The GENCON 2022 charter


One of the key questions in releasing a new contract is how much the shipping industry, which tends to view itself as conservative, will embrace it. When the GENCON 2022 editorial board began work on the contract in 2018, the world was very different. If the events of the past few years have proven nothing else, they have proven that the industry is capable of being nimble and adaptable where the drivers of change are strong enough.

Key factors

Need to modernize

While GENCON 1994 is familiar and continues to be popular, the reality is that the landscape in which it operates has changed, perhaps not unrecognizably, but certainly enough to warrant a full charter overhaul. Around the time the 1994 contract was delivered, people were starting to hear about something called the Internet, and email was mostly used by people connected to the computer industry and pioneers. Today, it’s hard to imagine a world without the degree of connectivity and IT solutions we’ve grown accustomed to, but standard contracts sometimes lag behind. This problem has been highlighted in Port Russell [2013] EWHC 490 (Comm) March 1, 2013 where the court held that it was not permitted to submit a NOR by email under the terms of the BPVOY3 charter party which provided for written notification by letter, fax, telex or telegram. The popularity of email was simply not anticipated when the BPVOY3 charter party terms and conditions were written.

The shipping industry has also undergone drastic changes in recent decades; we have seen a dramatic increase in regulations around ships and cargo, such as IMO 2020 or the IMSBC code, technological developments ranging from electronic invoices to autonomous ships and legal decisions that have taken the industry by surprise. For example, although this is not a decision on GENCON, The Kita [2005] 1 Lloyd’s Rep 432 resulted in an unexpected outcome to the litigation when the Court ruled that the treatment of hull fouling following prolonged stay in tropical waters was the responsibility of shipowners as part of their obligations of maintenance, rather than to charterers as an implied compensation for following their operating instructions. The ruling prompted a proliferation of hull fouling clauses allocating risk between contracting parties and ultimately the development of the BIMCO hull fouling clause.

These far-reaching changes not only give rise to obligations outside the scope of GENCON 1994, but also to opportunities not contemplated in the last revision. As such, there was a perceived need to recognize these superfluous requirements, as well as benefit from industry innovations. In addition, due to the granular nature of some of the regulatory instruments, there is less room to read terms implicit in the charterparty and a corresponding need to make explicit some of the assumptions that would previously have been implicit.

Room for improvement

At the same time, although GENCON has traditionally been viewed as an owners’ contract, the seemingly broad protection afforded by the owners’ liability clause (Clause 2) only applied to freight issues. In addition, an industry practice has developed of adding an overriding clause to charter parties to incorporate the Hague-Visby rules regime. Although the intention was presumably to meet the requirements of the shipowner’s P&I cover by ensuring that the terms of the charterparty were no less favorable than the Hague-Visby rules, the importation of the scheme greatly reduced the practical benefit of clause 2. For a more detailed discussion of the matter, see A very sloppy way of doing things: the Paramount clause reconsidered LMCLQ [2021] to the P. 333.Conversely, developed at a time of relative stability and before the rapid pace of change brought about by technological upheaval, GENCON 1994 offered very limited protection to shippers in the event of events beyond their control. The need for protection against foreign events has been highlighted with recent events during the development of GENCON 2022, be it the advent of COVID or the Russian invasion of Ukraine.

Global contract

As with any job, there were decisions to be made about the scope of the contract, whether prescriptive or detailed an approach to take, and the extent to which it was possible to make the contract permanent. In order to ensure that the contract is complete, it has been decided to include a number of specific BIMCO standard clauses which will reduce the need for the parties to prepare bespoke clauses. These standard clauses reflect the collaborative work and draw on the experience of a group of different representatives from across the industry, including lawyers, shipowners and chartering interests. While the particular circumstances of an arrangement may necessitate a modification of a standard clause, these clauses nevertheless provide a solid basis for the contractual framework. Although it was tempting to try to perpetuate the charterparty by referring to the most recent form of the BIMCO clause in circulation at the time of set-up, overall the benefit of certainty was felt to greater than the benefit of incorporating clauses as they are revised. the parties may not be familiar with the revised versions.

So what are the main changes?

Obligations of owners

As mentioned above, one of the main issues was retaining the Section 2 benefit while preserving the owners’ P&I coverage. Clause 2 has been extensively redrafted to provide shipowners with the full protection of the Hague Visby Rules and limits shipowners’ duty to exercise due diligence to two particular times, namely that the ship must be in a state of cargo at the start of loading and seaworthy at the start. busy trip. Changes to GENCON mean that there should no longer be a need for a general Paramount Clause as the charter party meets the minimum requirements for P&I cover.

Freight operations

The provisions regarding cargo operations in Section 4 have been consolidated and aligned with the equivalent regime under the NYPE charter party. The intention is to allow parties to benefit from the substantial body of law that has developed to clarify when cargo operations become a matter of seaworthiness for the vessel. However, the free in/free out principle has been maintained.

In terms of time permitted for cargo operations, the launching and demurrage regime is defined in a number of separate clauses, relating to the launching, at the start of the launching and operation of the launch. Building on a provision common to tanker charter parties, a new requirement has been added for cargo documents to be ready within 3 hours of completion of loading operations to improve certainty around this issue and to avoid debates on what constitutes a reasonable time.

Cancelation

There are two separate rights to cancel the charter party which are found in clause 9 and clause 14.

Clause 9 is an entirely new provision which allows charterers to cancel if, on arrival at berth, the vessel’s holds are found not to be ready and cannot be brought up to the required standard by the date of cancellation or within a specified time (96 hours is the default time), whichever is later. Although this may seem drastic, he recognizes that the fundamental nature of the obligation of shipowners to present a vessel ready to load in all respects and, if they wish to cancel, charterers must always compensate shipowners for the time spent waiting berth. Alternatively, clause 14 allows for cancellation if the vessel has not presented a valid NOR by the date of cancellation, rather than being tied to the arrival of the vessel.

Suspension and Termination

In addition to the usual cargo lien, the charterparty gives shipowners the right to suspend performance and ultimately terminate the charterparty if charterers fail to pay sums due under the charterparty within an agreed deadline. It is expected that the charterer will mitigate the risk of interference with vessel service by posting security. Charterers are also required to indemnify shipowners for any risk arising from bills of lading resulting from the exercise by shipowners of their recourse. This approach is similar to other standard clauses where charterers are required to indemnify shipowners for any risk arising from the exercise of their rights to deviate from the bill of lading contract, for example VOYWAR 2013.

Exception clause

As mentioned above, the perceived need to insulate charterers from the consequences of extraneous events affecting their contractual performance has been underscored by the events of recent years. It was obvious that there were already various tailor-made clauses dealing force majeure while other industry contracts took a slightly different approach and incorporated an exception clause. In order to enhance the protection available in the event of unforeseen events, an express exception clause has been included to exempt the parties from the consequences of a resulting breach, similar to the approach taken in ASBATANKVOY or NORGRAIN.

bills of lading

Finally, the charterparty gives charterers the right to use electronic bills of lading, waybills and delivery notes, which was seen as an important step forward in modernizing the charterparty and promoting use of electronic documents, with the advantages that electronic invoice systems offer in terms of speed of transmission of bills of lading. The CONGENBILL has also been amended to clarify that where no charterparty date is listed on the front of the invoice and there is a chain of charterparties, the incorporated charterparty is the charterparty to the voyage. . In addition, there is an express law and jurisdiction clause in the reverse terms of the bill of lading to promote consistency with the equivalent charterparty provision and to mitigate the risk of inconsistent decisions by courts and tribunals in different jurisdictions.

BIMCO Wait Time Definitions

Finally, it is important to note that the BIMCO wait time definitions have been given contractual effect in the new charter party, so those contracting on GENCON 2022 will need to familiarize themselves with these terms if they are unfamiliar with them. already.

Conclusion

Implementing the new GENCON has a number of advantages, as noted. Perhaps the most immediate practical benefit is the comprehensive nature of the document which aims to make life easier for contracting parties by including a suite of standard BIMCO clauses. There is considerable benefit in being able to adopt and adapt standard contract forms and clauses that draw on the collective experience and reflection of multiple interests. Not all developments will be in favor of charterers nor all in favor of shipowners, an inevitable consequence of a balanced contract. However, overall the 2022 GENCON is an improvement over the 1994 version for the reasons given and hopefully the industry will feel the same way.

Useful links accessible to BIMCO members

GENCON 2022 (bimco.org)

CONGENBILL 2022 (bimco.org)

Helena Biggs thanks Alan MacKinnon for his support during his time on the editorial board.

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