Draft BIMCO Quiet Enjoyment Letter ready for industry consultation

Published: 27 April 2023

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The subcommittee was welcomed to Wah Kwong’s offices by Capt. Zhou Jian Feng, Managing Director of Wah Kwong Maritime Transport Holdings Ltd., who is also a member of BIMCO’s Marine Environment Committee (pictured)

At a meeting on 25 and 26 April at BIMCO President Sabrina Chao’s offices in Hong Kong, the drafting team tasked with the development of BIMCO’s new standard Quiet Enjoyment Letter finalised a first draft of the form which is intended for use in ship financing.

The drafting team has been working hard across multiple time zones to complete a draft Quiet Enjoyment Letter as well as a short-form version.

“It has been a great pleasure to chair this sub-committee and work with such dedicated subcommittee members. We were very pleased to meet in person in Hong Kong at the offices of Wah Kwong Maritime Transport Holdings Ltd to finalise these draft documents which will now go out for industry consultation,” said Catherine Smith of Oldendorff (formerly of Wah Kwong), who is chairing the drafting team.

The QEL is intended to be a bilateral agreement in so far as it will be issued by the mortgagee to the charterer, who will then acknowledge the granting of quiet enjoyment with a separate collateral assignment of its rights on terms acceptable to the mortgagee. While a bilateral QEL will be most common, the drafting team considers that it might be useful also to develop multilateral and unilateral versions once the bilateral QEL has been published.

The draft QEL includes the traditional BIMCO box layout with key provisions dealing with the following:

• The mortgagee’s undertaking to grant to the charterer quiet enjoyment of the vessel
• The charterer’s acknowledgement of the assignment of rights, title and interest to the mortgagee
• Charterer’s undertakings to the mortgagee
• Reservation of charterer’s right to terminate the charter party in accordance with the charter terms
• The mortgagee’s ability to enforce any rights under the mortgage and facility agreement
• The charterer’s cooperation with the mortgagee to facilitate transfer of ownership or control of the vessel and assignment, novation or replacement of the charter party in connection with an enforcement process
• The charterer’s obligation to fulfil its obligations under the charter party and the QEL as a requirement of quiet enjoyment
• Termination
• Law and jurisdiction.

The short form will be a simplified version of the full QEL which only includes key elements dealing with the charterer’s quiet enjoyment, reservation of the charterer’s and mortgagee’s rights respectively and termination.

“It is hoped that these drafts will become a useful tool for lenders and charterers,” added Ms Smith.

In addition to Ms Smith, the drafting team is comprised of: Sarah Jane Thompson of BHP in Singapore, Gitte Vannus Kragelund of Danish Ship Finance in Copenhagen, Jay Shi of CMB Financial Leasing Co., Ltd. in Shanghai, Olga Petrovic of Linklaters in London and Gerald Morrissey of Holland & Knight in New York.

Documentary Committee review and industry consultations will take place shortly, with the target date for completion of the project in late 2023.

If you are interested in being a part of the sounding board, please provide your full name and e-mail address to contracts@bimco.org by 5 May 2023 at the latest.