BIMCO’s new IOCD Clause focuses on keeping the trade going and avoiding further supply chain issues
The revision was prompted by the COVID-19 pandemic. However, the clause is not intended to be a “COVID-19 clause” – it is designed with future epidemics and pandemics in mind.
The BIMCO IOCD Clause 2022 is appropriate for outbreaks of diseases on a pandemic scale like COVID-19, and outbreaks at a regional level, such as the Ebola virus epidemic in West Africa in 2014-2016.
In undertaking this revision, BIMCO has focused on a balanced approach to risk allocation. In particular, the clause focuses on keeping the contract going, which will help avoid potentially costly disputes and supply-chain disruptions.
Natalya Adamantia Skjelmose of Norden and chairperson of the drafting committee explained the objectives of the revision. “Our main goal was to develop a clause that reflects commercial realities, is balanced with protecting owners’, operators’ and charterers’ interests and offers workable and practical solutions and keeps the trade continuing.”
Julius Posselt of Oldendorff was also a member of the committee, and added “One of the main commercial problems for the industry we have seen when it comes to pandemics are delays caused by quarantines etc.”. He emphasised that the committee focused on precisely this and made sure that the revised clause has a well-balanced allocation of liability reflecting the nature of a time charter party.
Infectious or contagious diseases on a pandemic or epidemic scale are likely to continue to confront and challenge the maritime sector and BIMCO provides contractual tools to tackle such challenges
What we learned from the COVID-19 pandemic is that although mortality rates from the virus were relatively low per head of population, the social impact on the movement of people was significant. What is unknown is whether future pandemics will be of a similar nature or if it will be more life threatening, like Ebola.
The clause is therefore drafted on the premise that not every disease will be life-threatening and that the risk of crew infection can, in many cases, be avoided by taking measures to protect the crew and avoid the spread of the disease. It is based on three key principles:
- The owners’ measures to protect the crew;
- The allocation of liability for delays; and
- The owners’ right to refuse the charterers’ orders.
- The clause assumes that the charterers have control over the ship and determine which ports to go to, with the owners under the obligation to follow those orders. This means that for a time charter party, the liabilities and responsibilities can be amended by the parties recognising that the owners will know the ports at which the ship will call.
The new clause thus focuses on preventative measures which are appropriate to both the contracting parties’ interests.
The BIMCO IOCD Clause for Time Charter Parties 2022 has been developed by a team comprised of owners, charterers, P&I clubs and legal experts from NORDEN, Oldendorff Carriers, Vale, ENI, West and the Swedish Club.