it was felt appropriate to specify clearly that the owners shall instruct such officers and ratings to follow all reasonable orders of the managers in connection with the operation of the managers’ safety management system (SMS).

Sub-clause 5.3 is the reciprocal provision of sub-clause 4.2. Where the technical management of the vessel is the responsibility of the owners (or another manager undertaking such services on the behalf of the same owner) they will be considered “the Company” for the purpose of the ISM Code - thus assuming the duties and responsibilities in accordance with the Code.  Similar to sub-clause 4.2, compliance with flag state requirements will be the responsibility of the owners or whomsoever they may have appointed as technical managers under a different technical agreement.

Clause 6 - Insurance Policies

It is strongly recommended to study carefully the provisions in this clause and to discuss the extent of coverage with the insurers. The clause (previously Clause 13  of  SHIPMAN) has been updated to reflect current practices as applied in the management industry and addresses, among other things, the important and complicated issue of the managers’ right to be co-assured on the shipowners’ insurance policies and the ship managers’ exposure to liability for P & I calls not paid by the owners.

The issue is complicated not only because different terminologies are used to describe the co-assured status of a ship manager but also because no universal practice is applied by third party liability insurers as regards the managers’ responsibility for calls unpaid by the owners.

The approach adopted by most P&I Clubs towards parties who want the benefit of co-assurance together with the shipowner differs fundamentally between:

(a) those who are prepared to accept responsibility, together with the shipowner, for calls (premiums); and

(b) those who are not prepared to accept any such responsibility.

Although as previously mentioned there is no universal practice regarding co-assurance, in most cases a co-assured within the category (a) is given the benefit of full P&I cover (as opposed to limited cover usually referred to as “mis-directed arrow” cover) in the same way as the shipowner.

This cover is similarly unlimited except for any overall limit on the Club’s cover.  Normally no premium will be charged for co-assured cover but the co-assured must be prepared to pay any outstanding calls that the shipowner fails to pay.

Those co-assured within the category (b) will receive only limited cover which does not extend beyond whatever liability the ship-owners might have had for the claim had it been made against them. Such cover will only respond once, whether to the owners or to the co-assured managers, rather than the managers having a full and separate cover of their own. Accordingly, the managers will only recover from the Club to the extent that the owners themselves would have been entitled to recover, and if the owners can limit their liability and the managers cannot, the managers may find themselves uninsured for the amount of the claim beyond the owners’ limit. However, the managers will not be held liable for outstanding calls owed by the owners.

Sub-clause 6.3 (i) constitutes what seems to be the practice applied by most P&I Clubs today, i.e. that if the managers wish to benefit from having full cover as co-assured then they must also be prepared to accept liability for outstanding calls unpaid by the shipowners.

As will be seen, sub-clause 6.3 (ii), however, provides for the owners’ insurance to name the managers as joint-assured with full cover but where the managers shall be under no liability for premiums or calls arising in connection with the owners’ insurances. As indicated above, this may not be possible to achieve, since P&I Clubs in the International Group require that the managers assume responsibility for calls when fully covered. However, one cannot rule out the possibility that insurance facilities outside the Inter-national Group may offer full P&I cover with no responsibility for calls, and it was for this reason that sub-clause 6.3 (ii) was included.

Some managers provide only limited services such as crew management and, as mentioned in the comments to Clause 3, in providing crews some managers may act not as agent to the shipowners but as principal. In such cases they may place in their own name a separate crew risk insurance to that of the shipowners who will consequently exclude such risks from their own P&I cover. However, to safeguard themselves against the full range of P&I liabilities resulting from, e.g., the negligence of crews supplied by them, managers providing crewing services only may still want to be co-assured on the shipowners’ insurance policies.

Managers who provide only limited services, such as supplying crews in whole or part, may nevertheless be inclined to seek co-assurance on limited terms without the responsibility to pay for the shipowners’ unpaid calls. In doing so they should realise that most managers, even when acting only as a crew manager, would regard the risk of only having this limited cover as being far greater than the risk of being made liable for the owners’ unpaid P&I calls.

Accordingly, BIMCO considered it in-appropriate to make a specific provision dealing with limited cover, but realising that it is a commercial option in the insurance market sub-clause 6.3(iii) has been introduced. The commercial parties should make sure, however, that any terms agreed under sub-clause 6.3(iii) are in accordance with their insurances.

As a final observation, in cases where the managers themselves are not arranging the insurances under sub-clause 3.4 it is important for the managers to make sure that adequate insurance policies are being taken out by the owners.

Clause 7 - Income Collected and Expenses Paid on Behalf of Owners

This clause is self-explanatory.

Clause 8 - Management Fee

When “SHIPMAN” was first drafted practices varied a great deal with regard to the payment of the management fee. The concept adopted in the original SHIPMAN was an annual basic management fee on a lump sum basis payable in equal quarterly instalments in advance.

However, to reflect what seems to be an increasingly common practice, sub-clause 8.1 provides that the management fee shall be paid in monthly instalments in advance. 

Furthermore, to avoid any doubt that the fee structure adopted in SHIPMAN 98 is on a so-called “cost plus” basis, the previous reference to the management fee being paid on a lump sum basis has been removed.

As will be seen from sub-clause 8.4, even if the management agreement is terminated according to the provisions of Clause 17 or Clause 18 (for instance, in the event the vessel is lost), it has been considered reasonable that the management fee should continue to be payable for a further period of three months after the actual termination of the agreement. The rationale behind this is that even after the termination of the agreement, the managers may be engaged in settling outstanding matters like, for instance, freight, demurrage or cargo claims.

It is worthwhile emphasising that it is only in the event of a default by the managers resulting in termination of the agreement, that there is no obligation on owners to continue to pay the management fee for a further period of three months. As mentioned above, where the agreement has been terminated by the owners, or for that matter by the managers, in accordance with normal provisions of Clause 17 or where the vessel is lost, sold or otherwise disposed of the managers will be entitled to the additional fee.

Furthermore, the three-month additional fee is payable as from the termination date of the agreement and not, as has been held by a number of owners, from the date when the notice of termination was given.

Special attention is drawn to the provisions of sub-clauses 8.4 (i) and (ii) which are applicable where the managers provide crew for the vessel in accordance with sub-clause 3.1. In this context reference is made to the definition given to “Crew Support Costs” under Clause 1 - “Definitions”.

The question of redundancy costs as provided in sub-clause 8.4 (ii) is a complicated one and a solution as how to resolve it depends very much on the circumstances of each individual case. It was considered unreasonable that if owners who have had their vessels managed by the same managers for a number of years  suddenly withdraw their vessels from management or sell them, they should be able to avoid contributing to an equitable proportion of the redundancy costs. A fundamental principle of SHIPMAN 98 is that the owners should not be in a better position than if they had crewed the vessels themselves (see also comments under Clause 11). Furthermore, in the absence of a formula as how to assess the redundancy costs in each and every case, it has been left to the parties to negotiate and insert the relevant figure in the relevant Box in Part I.

Clause 9 - Budgets and Managements of  Funds

A careful study of this clause is strongly recommended as the successful and smooth operation of the management agreement is closely linked to the strict adherence by both the owners and the managers to the provisions contained in Clause 9.

To guard against the adverse effect of the managers not being able to pay crew wages because the owners have not advanced the necessary funds, the original SHIPMAN included a provision (sub-clause 16.4) according to which the owners should provide a bank guarantee in an amount equivalent to two months crewing costs. However, to reflect current practices it no longer seems relevant to provide such a provision and it has therefore been deleted from SHIPMAN 98.

Clause 10 - Managers’ Right to Sub-Contract

Shipowners, in their selection of a ship manager to look after their vessel or vessels, will usually exercise due care by appointing a reputable ship management company. For that reason, shipowners would generally not appreciate being confronted with a situation where the ship managers suddenly sub-contract some or all of their obligations to a third party. Consequently, Clause 10 provides that any sub-contracting by the managers to a third party cannot be done without the owners’ prior consent and even if such consent has been obtained, the managers remain fully liable for all their obligations under the agreement.

Clause 11 - Responsibilities

This clause is very central to the operation of SHIPMAN 98 and great efforts have been made to provide equitable solutions which strike a fair balance between the owners and the managers.

In the preparation of Clause 11 the basic philosophy adopted has been to apportion the liability between owners and managers on the basis that the owners should not be in a better position than they would have been in if they managed the vessel for themselves. Equally, it has been found that the managers ought to be liable to a certain extent for negligence.

In the assessment of what would constitute such a balanced solution it was found that compliance with the English Unfair Contract Terms Act 1977 and similar legislation existing in other jurisdictions which state that such clauses must be reasonable, would be a fair guideline as to what would be a reasonable apportionment of liability between the parties.

The following observations may assist in clarifying the provisions of Clause 11:

11.1. - Force Majeure. This clause exonerates both parties from any liability in case of non-performance of their contractual obligations due to events over which they have no reasonable control.

11.2. Liability to Owners.  The thinking behind this clause is that the managers should be able to limit their liability, so that they can insure it, except in particularly culpable situations. The limit of liability has been related to the level of the annual management fee in order to strike a reasonable balance between the funds received by the managers on the one hand, and their exposure for insurance purposes (and therefore level of insurance premiums) on the other. The circumstances in which the managers should have unlimited liability have been related to the wording in the 1976 Convention on Limitation of Liability for Maritime Claims, which is an internationally recognised formula.

Sub-clause 11.2, therefore, operates as follows:

Lines 330-336 begin by excluding the managers’ liability generally.

Lines 336-340 limit that exclusion in order to make the managers liable for negligence, gross negligence or wilful default, whether by themselves, their employees, agents, or sub-contractors.

However the limitation in the exclusion of the managers’ liability does not apply as regards the crew in the event that crewing services are provided by the managers. In the event of negligent action by the crew the managers shall not be responsible for any loss, damage, delay or expenses incurred as a result thereof unless the managers have acted negligently in selecting a competent crew for the vessel in accordance with sub-clause 3.1. The selection of a competent crew always remains the responsibility of the managers. The revised SHIPMAN 98 now makes this position entirely clear in sub-clause 11.2 (ii).

Lines 340 onwards limit the Managers liability in such circumstances to a total of ten times the annual management fee, except where the loss, damage, delay or expense has resulted from the Managers personal act or omission, etc. (in accordance with the concept underlying the 1976 Convention).

In practical terms, therefore, the Managers will carry unlimited liability in circum-stances where they have deliberately or recklessly acted contrary to the Owners interests, although this is restricted to the Managers’ personal acts or omissions. In other words, acts or omissions of this nature by employees, agents or sub-contractors are still subject to a limitation of ten times the annual management fee.

11.3. Indemnity. This is an indemnity clause which is intended to make the reciprocal provision to sub-clause 11.2. Under Scandinavian and Continental systems of law, 11.3. is probably unnecessary because the courts will imply an obligation on the part of the owners to indemnify the managers for anything for which the managers are not liable under 11.2. Unfortunately, under the English and American systems, this is not the case and it is necessary to incorporate a specific indemnity setting out the extent to which owners will have to indemnify the managers.  Lines 355-356 of 11.3. set out the extent of that indemnity by excluding from it any claim for which the managers would themselves be liable under sub-clause 11.2.

11.4. Himalaya.  In order to protect the interests of employees, agents or sub-contractors of the managers it has been found necessary to incorporate in Clause 11 a so-called “Himalaya” Clause. The clause is designed to afford such employees, agents or sub-contractors at least the same protection as the managers have under the Management Agreement and will thus remove the necessity to ensure the contractual chain of indemnities from sub-contractors, etc., to the managers.

As a concluding observation it may be mentioned that the original Clause 11 was reviewed by Queen’s Counsel and found to be in compliance with the English Unfair Contract Terms Act 1977. Since no fundamental changes have been made to this clause under SHIPMAN 98 the position is perceived to be the same.

Clause 12 - Documentation

This is a new clause that takes into account, inter alia, the ISM Code and STCW 95. The clause makes it clear that the managers, upon request, shall make available to the owners all records and documentation necessary to demonstrate compliance with the ISM Code and, where crewing is provided, also STCW 95. It is implied that the owners must give the managers due notice to enable them to collect all such records and documentation.

Clause 13  - General Administration

When performing their responsibilities under the SHIPMAN Agreement, it is logical that the managers handle all relevant disputes and claims. Additionally, if it comes to litigation the managers may also take action in that respect by obtaining expert advice. In this respect the professional ship manager will always keep the owners fully advised of disputes or claims involving third parties.

Some owners would perhaps feel more comfortable by having specific procedures detailing the circumstances under which the managers are able to obtain expert advice for the owners’ account. However, it should not be overlooked that circum-stances may require urgent action from the managers without them being able to consult with the owners beforehand. In such cases it will often appear to be in the owners best interests that the managers have a discretionary right to take such action as the circumstances may dictate.

Furthermore, following the entry into force of the ISM Code for a number of vessels and the fact that managers who perform technical management will be considered the “Company” for the purpose of the Code, therefore requires that the managers have a discretionary right to call in expert advice as warranted by the circumstances.

Clause 14 - Auditing

This clause provides the owners with a right to inspect and audit the accounts relating to the vessel and its operation as may be mutually agreed. Although most jurisdictions are likely to consider accounts and documentation relating to the vessel and its operation to be the property of the owners, the second sentence of Clause 14 makes it clear that the owners can always get back from the managers at least authorised copies of all vessel accounts and documentation after the termination of the management agreement.

Clause 15 - Inspection of Vessel

Notwithstanding the owners’ right to inspect their own vessel, to ensure the smooth and uninterrupted management services as agreed, there should be an element of professional courtesy extended by the owners in providing the managers with prior warning of any intended inspection or visit.

Clause 16 - Compliance with Law and Regulations

This clause is self-explanatory.

Clause 17 - Duration of the Agreement

SHIPMAN 98 is a “fixed term” agreement which requires the contractual parties to give an express notice of their intention to terminate the agreement latest two months prior to the end of the initially agreed contract period, as otherwise it will run unabated until terminated by either party.

Clause 18 - Termination

This clause gives clear rules as to the termination of the Agreement. It distinguishes between termination by default on the part of the owners, a default on the part of the managers, and extraordinary termination.

Sub-clause 18.1 - Owners’ Default

Sub-clause 18.2(i) deals with a default in payment relating to the vessel or vessels under the Agreement and associated vessels (as detailed in Annexe D). The sub-clause entitles the managers, without obligation, to terminate the agreement should the owners fail to pay moneys due to the managers within 10 running days of receipt of the managers request for funds.

Note: Parties should be aware that by completing Annexe “D” they will be subject to the provisions of sub-clause 18.1(i) of this Agreement.

Sub-clause 18.1(ii) provides a remedy for the managers should the owners fail to meet their obligations under sub-clause 5.2 and 5.3 or permit the vessel to undertake a voyage which the managers consider to be improper, unlawful or unduly hazardous. In keeping with sub-clause 18.1(i), the managers are given an entitlement to terminate the Agreement unless the owners’ default is rectified in a reasonable time and to the satisfaction of the managers.

Sub-clause 18.2 - Managers’ Default

This sub-clause corresponds to the pro-visions of sub-clause 18.1(ii) and gives the owners an express entitlement to terminate the agreement if the managers fail to adhere to their obligations to provide the services agreed in Clause 3.

Sub-clause 18.3 - Extraordinary Termination

This sub-clause lists a number of events which, if they materialise, will automatically entitle either party to terminate the agreement without further consequences, except as mentioned in sub-clause 18.6.

Clause 19 - Law and Arbitration

As SHIPMAN 98 is a standard agreement intended for use on a world-wide basis, the contract provides the flexibility of offering the parties a choice of law and place of arbitration.

The clause incorporates the most recently revised BIMCO Standard Law and Arbitration Clause.

The revised clause was developed in close consultation with the London Maritime Arbitrators Association (LMAA) and takes into account the English Arbitration Act 1996 and the LMAA terms 1997.

In line with the earlier BIMCO Standard Law and Arbitration Clause, when forming part of one of BIMCO´s own standard documents, the clause provides for an optional law system and venue of arbitration by leaving it to the parties to make their own choice in each individual case and to fill in Box 18 in Part I accordingly.

As follows from sub-clause 19.4, if Box 18 is not appropriately filled in, English law and arbitration will automatically apply according to sub-clause 19.1.

Clause 20 - Notices

This clause is self-explanatory.