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Shipman2009 Essays

SHIPMAN 2009 – EXPLANATORY NOTES 1 Comparison between SHIPMAN 2009 and SHIPMAN 98 The following table sets out a comparison between the text of SHIPMAN 2009 and SHIPMAN 98. The clauses of each agreement are laid out side by side to indicate where provisions from SHIPMAN 98 have been moved as part of the re-structuring of the agreement in SHIPMAN 2009. Notes accompany each clause explaining the reasoning behind any amendments and additions that appear in SHIPMAN 2009. Part I A comparison of the Part I box layout of SHIPMAN is not included as the format of Part I remains largely unchanged from SHIPMAN 98.
However, there are several notable changes to the box layout: Box 5 – this is a new and very important box which the parties must take great care to fill in correctly. It deals with the identity of the “Company” under the agreement for ISM/ISPS purposes. (See item on definitions below). Boxes 10, 11 and 12 – these boxes all deal with insurances under SHIPMAN 2009 and it is essential that users make a careful reading of the agreement to ensure that the proper entries are made in these boxes when optional choices of insurance are made.
Box 10 deals with crew insurance s; Box 11 with general insurance arrangements under the agreement; and Box 12 provides for the parties to agree on optional additional insurances such as K&R and F, D&D. Part II Sections For ease of reading, the revised SHIPMAN has been divided into five distinct sections each containing a specific “basket” of common provisions. In keeping with this structure the various optional services under SHIPMAN now appear as separate free-standing clauses within the “Services” section – to make it clear to the owners that they may choose any one or more of the management services offered.
The Sections are as follows: Section 1 – Basis of the Agreement Section 2 – Services Section 3 – Obligations Section 4 – Insurance, Budgets, Income, Expenses and Fees Section 5 – Legal, General and Duration of Agreement Copies of this explanatory note are also available to download from BIMCO’s website at www. bimco. org. Electronic editable copies of SHIPMAN 2009 can be obtained by subscribing to BIMCO’s online contract editing system, idea – see the products tab of www. bimco. org for more details. SHIPMAN 2009 – EXPLANATORY NOTES 2 SHIPMAN 2009 SHIPMAN 98 NOTES SECTION 1 – Basis of the Agreement 1. Definitions
In this Agreement save where the context otherwise requires, the following words and expressions shall have the meanings hereby assigned to them: “Company” (with reference to the ISM Code and the ISPS Code) means the organization identified in Box 5 or any replacement organization appointed by the Owners from time to time (see Sub-clauses 9(b)(i) or 9(c)(ii), whichever is applicable). “Crew” means the personnel of the numbers, rank and nationality specified in Annex “B” hereto. “Crew Insurances” means insurance of liabilities in respect of crew risks which shall include but not be limited to death, permanent isability, sickness, injury, repatriation, shipwreck unemployment indemnity and loss of personal effects (see Sub-clause 5(b) (Crew Insurances) and Clause 7 (Insurance Arrangements) and Clause 10 (Insurance Policies) and Boxes 10 and 11). “Crew Support Costs” means all expenses of a general nature which are not particularly 1. Definitions In this Agreement save where the context otherwise requires, the following words and expressions shall have the meanings hereby assigned to them “Owners” means the party identified in Box 2. “Managers” means the party identified in Box 3. “Vessel” means the vessel or vessels details of hich are set out in Annex “A” hereto. “Crew” means the Master, officers and ratings of the numbers, rank and nationality specified in Annex “B” hereto.
“Crew Support Costs” means all expenses of a general nature which are not particularly referable to any individual vessel for the time being managed by the Managers and which are incurred by the Managers for the purpose of providing an efficient and economic management service and, without prejudice to the generality of the foregoing, shall include the cost of crew standby pay, training schemes for officers and ratings, cadet training schemes, sick pay, study pay, recruitment and nterviews. Comment The definitions clause contains explanations of terms that are used throughout the agreement. A number of new definitions have been added to Clause 1 as a result of the amendments to the revised form. In addition, several of the existing definitions have been amended to make their meaning more clear. The definitions are now listed in alphabetical order. Defined words that appear in various clauses throughout the agreement are listed in this clause. If used only in the context of a single clause then the word will be defined in the clause itself. Among the new definitions is “Company” – a term sed in the agreement in relation to the ISM and ISPS Codes, the latter of which also features as a new definition. It is essential that users of SHIPMAN 2009 appreciate the importance of clearly identifying the “Company” from the outset of the agreement. Part I contains a new Box 5 which requires the parties to give the name and details of the “Company” for the purposes of the agreement. NOTE: this is regardless of whether the “Company” is the owners, the managers or a third party. If the Codes do not apply (e. g. , due to the size of the vessel), then “Not Applicable” (or “N/A”) should be entered into the box.
SHIPMAN 2009 – EXPLANATORY NOTES 3 SHIPMAN 2009 SHIPMAN 98 NOTES referable to any individual vessel for the time being managed by the Managers and which are incurred by the Managers for the purpose of providing an efficient and economic management service and, without prejudice to the generality of the foregoing, shall include the cost of crew standby pay, training schemes for officers and ratings, cadet training schemes, sick pay, study pay, recruitment and interviews. “Flag State” means the State whose flag the Vessel is flying. “ISM Code” means the International Management Code for the Safe Operation of
Ships and for Pollution Prevention and any amendment thereto or substitution therefor. “ISPS Code” means the International Code for the Security of Ships and Port Facilities and the relevant amendments to Chapter XI of SOLAS and any amendment thereto or substitution therefor. “Managers” means the party identified in Box 4. “Management Services” means the services specified in SECTION 2 – Services (Clauses 4 through 7) as indicated affirmatively in Boxes 6 through 8, 10 and 11, and all other functions performed by the Managers under the terms of this Agreement. “Owners” means the party identified in Box 3. Severance Costs” means the costs which the employers are legally obliged to pay to or in respect of the Crew as a result of the early termination of any employment contract for service on the Vessel. “Crew Insurances” means insurances against crew risks which shall include but not be limited to death, sickness, repatriation, injury, shipwreck unemployment indemnity and loss of personal effects. “Management Services” means the services specified in sub-clauses 3. 1 to 3. 8 as indicated affirmatively in Boxes 5 to 12. “ISM Code” means the International Management Code for the Safe Operation of Ships and for Pollution Prevention as adopted y the International Maritime Organisation (IMO) by resolution A. 741(18) or any subsequent amendment thereto. “STCW 95” means the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, 1978, as amended in 1995 or any subsequent amendment thereto. Should the registered owners of the vessel replace the organisation appointed as the “Com pany” during the course of the agreement, then any subsequently designated organisation becomes the “Company” under the agreement – bearing in mind, however, that the owners will have certain obligations under sub-clauses 9(a)(ii) and 9(b)(ii).
The added definition of the ISPS Code is consistent with the existing definition of the ISM Code in SHIPMAN 98. This has been done to bring to agreement in line with current legislative requirements of said Codes. The definition of “Crew Insurances” has been amended to include “permanent disability” in addition to “death” and “injury”. Specific reference is now made to the relevant clauses and boxes related to crew insurances. For the sake of clarity the definition has also been amended to make it clear that the insurance provided is for liabilities, not benefits. A definition of “Flag State” has been added to the greement – a previously undefined term. The definition is taken from the ISM Code. Sub-clause 4(a) refers to compliance with the law of the Flag State in respect of the technical management of the vessel. The definition of “Management Services” has been amended to include all functions performed by the managers under the agreement. This has been done because the previous definition limited the services only to those services agreed to under Clause 3 and did not take into account other services, such as SHIPMAN 2009 – EXPLANATORY NOTES 4 SHIPMAN 2009 SHIPMAN 98 NOTES “Severance Costs” means the costs which are egally required to be paid to the Crew as a result of the early termination of any contracts for service on the Vessel. “SMS” means the Safety Management System (as defined by the ISM Code). “STCW 95” means the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, 1978, as amended in 1995 and any amendment thereto or substitution therefor. “Vessel” means the vessel or vessels details of which are set out in Annex “A” attached hereto. general administration, provided under the standard agreement. “STCW 95” has had the words “or substitution therefor” added to the end of the definition.
This has been done to take account of new regulations designed to run in parallel to STCW, such as the ILO Maritime Labour Convention. 2. Commencement and Appointment With effect from the date stated in Box 2 for the commencement of the Management Services and continuing unless and until terminated as provided herein, the Owners hereby appoint the Managers and the Managers hereby agree to act as the Managers of the Vessel in respect of the Management Services. 2. Appointment of Managers With effect from the day and year stated in Box 4 and continuing unless and until terminated as provided herein, the Owners hereby appoint he Managers and the Managers hereby agree to act as the Managers of the Vessel. Comment The title of this Clause has been changed to reflect the fact that it deals with the time of commencement of the agreement as well as the appointment of the managers. In some circumstances it may not be possible to state in advance the precise day when a ship will be ready for the managers to take over – due perhaps to scheduling changes or delay in delivery of a newbuilding. To avoid this problem the reference to “day and year” has been replaced by “date”. For example, if the vessel is a newbuilding the parties an insert an agreed number of days prior to the “date of delivery”. SHIPMAN 2009 – EXPLANATORY NOTES 5 SHIPMAN 2009 SHIPMAN 98 NOTES
3. Authority of the Managers Subject to the terms and conditions herein provided, during the period of this Agreement, the Managers shall carry out the Management Services in respect of the Vessel as agents for and on behalf of the Owners. The Managers shall have authority to take such actions as they may from time to time in their absolute discretion consider to be necessary to enable them to perform the Management Services in accordance with sound ship management practice, including but not limited to ompliance with all relevant rules and regulations. 3. Basis of Agreement Subject to the terms and conditions herein provided, during the period of this Agreement, the Managers shall carry out Management Services in respect of the Vessel as agents for and on behalf of the Owners. The Managers shall have authority to take such actions as they may from time to time in their absolute discretion consider to be necessary to enable them to perform this Agreement in accordance with sound ship management practice. Comment Due to the restructuring of the service provisions under SHIPMAN into separate clauses, the preamble o the old Clause 3 has now become a clause in its own right and has been renamed “Authority of the Managers”, which more closely describes its contents. The provisions of the first sentence remain unchanged from the previous edition. They establish the fundamental principle of SHIPMAN that it is an agency agreement with the managers carrying out the functions specified in the agreement as agents for and on behalf of the owners. It is worth noting that although SHIPMAN 2009 is designed as a multi-functional management agreement, it is more appropriately used as a full management or technical management agreement.
The crewing provisions of SHIPMAN 2009, although more detailed than those of its predecessor, are not intended to replace the recommended specialist crewing agreements provided by the revised CREWMAN A and CREWMAN B contracts. This is particularly the case where the managers may wish to act as principal (and thus the crew’s employer) in providing crew – SHIPMAN 2009 is an agency only agreement and therefore not suitable for this purpose. In such cases where the managers are the crew’s employer, managers are recommended to use CREWMAN B (Lump Sum) 2009. The provisions of the second sentence of Clause 3 rovide the managers with a right to take such action SHIPMAN 2009 – EXPLANATORY NOTES 6 SHIPMAN 2009 SHIPMAN 98 NOTES or actions as they may in their absolute discretion consider necessary from time to time to enable them to perform the agreed Management Services, such actions to be in compliance with relevant laws and regulations. The wording of the original sentence has been amended for greater clarity to refer to the performance of the “Management Services” rather than the “Agreement”. Similarly, additional wording has been added to emphasise that managers must work within the parameters of applicable laws and regulations.
SHIPMAN 2009 – EXPLANATORY NOTES 7 SHIPMAN 2009 SHIPMAN 98 NOTES SECTION 2 – Services 4. Technical Management (only applicable if agreed according to Box 6). The Managers shall provide technical management which includes, but is not limited to, the following services: (a) ensuring that the Vessel complies with the requirements of the law of the Flag State; (b) ensuring compliance with the ISM Code; (c) ensuring compliance with the ISPS Code; (d) providing competent personnel to supervise the maintenance and general efficiency of the Vessel; (e) arranging and supervising dry dockings, repairs, alterations and the maintenance of the
Vessel to the standards agreed with the Owners provided that the Managers shall be entitled to incur the necessary expenditure to ensure that the Vessel will comply with all requirements and recommendations of the classification society, and with the law of the Flag State and of the places where the Vessel is required to trade; (f) arranging the supply of necessary stores, spares and lubricating oil; 3. 2. Technical Management (only applicable if agreed according to Box 6). The Managers shall provide technical management which includes, but is not limited to, the following functions: (i) provision of competent personnel to upervise the maintenance and general efficiency of the Vessel; (ii) arrangement and supervision of dry dockings, repairs, alterations and the upkeep of the Vessel to the standards required by the Owners provided that the Managers shall be entitled to incur the necessary expenditure to ensure that the Vessel will comply with all requirements and recommendations of the classification society, and with the law of the flag of the Vessel and of the places where she trades; (iii) arrangement of the supply of necessary stores, spares and lubricating oil; (iv) appointment of surveyors and technical consultants as the Managers may onsider from time to time to be necessary; Comment One of the most noticeable changes to SHIPMAN 2009 is that the provisions for optional services under the agreement have been re-structured to form individual free-standing clauses.
The order of the first two services offered under the agreement has been reversed. This has been done chiefly for presentational reasons as the primary (and most commonly used) optional service offered under the agreement is technical management and should therefore be listed first. Sub-clause 4(a) is taken from the old Sub-clause 4. 2 dealing with the managers’ obligations. As 4. 2 only pplies if the managers are providing technical management services it was felt that it was more appropriate to include the wording in the technical management services clause. Similarly, sub-clauses 4(b) and 4(c) emphasise the focus of SHIPMAN 2009 on the ISM and ISPS Codes by requiring the technical managers to ensure compliance. Sub-clause (b) replaces the former sub-clause 3. 2(v) as ISM is now considered to be an integral part of industry working practice so that almost all vessels will now have the appropriate systems in place. Sub-clause 4(h) is new to the technical management services clause. It was felt that the technical
SHIPMAN 2009 – EXPLANATORY NOTES 8 SHIPMAN 2009 SHIPMAN 98 NOTES (g) appointing surveyors and technical consultants as the Managers may consider from time to time to be necessary; (h) in accordance with the Owners’ instructions, supervising the sale and physical delivery of the Vessel under the sale agreement. However services under this Sub-clause 4(h) shall not include negotiation of the sale agreement or transfer of ownership of the Vessel; (i) arranging for the supply of provisions unless provided by the Owners; and (j) arranging for the sampling and testing of bunkers. (v) development, implementation and aintenance of a Safety Management System (SMS) in accordance with the ISM Code (see sub-clauses 4. 2 and 5. 3). 3. 6. Sale or Purchase of the Vessel (only applicable if agreed according to Box 10). The Managers shall, in accordance with the Owners’ instructions, supervise the sale or purchase of the Vessel, including the performance of any sale or purchase agreement, but not negotiation of the same. 3. 7. Provisions (only applicable if agreed according to Box 11). The Managers shall arrange for the supply of provisions. managers’ role encompassed the supervision of the sale and delivery of the vessel, rather than being a eparate optional service as in the previous sub-clause 3. 6 (Sale and Purchase of the Vessel). However, the sub-clause retains the exception that the role of the technical managers in the sale of the vessel does not extend to negotiations or transfer of ownership. The former sub-clause 3. 7 (Provisions) has been incorporated into the technical management services as this reflects actual practice whereby the managers will arrange for victualling on behalf of the owners. Finally, sub-clause 4(j) requires the technical managers to arrange for the sampling and testing of bunkers. Arranging for the supply of bunkers for the essel by the managers is dealt with in sub-clause 6(b) (Commercial Management). (See comments on sub-clause 6(b) below). 5. Crew Management and Crew Insurances (a) Crew Management (only applicable if agreed according to Box 7) The Managers shall provide suitably qualified Crew who shall comply with the requirements of STCW 95. The provision of such crew management services includes, but is not limited to, the following services: (i) selecting, engaging and providing for the administration of the Crew, including, as applicable, payroll arrangements, pension arrangements, tax, social 3.
1. Crew Management only applicable if agreed according to Box 5) The Managers shall provide suitably qualified Crew for the Vessel as required by the Owners in accordance with the STCW 95 requirements, provision of which includes but is not limited to the following functions: (i) selecting and engaging the Crew of the Vessel, including payroll arrangements, pension administration, and insurances for the crew other than those mentioned in Clause 6; Comment The crew management services section of SHIPMAN 2009 has perhaps undergone the most noticeable changes to the agreement. The main changes have been made to strengthen the crew management rovisions consistent with the CREWMAN A and B agreements. BIMCO recognises that some parties prefer to use SHIPMAN even when the agreement is only for crew management purposes, even though BIMCO recommends the use of the specialist standard crew management agreement, CREWMAN A (on an agency basis). To assist in this and also to make SHIPMAN’s crewing provisions more SHIPMAN 2009 – EXPLANATORY NOTES 9 SHIPMAN 2009 SHIPMAN 98 NOTES security contributions and other mandatory dues related to their employment payable in each Crew member’s country of domicile; (ii) ensuring that the applicable requirements of the law of the Flag State n respect of rank, qualification and certification of the Crew and employment regulations, such as Crew’s tax and social insurance, are satisfied; (iii) ensuring that all Crew have passed a medical examination with a qualified doctor certifying that they are fit for the duties for which they are engaged and are in possession of valid medical certificates issued in accordance with appropriate Flag State requirements or such higher standard of medical examination as may be agreed with the Owners. In the absence of applicable Flag State requirements the medical certificate shall be valid at the time when he respective Crew member arrives on board the Vessel and shall be maintained for the duration of the service on board the Vessel;
(iv) ensuring that the Crew shall have a common working language and a command of the English language of a sufficient standard to enable them to perform their duties safely; (ii) ensuring that the applicable requirements of the law of the flag of the Vessel are satisfied in respect of manning levels, rank, qualification and certification of the Crew and employment regulations including Crew’s tax, social insurance, discipline and other requirements; (iii) ensuring that all members of the Crew ave passed a medical examination with a qualified doctor certifying that they are fit for the duties for which they are engaged and are in possession of valid medical certificates issued in accordance with appropriate flag State requirements. In the absence of applicable flag State requirements the medical certificate shall be dated not more than three months prior to the respective Crew members leaving their country of domicile and maintained for the duration of their service on board the Vessel; (iv) ensuring that the Crew shall have a command of the English language of a sufficient standard to enable them to erform their duties safely; (v) arranging transportation of the Crew, including repatriation; (vi) training of the Crew and supervising comprehensive for when it is used for crew management purposes together with other management services, we have harmonised the crewing provisions more comprehensive by streamlining the crewing provisions of SHIPMAN 2009 with those of CREWMAN A (Cost Plus Fee) 2009. The crew services clause consolidates the crew management services provisions (Cl. 3. 1) of SHIPMAN
98 with the crew insurances provisions taken from Clause 4 (Crew Insurance Arrangements) of CREWMAN A (the 1999 edition). The latter nsurance services are optional but can only apply if crew management services have been agreed, with one exception for “persons proceeding to sea onboard” (see sub-clause 5(b)(i) and Box 10). Sub-clause (a) has been re-written to split the provision into two sentences. This has been done purely to add greater clarity. The wording of sub-clause 5(a)(i) has been expanded to make clearer the obligations on the crew managers to administer on behalf of the crew, tax, social security payments and other mandatory dues related to employment payable in the crew’s country of residence. In sub-clause 5(a)(ii) the word “discipline” has been eleted. This is because it is not clear whether the word related to grievance policies or employee disciplinary procedures – both of which would most likely be dealt with on board the vessel by the Master. SHIPMAN 2009 – EXPLANATORY NOTES 10 SHIPMAN 2009 SHIPMAN 98 NOTES (v) arranging transportation of the Crew, including repatriation; (vi) training of the Crew; (vii) conducting union negotiations; and (viii) if the Managers are the Company, ensuring that the Crew, on joining the Vessel, are given proper familiarisation with their duties in relation to the Vessel’s SMS and that instructions hich are essential to the SMS are identified, documented and given to the Crew prior to sailing. (ix) if the Managers are not the Company: (1) ensuring that the Crew, before joining the Vessel, are given proper familiarisation with their duties in relation to the ISM Code; and (2) instructing the Crew to obey all reasonable orders of the Company in connection with the operation of the SMS. (x) Where Managers are not providing technical management services in accordance with Clause 4 (Technical Management): (1) ensuring that no person connected to the provision and the performance of the their efficiency; vii) conducting union negotiations; (viii) operating the Managers’ drug and alcohol policy unless otherwise agreed One of the areas in which SHIPMAN 98 was felt to no longer reflect current practice concerns the validity of medical certificates. The previous three month validity requirement in sub-clause 3. 1(iii) has been replaced with a requirement that crew medical certificates should be valid at the time the crew member joins the vessel and remain valid for the period of service. In addition, sub-clause 5(a)(iii) introduces an option for the parties to agr ee a higher medical standard than that required by the flag state.
On the issue of working language on board the vessel, sub-clause 3. 1(iv) (of SHIPMAN 98) has been amended to emphasise that a command of the English language for every crew member is not a strict requirement (which was not the intention in SHIPMAN 98 either). The provision now clarifies that there should be a common working language on board the vessel, which need not be English. However, this is qualified by a requirement for that crew to have a sufficient command of the English language to enable them to perform their duties safely, e. g. , those who are involved in ship to ship and/or ship to shore communications.
The same would apply when more than one party provides crew members for the vessel. In sub-clause 3. 1(vi) the reference to “supervising their efficiency” in respect of the crew has been deleted. This is because, strictly speaking, the managers will not be present on board the vessel to actually supervise the crew and that that responsibility rests with the Master and officers on board. SHIPMAN 2009 – EXPLANATORY NOTES 11 SHIPMAN 2009 SHIPMAN 98 NOTES crew management services shall proceed to sea on board the Vessel without the prior consent of the Owners (such consent not to be unreasonably withheld); and 2) ensuring that in the event that the Owners’ drug and alcohol policy requires measures to be taken prior to the Crew joining the Vessel, implementing such measures; (b) Crew Insurances (only applicable if Sub-clause 5(a) applies and if agreed according to Box 10) The Managers shall throughout the period of this Agreement provide the following services: (i) arranging Crew Insurances in accordance with the best practice of prudent managers of vessels of a similar type to the Vessel, with sound and reputable insurance companies, underwriters or associations. Insurances for any other persons proceeding to sea nboard the Vessel may be separately agreed by the Owners and the Managers (see Box 10); (ii) ensuring that the Owners are aware of the terms, conditions, exceptions and limits of liability of the insurances in Sub-clause 5(b)(i); (iii) ensuring that all premiums or calls in The balance of Clause 5(a) from (viii) through to (x) deals with the responsibilities of the managers depending on whether they are or are not the “Company” for ISM purposes under the agreement or are not providing technical management services.
A distinction is made between the provision of technical management services and the “Company” because here may be circumstances where the ISM/ISPS Codes are not mandatory and thus do not apply (for example due to the size of the vessel). In such circumstances BIMCO wants to ensure that managers are not caught by ISM/ISPS related provisions by which are not be bound by law. If one or both Codes are not mandatory, then the parties will have to agree to implement one or both by amending the standard wording accordingly. Where the managers are the “Company” they are obliged by sub-clause 5(a)(viii) to ensure that the crew on joining the vessel are given proper familiarisation consistent with the requirements of the essel’s safety management system (SMS) prior to sailing. Where the managers are not the “Company” but are providing crewing services (see sub-clause 5(a)(ix)), they are obliged to instruct the crew to obey the orders of the “Company” in relation to the SMS and to ensure that the crew are given familiarisation training in respect of their ISM related duties prior to embarkation on the vessel. Sub-clause 5(a)(x)(1) applies where the managers are not providing technical management services and whether or not the ISM/ISPS Codes apply, and sub- SHIPMAN 2009 – EXPLANATORY NOTES 12 SHIPMAN 2009 SHIPMAN 98 NOTES espect of the insurances in Sub-clause 5(b)(i) are paid by their due date; (iv) if obtainable at no additional cost, ensuring that insurances in Sub-clause 5(b)(i) name the Owners as a joint assured with full cover and, unless otherwise agreed, on terms such that Owners shall be under no liability in respect of premiums or calls arising in connection with such insurances.
(v) providing written evidence, to the reasonable satisfaction of the Owners, of the Managers’ compliance with their obligations under Sub-clauses 5(b)(ii), and 5(b)(iii) within a reasonable time of the commencement of this Agreement, and of ach renewal date and, if specifically requested, of each payment date of the insurances in Sub -clause 5(b)(i). clause (1) requires the managers to get the owners’ prior consent in writing (see sub-clause 24(a)) for persons other than crew (such as superintendents, trainers or family members of the crew) to proceed to sea on board. The drug and alcohol policy provision has been amended to reflect the fact that such policies fall under the ISM Code and are therefore obligatory. The revised wording (see sub-clause 5(a)(x)(2)) now takes account of drug and alcohol testing measures that may require the crew to be tested by the anagers prior to joining the vessel. The second section of Clause 5 incorporates the optional crew insurance provisions. This sub-clause 5(b) is derived from the insurance arrangement provisions of the 1999 edition of CREWMAN A and provides an overall more comprehensive set of crew management provisions. Sub-clause 5(b) applies only if crew management services have been agreed and the parties have also agreed that the crew insurance option should apply, with one exception related to insurance “for persons proceeding to sea onboard” (see Box 10 alternative (ii) and the comments to Clause 4 of SHIPMAN 98 above.
Sub-clause 5(b)(ii) requires the managers to make sure that the owners are aware of the terms, conditions, exceptions and limitations of liability of the crew insurances. This is of particular relevance where the owners rely on the P&I type crew liability cover provided by the managers acting as crew managers. The managers’ P&I type crew liability cover will normally be restricted in scope and limits of liability SHIPMAN 2009 – EXPLANATORY NOTES 13 SHIPMAN 2009 SHIPMAN 98 NOTES (whereas an owners’ P&I crew liability cover will be incorporated in the owners’ normal P&I cover therefore enjoying not only a wider scope of cover but also the aximum limit of liability that P&I clubs usually provide). Therefore it is important that when the owners procure insurance under the provisions of Clause 10 (Insurance Policies) but have not agreed crew management and/or crew insurance services under Clause 5, they are aware of the full extent of the managers’ crew insurances. (This point is emphasised in SHIPMAN 2009 with a note in italic type in sub-clause 10(a)). Sub-clause 5(b)(v) is taken from the previous Insurances Clause because it is intended to be an option that applies only if crew management has also been agreed. This is felt by BIMCO to be a less omplex approach than in SHIPMAN 98. 6. Commercial Management (only applicable if agreed according to Box 8). The Managers shall provide the following services for the Vessel in accordance with the Owners’ instructions, which shall include but not be limited to: (a) seeking and negotiating employment for the Vessel and the conclusion (including the execution thereof) of charter parties or other contracts relating to the employment of the Vessel. If such a contract exceeds the period stated in Box 9, consent thereto in writing shall first be obtained from the Owners; 3. 3. Commercial Management (only applicable if agreed according to Box 7).
The Managers shall provide the commercial operation of the Vessel, as required by the Owners, which includes but is not limited to the following functions: (i) in accordance with the Owners’ instructions, providing chartering services which include but are not limited to seeking and negotiating employment for the Vessel and the conclusion (including the execution thereof) of charter parties or other contracts relating to the employment of Comment The preamble text to this clause has been amended to say that the provision of commercial management services by the managers is to be in accordance with the owners’ instructions.
Because the list of services in Clause 6 is not exhaustive, the actual services provided by the managers will be determined by what the owners instruct the managers to do within the provisions of what is otherwise agreed. A new sub-clause 6(b) now incorporates the arrangement of the supply of bunkers for the vessel by the managers, formally an optional service under sub-clause 3. 8 of SHIPMAN 98. SHIPMAN 2009 – EXPLANATORY NOTES 14 SHIPMAN 2009 SHIPMAN 98 NOTES (b) arranging for the provision of bunker fuels of the quality specified by the Owners as required for the Vessel’s trade; (c) voyage estimating and accounting and alculation of hire, freights, demurrage and/or despatch monies due from or due to the charterers of the Vessel; assisting in the collection of any sums due to the Owners related to the commercial operation of the Vessel in accordance with Clause 11 (Income Collected and Expenses Paid on Behalf of Owners); If any of the services under Sub-clauses 6(a), 6(b) and 6(c) are to be excluded from the Management Fee, remuneration for these services must be stated in Annex E (Fee Schedule). (See Sub-clause 12(e)).
(d) issuing voyage instructions; (e) appointing agents; (f) appointing stevedores; and (g) arranging surveys associated with the ommercial operation of the Vessel. the Vessel. If such a contract exceeds the period stated in Box 13, consent thereto in writing shall first be obtained from the Owners. (ii) arranging of the proper payment to Owners or their nominees of all hire and/or freight revenues or other moneys of whatsoever kind to which Owners may be entitled arising out of the employment of or otherwise in connection with the Vessel. (iii) providing voyage estimates and accounts and calculating of hire, freights, demurrage and/or despatch moneys due from or due to the charterers of the Vessel; (iv) issuing of voyage instructions; (v) appointing agents; vi) appointing stevedores; (vii) arranging surveys associated with the commercial operation of the Vessel. 3. 8. Bunkering (only applicable if agreed according to Box 12). The Managers shall arrange for the provision of bunker fuel of the quality specified by the Owners as required for the Vessel’s trade. For the sake of clarification in respect of the managers assisting the owners to recover unpaid hire, freight or other monies, the wording in sub-clause 6(c) has been amended from “arrangement of the proper payment” to “assisting in the collection of any sums due”. The reason for stating that remuneration for the ervices under sub-clauses 6(a), 6(b) and 6(c) can only be excluded from the management fee if expressly stated is to avoid the risk of hidden commissions, which an agent such as the manager under SHIPMAN is not permitted to earn (see sub-clause 12(e)). The parties have the choice of making remuneration for these services additional to the management fee by stating so in a new Annex “E” (Fee Schedule). SHIPMAN 2009 – EXPLANATORY NOTES 15 SHIPMAN 2009 SHIPMAN 98 NOTES 7. Insurance Arrangements (only applicable if agreed according to Box 11). The Managers shall arrange insurances in accordance with Clause 10 (Insurance
Policies), on such terms as the Owners shall have instructed or agreed, in particular regarding conditions, insured values, deductibles, franchises and limits of liability. 3. 4. Insurance Arrangements (only applicable if agreed according to Box 8). The Managers shall arrange insurances in accordance with Clause 6, on such terms as the Owners shall have instructed or agreed, in particular regarding conditions, insured values, deductibles and franchises. Comment This clause remains the same as found in SHIPMAN 98 and provides the owners with the option for the managers to arrange insurances on behalf of the wners in accordance with the insurance provisions of Clause 10 (Insurance Policies). SHIPMAN 2009 – EXPLANATORY NOTES 16 SHIPMAN 2009 SHIPMAN 98 NOTES SECTION 3 – Obligations 8. Managers’ Obligations (a) The Managers undertake to use their best endeavours to provide the Management Services as agents for and on behalf of the Owners in accordance with sound ship management practice and to protect and promote the interests of the Owners in all matters relating to the provision of services hereunder. Provided however, that in the performance of their management responsibilities under this Agreement, the Managers shall be entitled to ave regard to their overall responsibility in relation to all vessels as may from time to time be entrusted to their management and in particular, but without prejudice to the generality of the foregoing, the Managers shall be entitled to allocate available supplies, manpower and services in such manner as in the prevailing circumstances the Managers in their absolute discretion consider to be fair and reasonable. (b) Where the Managers are providing technical management services in accordance with Clause 4 (Technical Management), they shall procure that the requirements of the Flag State are satisfied and they shall agree to be ppointed as the Company, assuming the 4. Managers’ Obligations 4.
1. The Managers undertake to use their best endeavours to provide the agreed Management Services as agents for and on behalf of the Owners in accordance with sound ship management practice and to protect and promote the interests of the Owners in all matters relating to the provision of services hereunder. Provided however that the Managers in the performance of their management responsibilities under this Agreement shall be entitled to have regard to their overall responsibility in relation to all vessels as may from time to time be entrusted to their anagement and in particular, but without prejudice to the generality of the foregoing, the Managers shall be entitled to allocate available supplies, manpower and services in such manner as in the prevailing circumstances the Managers in their absolute discretion consider to be fair and reasonable. 4. 2. Where the Managers are providing Technical Management in accordance with sub-clause 3. 2(v), they shall procure that the requirements of the law of the flag of the Vessel are satisfied and they shall in particular be deemed to be the “Company” as defined by Comment With the exception of a reference to the ISPS Code in ub-clause 8(b) and a general tidying up of the language used, the provisions of Clause 8 (Manager’s Obligations) remain unchanged from those found in SHIPMAN 98. The provisions of this Clause define the managers’ obligations in carrying out the agreed services as managers. The managers are obliged to use “their best endeavours” to provide management services to the owners in accordance with “sound management practice” and to protect and promote the interests of the owners in all matters related to the provision of the services under the agreement.
The managers’ general obligation to use “their best ndeavours” should not to be taken lightly. Courts often take a fairly strict view as to what constitutes “best endeavours” and it has been said that the phrase does not mean “second best endeavours”. “Sound management practice” does not depend on what a particular manager may regard as sound. In the event of a dispute, acceptable standards of best management practice may well be heard by the testimony of each party’s industry expert. Managers may simultaneously act as managers for other vessels on behalf of other owners. The second SHIPMAN 2009 – EXPLANATORY NOTES 17 SHIPMAN 2009 SHIPMAN 98 NOTES esponsibility for the operation of the Vessel and taking over the duties and responsibilities imposed by the ISM Code and the ISPS Code, if applicable. the ISM Code, assuming the responsibility for the operation of the Vessel and taking over the duties and responsibilities imposed by the ISM Code when applicable. paragraph of sub-clause 8(a) defines the overall responsibility of the managers in relation to all vessels entrusted to their management. This important provision permits managers who are acting on behalf of a number of different owners to allocate manpower and services in a fair and reasonable manner.
In the absence of such provisions the managers would be faced with the impracticability of trying to give priority to all owners. In sub-clause 8(b) the managers are obliged to comply with applicable flag state law in the provision of services and, if they are providing technical management services, they must also agree to being designated as the “Company” for ISM/ISPS purposes. The phrase “deemed to be the Company” in SHIPMAN 98 has been replaced by “they shall agree to be appointed as the Company” as this is considered to be more appropriate language since it indicates a mutual agreement between two parties. 9.
Owners’ Obligations (a) The Owners shall pay all sums due to the Managers punctually in accordance with the terms of this Agreement. In the event of payment after the due date of any outstanding sums the Manager shall be entitled to charge interest at the rate stated in Box 13. (b) Where the Managers are providing technical management services in accordance with Clause 4 (Technical Management), the Owners shall: 5. Owners’ Obligations 5. 1. The Owners shall pay all sums due to the Managers punctually in accordance with the terms of this Agreement. 5. 2. Where the Managers are providing Technical Management in accordance with ub-clause 3. 2(v), the Owners shall: (i) procure that any officers and ratings supplied by them or on their behalf comply with the requirements of STCW 95; Comment The preamble to Clause 9 (Owners’ Obligations) contains the same important opening sentence as found in SHIPMAN 98 emphasising the importance to the managers of the timely payment of all sums by the owners. SHIPMAN 2009, however, introduces a new feature for SHIPMAN in the form of an interest charge mechanism for payments made beyond their due date. The level of interest charged is to be determined by the parties and inserted into Box 12 of Part I.
If the late payment is caused by a force majeure event (see sub-clause 17(a)), then the owners’ prompt payment following the expiry of the SHIPMAN 2009 – EXPLANATORY NOTES 18 SHIPMAN 2009 SHIPMAN 98 NOTES (i) report (or where the Owners are not the registered owners of the Vessel procure that the registered owners report) to the Flag State administration the details of the Managers as the Company as required to comply with the ISM and ISPS Codes; (ii) procure that any officers and ratings supplied by them or on their behalf comply with the requirements of STCW 95; and (iii) instruct such officers and ratings to obey ll reasonable orders of the Managers (in their capacity as the Company) in connection with the operation of the Managers’ safety management system. (c) Where the Managers are not providing technical management services in accordance with Clause 4 (Technical Management), the Owners shall: (i) procure that the requirements of the Flag State are satisfied and notify the Managers upon execution of this Agreement of the name and contact details of the organization that will be the Company by completing Box 5; (ii) if the Company changes at any time during this Agreement, notify the Managers in a timely manner of the ame and contact details of the new (ii) instruct such officers and ratings to obey all reasonable orders of the Managers in connection with the operation of the Managers’ safety management system. 5.
3. Where the Managers are not providing Technical Management in accordance with sub-clause 3. 2(v), the Owners shall procure that the requirements of the law of the flag of the Vessel are satisfied and they, or such other entity as may be appointed by them and identified to the Managers shall be deemed to be the “Company” as defined by the ISM Code assuming the responsibility for the operation of the Vessel and taking over the duties and esponsibilities imposed by the ISM Code when applicable. event will still be punctual within the meaning of this sub-clause. Sub-clause 9(b) contains a new sub-clause 9(b)(i) refining the ISM/ISPS requirements under the agreement. It requires the owners to report to the flag state administration the details of the technical managers to designate them as the “Company”. Should the owners not be the registered owners of the vessel (e. g. , the bareboat charters and therefore not the correct party to report to the flag state under the ISM/ISPS Codes) they are nevertheless obliged (under this agreement) to ensure that the registered wners make the necessary/required report to the flag state administration to ensure compliance with said Codes. Sub-clauses 9(c)(i)-(iv) deal with the owners’ obligations when the managers are not providing technical management services. It is much more extensive than the original sub-clause 5. 3. Sub-clause 9(c)(i) places an obligation on the owners to provide the managers with contact details of the organisation designated as the “Company”. These details need to be provided to the managers on execution of the agreement and must be completed in Box 5 of Part I. Any change in the “Company” during the period of he agreement is dealt with by the provisions of sub-clause 9(c)(ii) – again the managers need to be notified of the identity and contact details of the new “Company” as soon as possible after the change is made.
SHIPMAN 2009 – EXPLANATORY NOTES 19 SHIPMAN 2009 SHIPMAN 98 NOTES organization; (iii) procure that the details of the Company, including any change thereof, are reported to the Flag State administration as required to comply with the ISM and ISPS Codes. The Owners shall advise the Managers in a timely manner when the Flag State administration has approved the Company; and (iv) unless otherwise agreed, arrange for the upply of provisions, at their own expense. (d) Where the Managers are providing crew management services in accordance with Sub-clause 5(a) the Owners shall: (i) inform the Managers prior to ordering the Vessel to any excluded or additional premium area under any of the Owners’ Insurances by reason of war risks and/or piracy or like perils and pay whatever additional costs may properly be incurred by the Managers as a consequence of such orders including, if necessary, the costs of replacing any member of the Crew. Any delays resulting from the negotiation with or replacement of any member of the Crew s a result of the Vessel being ordered to such an area shall be for the Owners’ account. Should the Vessel be within an area which becomes an excluded or Sub-clause 9(c)(iii) is the second limb of the change of “Company” process and requires the owners to notify the flag state’s administration and then tell the managers when approval of the new “Company” by said authority has been granted. Sub-clause 9(c)(iv) is the reciprocal to sub-clause 4(i) (Technical Management) (of SHIPMAN 2009) requiring the owners to arrange their own supply of provisions for the vessel. As part of the expansion of the crewing provisions of
SHIPMAN 2009, sub-clause 9(d) is introduced to cover the owners’ obligations when the managers are providing crew management services. Sub-clause 9(d)(i) places an obligation on the owners to not only inform the managers if the vessel is to pass through a high risk area, but also to meet any associated costs including crew replacement costs. Sub-clause 9(d)(ii) provides for the mutual agreement of the parties to a change of flag of the vessel and the consequences of such a change to the crew managers (should they be required to make any change of personnel due to the change of flag). If the hange of flag places the managers as providers of crew in such a position that they can no longer fulfil their obligations under the agreement then either party has the right to terminate on not less than one month’s notice. Sub-clause 9(d)(iii) deals with the standard of accommodation and living standards that the owner SHIPMAN 2009 – EXPLANATORY NOTES 20 SHIPMAN 2009 SHIPMAN 98 NOTES additional premium area the above provisions relating to cost and delay shall apply; (ii) agree with the Managers prior to any change of flag of the Vessel and pay whatever additional costs may properly be incurred by the Managers as a onsequence of such change. If agreement cannot be reached then either party may terminate this Agreement in accordance with Sub-clause 22(e); and (iii) provide, at no cost to the Managers, in accordance with the requirements of the law of the Flag State, or higher standard, as mutually agreed, adequate Crew accommodation and living standards. (e) Where the Managers are not the Company, the Owners shall ensure that Crew are properly familiarised with their duties in accordance with the Vessel’s SMS and that instructions which are essential to the SMS are identified, documented and given to the Crew prior to sailing. s obliged to provide the crew. This provision has been added as part of the harmonising process with CREWMAN A (Cost Plus Fee) 2009. Sub-clause 9(e) deals with the situation where the managers are not the Company, obliging the owners to ensure that the crew are familiarised with the vessel’s SMS and their respective duties. SHIPMAN 2009 – EXPLANATORY NOTES 21 SHIPMAN 2009 SHIPMAN 98 NOTES SECTION
4 – Insurance, Budgets, Income, Expenses and Fees 10. Insurance Policies The Owners shall procure, whether by instructing the Managers under Clause 7 (Insurance Arrangements) or otherwise, that throughout the period of this Agreement: a) at the Owners’ expense, the Vessel is insured for not less than its sound market value or entered for its full gross tonnage, as the case may be for: (i) hull and machinery marine risks (including but not limited to crew negligence) and excess liabilities; (ii) protection and indemnity risks (including but not limited to pollution risks, diversion expenses and, except to the extent insured separately by the Managers in accordance with Sub-clause 5(b)(i), Crew Insurances; NOTE: If the Managers are not providing crew management services under Sub-clause 5(a) (Crew Management) or have agreed not to provide Crew Insurances separately in ccordance with Sub-clause 5(b)(i), then such insurances must be included in the protection and indemnity risks cover for the Vessel (see Sub-clause 10(a)(ii) above). 6. Insurance Policies The Owners shall procure, whether by instructing the Managers under sub-clause 3. 4 or otherwise, that throughout the period of this Agreement: 6. 1. at the Owners’ expense, the Vessel is insured for not less than her sound market value or entered for her full gross tonnage, as the case may be for: (i) usual hull and machinery marine risks (including crew negligence) and excess liabilities; (ii) protection and indemnity risks (including ollution risks and Crew Insurances); and (iii) war risks (including protection and indemnity and crew risks) in accordance with the best practice of prudent owners of vessels of a similar type to the Vessel, with first class insurance companies, underwriters or associations (“the Owners’ Insurances”); 6. 2. all premiums and calls on the Owners’ Insurances are paid promptly by their due date, Comment The insurance provisions are central to the whole operation of SHIPMAN and great care has been taken in reviewing the existing wording. In sub-clause 10(a)(i) the reference to “usual” in respect of hull and machinery marine risks has been emoved because it is already covered by the phrase “best practice of prudent owners” at the end of sub-clause 10(a). In sub-clauses 10(a)(ii) and 10(a)(iii) dealing with P&I risks and war risks, the list of risks is no longer limited to the examples given in the text because such insurances are rarely uniformly described by insurers. In sub-clause 10(a)(ii) new wording has been added to qualify the owners’ requirement to provide crew insurances. A practice has developed in ship-management whereby owners make use of the managers’ P&I type cover for crew liabilities when the manager is providing crew management services.
However, the crew liability cover that the manager can obtain may not be as wide in scope and limits of liability as the crew liability cover that owners can obtain through their P&I club entry. If the managers are providing crew and crew insurances in accordance with sub-clauses 5(a) (Crew Management) and 5(b) (Crew Insurances) then the owners need to provide cover for crew liabilities through their P&I club cover over and above the SHIPMAN 2009 – EXPLANATORY NOTES 22 SHIPMAN 2009 SHIPMAN 98 NOTES (iii) war risks (including but not limited to blocking and trapping, protection and indemnity, terrorism and crew risks); and iv) such optional insurances as may be agreed (such as piracy, kidnap and ransom, loss of hire and FD & D) (see Box 12) Sub-clauses 10(a)(i) through 10(a)(iv) all in accordance with the best practice of prudent owners of vessels of a similar type to the Vessel, with sound and reputable insurance companies, underwriters or associations (“the Owners’ Insurances”); (b) all premiums and calls on the Owners’ Insurances are paid by their due date; (c) the Owners’ Insurances name the Managers and, subject to underwriters’ agreement, any third party designated by the Managers as a joint assured, with full cover. It s understood that in some cases, such as protection and indemnity, the normal terms for such cover may impose on the Managers and any such third party a liability in respect of premiums or calls arising in connection with the Owners’ Insurances.
If obtainable at no additional cost, however, the Owners shall procure such insurances on terms such that neither the Managers nor any such third party shall be under any liability in 6. 3. the Owners’ Insurances name the Managers and, subject to underwriters’ agreement, any third party designated by the Managers as a joint assured, with full cover, with the Owners obtaining cover in respect of ach of the insurances specified in (i) above: (i) on terms whereby the Managers and any such third party are liable in respect of premiums or calls arising in connection with the Owners’ Insurances; or (ii) if obtainable, on terms such that neither the Managers nor any such third party shall be under any liability in respect of premiums or calls arising in connection with the Owners’ Insurances; or (iii) on such other terms as may be agreed in writing. Indicate alternative (i), (ii) or (iii) in Box 14 If Box 14 is left blank then (i) applies. 6. 4. written evidence is provided, to the reasonable satisfaction of the Managers, of heir compliance with their obligations under this clause within a reasonable time of the commencement of the Agreement, and of each renewal date and, if specifically requested, of each payment date of the Owners’ Insurances. cover provided by the crew managers’ liability cover (please also see comment re sub-clause 5(b)(ii) above). To emphasise this point a note in italic type has been added under sub-clause 10(a)(ii) to clarify that crew insurances cannot be agreed separately unless crew management services have been agreed and therefore the owners’ P&I crew liability cover must be able to respond fully to crew liability risks.
A reference to “blocking and trapping” in sub-clause 10(a)(iii) has been added as this feature does not normally form part of an owners’ war risks insurances. A new sub-clause 10(a)(iv) has been added to deal with additional optional insurances that the owners may want included, such as kidnap and ransom insurance and FD&D (Freight, Demurrage and Defence) cover. During the revision of SHIPMAN consideration was given to requiring the owners to have in place FD&D insurance. Although it is considered a good insurance for the owners to have, by including it in the agreement the managers would be named as co-assured. This ould preclude using the insurance for any claims by the owners against the managers as such claims between co-assureds would be excluded by the insurers. In such circumstances it would be preferable for the owners and managers to have separate FD&D cover. Consequently, if the parties wish to benefit from the protection offered by FD&D cover they should agree it as a separate insurance under the provisions of sub-clause 10(a)(iv) and by clearly stating their chosen optional insurance in Box 12. SHIPMAN 2009 – EXPLANATORY NOTES 23 SHIPMAN 2009 SHIPMAN 98 NOTES respect of premiums or calls arising in connection with the Owners’ Insurances.
In any event, on termination of this Agreement in accordance with Clause 21 (Duration of the Agreement) and Clause 22 (Termination), the Owners shall procure that the Managers and any third party designated by the Managers as joint assured shall cease to be joint assured and, if reasonably achievable, that they shall be released from any and all liability for premiums and calls that may arise in relation to the period of this Agreement; and (d) written evidence is provided, to the reasonable satisfaction of the Managers, of the Owners’ compliance with their obligations under this Clause within a reasonable time of he commencement of the Agreement, and of each renewal date and, if specifically requested, of each payment date of the Owners’ Insurances. BIMCO also discussed the issue of the criminalisation of seafarers. Although P&I Clubs often take care of matters arising out of the detention and prosecution of seafarers, this is not always the case. However, separate insurance is available on the market to cover this risk and BIMCO recommends that if the parties feel that such optional insurance is required they should agree to its inclusion under sub-clause 10(a)(iv). One particular issue that BIMCO has addressed is he use at the end of sub-clause 10(a) of the phrase “first class” in respect of the insurance companies, underwriters or association used by the owners to obtain the required insurances. In practice, it has proven very difficult to define what constitutes “first class”. The phrase chosen to replace “first class” is “sound and reputable”. In most countries “sound” means that the company has a good financial standing. “Reputable” could be taken to mean that the company appears on sound broker’s approval lists. Sub-clause 10(c) deals with naming the managers as a joint assured, with full cover, on the owners’ nsurance policies. The terms of cover are no longer listed as three options and it is recommended that users carefully read the revised clause in this respect. The provision now consolidates the previous sub-clause 6. 3 to reflect current industry practice in terms of what is practically achievable in respect of insurance. By way of a warning, the second sentence of 10(c) SHIPMAN 2009 – EXPLANATORY NOTES 24 SHIPMAN 2009 SHIPMAN 98 NOTES now emphasises that by being named as a joint assured on the owners’ P&I cover the managers are likely be exposed to liability for premiums or calls on the owners’ insurances.
Sub-clause 10(d) attempts to counter the managers’ potential liability for premiums and calls under sub-clause 10(c) by requiring the owners to arrange with their insurers that no such liability will arise for the managers – provided this can be done at no additional cost to the owners. The practical reality, certainly as far as P&I clubs (within the International Group) are concerned, is that they reserve the right to demand premiums or calls from joint assureds and will not take into account any contractual arrangement between owners and managers to the contrary. Another issue that has been given careful onsideration by BIMCO is the risk to the managers of having to pay release calls on an owners’ insurance after the termination of the agreement, due to the owners’ default. The particular scenario considered was that a manager named as joint assured on owners’ insurance could be liable for calls even after a management agreement has ended if the owner subsequently leaves the P&I Club but is unable or refuses to pay the release call. As release calls cannot be quantified until the vessel is released from the Club, the managers have a potential open ended exposure until the policy year is closed.
While it is possible to insure against the risk of the managers being exposed to liability for premiums or calls, it is recognised that such insurance can be SHIPMAN 2009 – EXPLANATORY NOTES 25 SHIPMAN 2009 SHIPMAN 98 NOTES prohibitively expensive. In terms of liability for premiums and calls after the termination of the agreement, sub-clause 10(c) no longer refers to the owners getting the underwriters to release the managers from future liability for premiums and calls since it is recognised that it is not possible for the owners to get underwriters to agree such a release. However, recognising that some mechanism may be vailable to achieve this result under certain circumstances, the clause has been amended to require the owners to release the managers from future liability “if reasonably achievable”. This is intended to avoid the owners having to achieve what may be impossible or prohibitively expensive. If this is an area of real concern to a manager when concluding an agreement with an owner then BIMCO strongly recommends that the managers make appropriate arrangements to cover the potential risk. 11. Income Collected and Expenses Paid on Behalf of Owners (a) Except as provided in Sub-clause 11(c) all monies collected by the Managers under the erms of this Agreement (other than monies payable by the Owners to the Managers) and any interest thereon shall be held to the credit of the Owners in a separate bank account. (b) All expenses incurred by the Managers under the terms of this Agreement on behalf of the Owners (including expenses as provided in Clause 12(c)) may be debited against the Owners in the account referred to under Sub-7. Income Collected and Expenses Paid on Behalf of Owners 7. 1. All moneys collected by the Managers under the terms of this Agreement (other than moneys payable by the Owners to the Managers) and any interest thereon shall be eld to the credit of the Owners in a separate bank account. 7. 2. All expenses incurred by the Managers under the terms of this Agreement on behalf of the Owners (including expenses as provided in Clause 8) may be debited against the Owners in the account referred to under sub-clause 7. 1 Comment A new Sub-clause 11(c) has been added to this provision to clearly identify the bank account in to which the managers should pay monies collected under the optional commercial management provisions of Clause 6. SHIPMAN 2009 –
EXPLANATORY NOTES 26 SHIPMAN 2009 SHIPMAN 98 NOTES clause 11(a) but shall in any event remain ayable by the Owners to the Managers on demand. (c) All monies collected by the Managers under Clause 6 (Commercial Management) shall be paid into a bank account in the name of the Owners or as may be otherwise advised by the Owners in writing. but shall in any event remain payable by the Owners to the Managers on demand. 12. Management Fee and Expenses (a) The Owners shall pay to the Managers an annual management fee as stated in Box 14 for their services as Managers under this Agreement, which shall be payable in equal monthly instalments in advance, the first instalment (pro rata if appropriate) being ayable on the commencement of this Agreement (see Clause 2 (Commencement and Appointment) and Box 2) and subsequent instalments being payable at the beginning of every calendar month. The management fee shall be payable to the Managers’ nominated account stated in Box 15. (b) The management fee shall be subject to an annual review and the proposed fee shall be presented in the annual budget in accordance with Sub-clause 13(a). (c) The Managers shall, at no extra cost to the Owners, provide their own office accommodation, office staff, facilities and stationery. Without limiting the generality of this 8. Management Fee 8. . The Owners shall pay to the Managers for their services as Managers under this Agreement an annual management fee as stated in Box 15 which shall be payable by equal monthly instalments in advance, the first instalment being payable on the commencement of this Agreement (see Clause 2 and Box 4) and subsequent instalments being payable every month. 8. 2. The management fee shall be subject to an annual review on the anniversary date of the Agreement and the proposed fee shall be presented in the annual budget referred to in sub-clause 9. 1. 8. 3. The Managers shall, at no extra cost to the Owners, provide their own office ccommodation, office staff, facilities and stationery. Without limiting the generality of Clause 7 the Owners shall reimburse the Managers for postage and communication expenses, travelling expenses, and other out Comment The title of this Clause has been changed to “Management Fee and Expenses” to more closely reflect its content. Sub-clause 12(a) now clarifies that if the first instalment under the management agreement is not for a full month then a pro rata payment may be required. Further clarity is added by reference to the requirement by the owners to pay instalments at the “beginning” of each month.
Finally, a new last entence in sub-clause 12(a) requires the details of the managers’ bank account into which the monthly fee should be paid, to be stated in Box 15. In sub-clause 12(b) it has been clarified that the management fee is to be reviewed annually but not necessarily on the anniversary date as in practice such reviews actually take place either at the end of the calendar or fiscal year Sub-clause 12(c) introduces a new feature dealing SHIPMAN 2009 – EXPLANATORY NOTES 27 SHIPMAN 2009 SHIPMAN 98 NOTES Clause 12 (Management Fee and Expenses) the Owners shall reimburse the Managers for postage and communication expenses, ravelling expenses, and other out of pocket expenses properly incurred by the Managers in pursuance of the Management Services. Any days used by the Manager’s personnel travelling to or from or attending on the Vessel or otherwise used in connection with the Management Services in excess of those agreed in the budget shall be charged at the daily rate stated in Box 15. (d) If the Owners decide to lay-up the Vessel and such lay-up lasts for more than the number of months stated in Box 16, an appropriate reduction of the Management Fee for the period exceeding such period until one month before the Vessel is again put into ervice shall be mutually agreed between the parties. If the Managers are providing crew management services in accordance with Sub-clause 5(a), consequential costs of reduction and reinstatement of the Crew shall be for the Owners’ account. If agreement cannot be reached then either party may terminate this Agreement in accordance with Sub-clause 22(e). (e) Save as otherwise provided in this Agreement, all discounts and commissions obtained by the Managers in the course of the performance of the Management Services shall be credited to the Owners. of pocket expenses properly incurred by the Managers in pursuance of the Management
Services. 8. 4. In the event of the appointment of the Managers being terminated by the Owners or the Managers in accordance with the provisions of Clauses 17 and 18 other than by reason of default by the Managers, or if the Vessel is lost, sold or otherwise disposed of, the Management Fee payable to the Managers according to the provisions of sub-clause 8. 1, shall continue to be payable for a further period of three calendar months as from the termination date. In addition, provided that the Managers provide Crew for the Vessel in accordance with sub-clause 3. 1: (i) the Owners shall continue to pay Crew
Support Costs during the said further period of three calendar months and (ii) the Owners shall pay an equitable proportion of any Severance Costs which may materialize, not exceeding the amount stated in Box 16. 8. 5. Whilst this Agreement remains in force, if the Owners decide to lay-up the Vessel and such lay-up lasts for more than three months, an appropriate reduction of the Management Fee for the period exceeding three months until one month before the Vessel is again put into service shall be mutually agreed between the parties. with travelling days used by the managers’ personnel in relation to the provision of services.
The new final sentence places no limit on the number of days spent by the manager’s personnel visiting the vessel, but applies an agreed daily rate to any days used in excess of those agreed in the budget. The daily rate feature is designed to ensure that the managers’ personnel are not committed to one vessel for excessively lengthy periods of time. The termination provision formerly in sub-clause 8. 4 has been moved to Clause 22 (Termination) as part of the consolidation of all the termination provisions of the agreement into one clause. The lay-up provisions of sub-clause 12(d) have been mended to make them consistent with CREWMAN. The number of months before a reduction in the management fee has to be discussed is now to be stated in Box 17 (previously it was fixed at 3 months). It is therefore important that the parties agree on a number of months for the layup period and enter it into Box 17. The second sentence of sub-clause 12(d) is new and provides each party with the right to terminate the agreement if they cannot agree on costs related to the reduction and re-instatement of the crew (if provided by the managers). Sub-clause 12(e) dealing with discounts and commissions obtained by the managers remains nchanged from the original SHIPMAN 98, sub-clause 8. 6. SHIPMAN 2009 – EXPLANATORY NOTES 28 SHIPMAN 2009 SHIPMAN 98 NOTES 8. 6. Unless otherwise agreed in writing all discounts and commissions obtained by the Managers in the course of the management of the Vessel shall be credited to the Owners. 13. Budgets and Management of Funds (a) (a) The Managers’ initial budget is set out in Annex “C” hereto. Subsequent budgets shall be for twelve month periods and shall be prepared by the Managers and presented to the Owners not less than three months before the end of the budget year. (b) The Owners shall state to the Managers in

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