The most widely-used charterparty for offshore service and support vessels, Supplytime 2005, is over a decade old and is currently under review, with a new version expected to be published by BIMCO in early 2017.
The drafting committee, with industry input, is in the process of identifying key areas for revision. Supplytime 2005 is generally perceived as owner-friendly, and it has increasingly been felt that it could be more balanced. In addition, some provisions are insufficiently clear, or not in line with the current position under English law. Nevertheless, Supplytime 2005 is very popular and, according to BIMCO, the revision “is likely to be in the form of a “light touch”, focusing on incorporating the latest editions of BIMCO standard clauses such as Dispute Resolution and CONWARTIME.”
We examine some of the likely key provisions, and discuss some improvements that could be made to Supplytime 2005.
Knock-for-knock (Clause 14 – Liabilities and Indemnities)
Supplytime 2005 broadened the definitions of ‘Owners’ Group’ and ‘Charterers’ Group’. However, depending on the contractual arrangements, sometimes the definitions are not broad enough. Owners may need to amend ‘Charterers’ Group” along the following lines:
- Both ‘contractors and sub-contractors’ and ‘customers’ (in clause 14(a) and 14(e)) should be followed by the words ‘of any tier’ to cover the increasingly complex contractual arrangements in offshore operations.
- Charterers’ customer’s co-venturers should also be included, as they will typically own a share of the field and the offshore units - this is a cause of disputes we often see.
It can also assist the parties to insert the words ‘or non-performance’ in lines 634 and 658, so that owners and charterers are protected under the knock-for-knock for the events and losses named arising from a total failure by a member of their respective ‘Groups’ to perform the charterparty, as well as for events and losses arising from actual performance.
In the case of Owners’ Group, without this amendment, it is likely that a ‘radical breach’ of the charterparty – such as deliberate non-performance – could fall outside the knock-for-knock regime1.
The Windtime form2 incorporates this amendment (for both parties’ benefit) and we expect it will be included in the revised version of Supplytime.
Another common amendment is the express inclusion or exclusion of gross negligence. Whilst this is not a separate concept under English law, parties often wish to refer to it expressly. Some charterers, especially major oil companies, frequently require it to be excluded from the knock-for-knock regime. Windtime expressly includes gross neglect, but excludes wilful misconduct, and it will be interesting to see if Supplytime follows suit.
Consequential Damages (Clause 14(c))
The word ‘consequential’ in this context has a very specific meaning under English law, covering only losses which were unforeseeable in the absence of specific information. Clause 14(c) may therefore not be effective in excluding loss of production, loss of profits and so on, which follow in the normal course of things from a breach of contract. This issue has been addressed in Windtime3, and we would expect the new Supplytime to adopt a similar approach.
Early Termination For Cause (Clause 31(b))
Clause 31(b) could benefit from clarification in several respects, in relation both to the events that may entitle a party to terminate, and the procedure for doing so. The Windtime wording makes it clear that if a party is in repudiatory breach, the grace period and notification provisions in clause 31(b) do not apply and the innocent party may terminate immediately4. However, there is room for further clarification. A party becoming aware of one of the circumstances described in clause 31(b)(i) to (vi) must currently notify the other party of the occurrence ‘and its intention to terminate’, but it is unclear what that party must do if it does not intend to terminate. Conversely, it seems that after the three-day grace period, a party may terminate based on information notified by the other party – without itself having to give any warning or grace period before terminating.
Windtime has clarified several areas, and has been well-received in the market, despite placing increased potential liabilities on owners. However, Windtime is a charter for very specific purposes, and less frequently used than Supplytime. It remains to be seen to what extent its improvements, and shortcomings, will appear in the new Supplytime.
One possible useful addition not expressly mentioned by BIMCO in their recent statements about Supplytime is BIMCO’s new Anti-Corruption Clause, published in November 2015 – although some major oil companies may no doubt prefer to continue using their own bespoke provisions.
Some may say “if it isn’t broken, don’t fix it”, but BIMCO consider that the time is right to provide an updated form. It will be interesting to see how the drafting committee manages to balance the industry feedback received, and the need for legal improvement and clarification, against due consideration of the popularity of the 2005 edition.