A New ASBATANKVOY Form Charter
The ASBATANKVOY form was first published in 1969, with minor updates in 1977. It is the oldest tanker voyage charter form in use day to day. The outstanding longevity of this charter form is testimony to the fact that the market, particularly in Asia, prefers strongly to work with what it knows.
As a charter that is now over 50 years old, the standard printed form inevitably lacks the clauses required for present-day trading and chartering conditions. It is also, when compared to newer forms, biased in the shipowner's favour. It was written on the principle that 'once a ship is on demurrage, it is always on demurrage' and provides a limited range of exceptions to protect the charterer on demurrage.
The ASBATANKVOY form also lacks the flexibility that the trade chain needs from the modern voyage charter and is out of step with modern era forms such as SHELLVOY and BPVOY and the way they commercially balance the interests of the owners and the charterer. It was the release of new charter forms by the majors – particularly BPVOY4 – which provided many of the integrated oil companies with the incentive and opportunity to cease their use of ASBATANKVOY. Its use has therefore steadily declined.
The main issue that owners and charterers face when using the ASBATANKVOY form is that it must be amended and then at least 40 – 50 additional clauses must be added as a matter of course. It is not uncommon to see over 100 clauses being added from the Standard Additional Clauses and Mandatory Additional Clauses boilerplate terms – so called MAC's and SAC's – of Owners and Charterers. Parties using ASBATANKVOY therefore have to navigate their way through a recap, the charter form (as amended), owners' additional terms and charterers' additional terms — four contractual documents — to operate the charter. Using ASBATANKVOY can feel like wading through a contractual quagmire.
However, and whilst its use day to day has significantly declined, this has not stopped ASBATANKVOY being widely used in the oil and gas trade, along with the recently released ASBAGASVOY charter produced, with BIMCO being closely based on it. One of our ship owning clients on the Greek market vigorously refuses to countenance any criticism in their use of this form.
A long awaited update of the ASBATANKVOY form is underway with that work being done by a committee formed by the owners of the form The Association of Ship Brokers and Agents (USA) Inc. (ASBA). We recently attended a luncheon in New York where we discussed the changes being made with members of the ASBA committee. We drew attention to the frequent battle ground that develops over the reachable on arrival provisions of Clause 9 and the exception that is carved out by clause 6 and the interaction with additional exception clauses and the confusion and disputes this causes. Following feedback, these provisions are now under the spotlight. Work is nearing completion. Our understanding is that the intention is to release the new form later this year.
The work being done on a new ASBATANKVOY form follows the release of ASBAGASVOY in 2020, which followed the same general lay-out and clause numbering as ASBATANKVOY. ASBAGASVOY was based on an adjustment for the LPG trade. It was not an overhaul. As one experienced analyst who attended our webinar on this form remarked, the new gas form was a disappointment because the changes were not bold enough and the form would still be held hostage to many additional clauses and the tendency for this to cause disputes. Another view was that the form provides a strong and well-known backbone for a voyage charter form to which the parties can then add the many clauses that they need and want. Amending a standard printed form is an overriding characteristic of all voyage charters.
ASBATANKVOY is an important industry contract, but we think significant changes are necessary to revive this form and bring it up to date. This is because the demand for tankers is derived from the trade chain. It is therefore the charterers who determine which form is to be used and, apart from Asia, the market in the West prefers the oil major forms. To reverse the steady move away from this form, ASBATANKVOY must attract the business of the charterers and the integrated oil companies who regularly fix ships. For this to happen, the new ASBATANKVOY form needs to be a bold step forward.
ASDEM will review the new form and provide a commentary on it as soon as ASBA tells us it is ready for release.
Return to ETERNAL BLISS – A Solution for the Dilemma Over Demurrage and Damages for Detention
At the recent LTOPs Operations Conference organised by ASDEM there was a healthy debate over the way forward following the commercially misconceived decision of the Court of Appeal in the case of The Eternal Bliss (K Line Pte Limited v Priminds Shipping (HK) Co Limited (The Eternal Bliss) [2021] EWCACiv 1712). We discussed this decision in our January 2023 newsletter.
The case concerned a cargo of soya. Soya bean cargoes go mouldy after about 12 days waiting at anchorage. Scientific research shows that there is nothing a ship owner can do to stop this from happening. It occurs without the shipowners' fault. The charterer can prevent mould damage by discharging the cargo without a long delay.
Receivers in China often delay discharge of these cargoes. Inevitably, the cargo rots. The receiver claims damages for the rotten cargo from the shipowner which it is forced to pay. Numerous claims of this type have been made, in the Chinese courts, against shipowners. One estimate is there is US$60 million in claims made. The consequence of the Court of Appeals ruling is that whilst a shipowner can claim demurrage, it cannot, in addition, recover the cost of a cargo claim caused by the delay in discharging it. In the oil industry, shipowners can be exposed to claims arising from delay – layering of cargo is possibly one of these, another which looms large is claims against shipowners for carbon emissions. These claims are not the cost of the delay, which is covered by the demurrage rate, yet are caused by the delay.
Various solutions to this problem are being considered as The Eternal Bliss case goes to the Supreme Court. As an industry, we can hope for the right result, but the possibility of the wrong result exists. The Judges making this decision are not commercial men and as the debate at LTOPS revealed; the court knows painfully little about demurrage and the way it works commercially because they do not have the benefit of expert evidence. As one shipowner pointed out, raising demurrage rates to cover the possibility of cargo claims, a solution canvassed in court, is commercially unworkable. The other possibility mentioned by the Court of Appeal was the shipowner insuring itself against such claims. This is being considered by ship owners insurers, but as yet, having spoken with them, no product is available and one seems unlikely. Despite the valiant attempts by one person to defend the Chinese receivers by pointing out the shipowner was at fault, this missed the point. The only fault was the delay in the charterers discharging the cargo. The Court of Appeal decision is a problem for both owners and their charterers and both sides of the debate need to find solutions. So what is the solution?
State what the rate of demurrage covers, and what it does not cover in the charterparty. An agreed rate compensating the owner for the cost of overtime only. The rate of demurrage pays for the cost of that time. Nothing more. A second and additional less neat, but effective solution, is to limit the time on demurrage to, e.g. 10 days, after which the delay claim becomes one for damages for detention covering trade to certain ports or for certain voyage options. Detention claims can be settled by reference to the agreed rate of demurrage, as they usually are. This is because the shipowner and charterer know it covers the cost of time. Crucially for a shipowner (or its insurers) who face a claim not covered by demurrage, this solution offers an avenue of recovering it from the charterer.
Whichever way the Supreme Court decision goes, ASDEM feels best practice is to consider the use of such provisions or ones similar to it to avoid uncertainty over what demurrage covers and does not cover once the fixture is agreed.