ENGThe 2011 Agreement will be of much greater benefit to Owners than Charterers as in the majority of cases it will be the head owner, not the Charterer, who will be forced to put up security to cargo interests in the first instance. This is simply because their asset, the ship, is readily (and easily) available to claimants to obtain security in multiple jurisdictions. The 2011 Agreement will potentially encourage Owners immediately to grant such security, minimising delay to the vessel, in the knowledge that they will be entitled to immediate counter security under new clause 9, or otherwise take aggressive steps against Charterers assets based upon their breach in failing to comply with the provisions of the new clause 9. Charterers should therefore think carefully before agreeing to any change in their existing charterparties and to agreeing to the incorporation of the 2011 Agreement. By agreeing such a change/adopting the new 2011 Agreement, Charterers will be exposing themselves to the need to post immediate countersecurity and giving up an argument that such a right to security does not arise until the underlying cargo claim has crystallised.
Conclusion – Club Cover
The 2011 Agreement is not favourable to charterers and should ideally contain some checks and balances that afford better protection to charterers whilst still achieving the streamlined process that the IG Clubs are seeking. By way of example we think that charterers should be protected from owners simply providing a grossly over-inflated level of security in order to obtain the prompt release of the vessel – relying on the ‘safety net’ of attempting to demand a reciprocal counter-guarantee from the charterer. We also have concerns that some owners might try to interpret the 2011 Agreement as entitling them to obtain counter security in respect of a claim which is clearly not the charterers’ responsibility under the Inter Club Agreement, for example, un-seaworthiness. We don’t believe this to be the intent and we would robustly defend any such attempt by an owner; however to avoid the potential for disputes we would prefer clarity on points such as these. We appreciate the desire of the International Group to streamline process and to reduce the attendant delays and costs and to that extent we are broadly supportive of what they are trying to achieve. We are sure that many of the charterers entered with the owners clubs will have views on this matter. For our part we would like to make more enquiries prior to giving our further views. In the interim our recommendation is that Assureds should:
Resist any attempt to retrospectively change charterparties currently in force;
On extension of any existing charterparties stipulate that it is the 1996 agreement that is to apply and NOT the 2011 agreement – see our suggested clause below:
On fixing new tonnage make it clear that it is the 1996 agreement that is to apply – see our suggested clause below.
Suggested Charterparty Clause:
“Cargo claims under this charterparty to be settled between Owners and Charterers solely in accordance with the Inter-Club New York Produce Exchange Agreement (1996) excluding any later or subsequent amendment.”
Assured that are re-letting the ship on a back to back basis can agree to the 2011 Agreement providing that this is back to back in both charterparties.
Assureds may accept the incorporation of the 2011 Agreement providing that they can demonstrate that they took all reasonable steps to avoid its incorporation. We are minded to support the 2011 agreement; but do not feel that we are in a position to do so at this stage and we will report back further when we have finished our enquiries. On a final note we would remind Assureds that as a matter of general principle P&I Underwriters, including the Charterers P&I Club and those that are members of the IG, are not obliged to provide security and that any requests for the provision of security will always be assessed on an ad hoc basis taking account of a range of different factors.
Assureds requiring more information on the above should approach their usual contact at the claims department.
Should you have any enquiry, please feel free to contact with us. Thanks.
