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Sector Insights

New BIMCO Cyber Security Clause

08.10.2019 Energy & Infrastructure

Alex  Ktorides

Alex Ktorides Partner

Alex Matheson

Alex Matheson Associate

With the increasing digitisation and use of information technology in the world today, the chance of becoming a victim of a cyber-attack is greater than ever. The energy industry is particularly susceptible as it seeks to increase the automation of processes in the interests of efficiency, safety and reducing the potential impact of human operational errors.

The potential fallout from a cyber-attack, therefore, could be devastating, resulting in damage to reputations, the environment or property, injury or death of personnel, and financial hardship to the company targeted.

Companies in the offshore oil and gas sector are, therefore, seeking to increase their resilience to such attacks; this is not only a question of strengthening the IT systems that protect the company, but also ensuring that personnel are fully trained to recognise the increasingly sophisticated tactics used by hackers.

Particular areas where operators and contractors may be vulnerable arise from the facility for offshore assets to be remotely controlled through networked systems. Whether that is a dynamically positioned drillship, or a remotely operated pipeline valve, any area where technology is used in operations is susceptible. There are particular concerns regarding the security of equipment within the sphere of the Internet of Things.

In order to regulate some of these risks between contracting parties, BIMCO has released its new Cyber Security Clause 2019. The clause broadly achieves four objectives: it sets out the cyber security arrangements that should be in place, it requires the parties to use reasonable endeavours to ensure that any third party contractors adopt the same arrangements, it contains a notification regime - which can quickly reduce and manage any risk that might arise - and it contains a standard provision to limit liability in the absence of gross negligence or wilful misconduct.

According to BIMCO’s own guidance, the intention behind its clause is threefold: (1) to raise awareness of the risk of cyber security attacks, (2) to ensure the parties have appropriate measures in place to mitigate against the risk, and (3) to manage the effects of an incident when it occurs through co-operation between the parties. It is expressly designed not to cover payment fraud since there is little that a generic clause can do to reduce the risk of this type of incident.

The standard BIMCO clause does not require cyber security insurance since the availability of different types of cyber security insurance policy can vary significantly between providers and across different jurisdictions. It is hoped by BIMCO that, although the clause does not require (or fully address) cyber insurance, it will help parties to secure affordable insurance protection based on the liability cap included in the clause. 

Article authors:

Alex Ktorides Alex Matheson