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NYPE 2015 - Setting the new standard?

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In October 2015, the 1946 and 1993 versions of the New York Produce Exchange (NYPE) form, which is the norm for time chartering dry bulk vessels, were substantially revised. The new version comprises 57 clauses and a detailed vessel description, to bring the form in line with current industry practices and recent legal changes. The key revisions are addressed below.

Type of charter

Under Clause 1, the parties can choose between a trip or period time charterparty, under which the berths/anchorages/places of call must be safe and the parties can designate where the vessel can safely lie aground (with the owner being indemnified for any resultant losses). In the case of a period charter exceeding five months, Clause 52 sets out additional provisions, among other things stipulating that the market or charter daily hire rate (whichever is higher) applies from the latest permitted redelivery date if the vessel's last ballast/laden voyage unexpectedly exceeds that date.

Hold cleanliness

Clause 2 (as clarified by the Explanatory Notes) requires the holds to be sufficiently clean (1) to load any permissible cargo on delivery (which the Explanatory Notes envisage as involving grain cleanliness in practice, though an owner should check that a greater level of cleanliness is not required by any of the cargoes); or (2) to load the intended cargo at the first loadport (if the parties select this option instead). It interacts with Clause 10, which repeats the owner's more limited responsibility for hold cleaning in between subsequent laden voyages as set out under the 1993 form.

Delivery/redelivery notices

Under Clauses 2 and 4, after giving a delivery/redelivery notice the owner/charterer can only employ the vessel in line with the estimated place/date in its notice.

Bunkers

Clause 9 sets out three alternatives: (1) the charterer pays for the bunkers on delivery, and the owner pays for them on redelivery, at agreed quantities/prices; or (2) for a trip charter, the charterer pays for the estimated bunker consumption and pays/is paid an adjustment on redelivery; or (3) no payment is made on delivery whereas on redelivery the excess/shortfall compared with the delivery quantity is paid for by the charterer/owner (as the case may be) at the price paid for the delivery/redelivery bunkers excess. It also sets out detailed bunker quality/testing/sampling requirements, in line with modern regulations (including updated MARPOL and ISO requirements).

Whilst clause 23 deals with liens over the vessel, BIMCO’s Bunker Non-Lien Clause (which was published in November 2014, in response to O.W. Bunker's collapse, to assist owners in avoiding potential claims by third party bunker suppliers) is not included in the 2015 NYPE form. Therefore, if parties wish to include it, this would have to be way of a tailor-made addition.

Payment of hire

Clause 11 requires the owner to give three banking days' "grace period" for charterers to pay overdue hire (though, unlike before, this is not limited to non payment due to an oversight, error or omission). After that, the owner can withdraw the vessel from the charter and claim damages for the unexpired charter balance. This may be the most controversial change, as it circumvents the decision in Spar Shipping v. Grand China in [2015], pursuant to which (overruling the obiter dictum decision in The Astra in 2013) payment of hire is not a legal condition of the charter party such that an owner can only bring the charter to an end and claim damages for the unexpired charter balance if the non payment constitutes a repudiatory breach/renunciation of the charter party.

As under the 1993 form, the owner can, without prejudice to its right of withdrawal, suspend performance of the charter whilst hire is outstanding.

Speed and consumption

Clause 12 applies the vessel's speed and consumption capability warranties throughout the charter (whereas,under the previous NYPE versions, the warranties apply at the start of the charter and, during the charter, the owner maintains the vessel to retain that capability - a less onerous obligation). "Douglas Sea State" is expressed in terms of the Douglas Sea Scale, in view of continued debates about the meaning of "Douglas Sea State", and a third party assessment will bind the parties in the event of a performance dispute. The clause interacts with Clause 38 (BIMCO Slow Steaming Clause) under which the vessel must proceed at an ordered reduced speed/RPM; and with Clause 30 (BIMCO Hull Fouling Clause) which requires an underwater inspection/cleaning at the charterer’s time/expense/risk in the event of a port stay exceeding 15 days (or any other agreed period) and dis-applies the speed/consumption warranties until this is done.

Additional clauses

1.  Under Clause 6, if an oil pollution Certificate of Financial Responsibility (which the owners must maintain, as under the 1993 form) is not available in the market at the time of renewal, or the premium increases significantly during the charter, the parties must agree a solution, failing which ports requiring it are treated as excluded ports under the charter. Clause 18 adds that the owner must have oil pollution cover equal to the level offered by International Group P&I Clubs and Clause 51 requires compliance with ballast water regulations.

2.  Clause 29 imposes broader obligations on the charterer (coupled with rights given to the owner/Master) with regards to cargoes which are subject to the IMSBC Code and/or the IMDG Code - addressing concerns in recent years over cargoes that are susceptible to liquefaction.

3.  Clause 32 requires the issue of electronic bills of lading/waybills/delivery orders, if ordered by the charterer, and holds the owner harmless from any resultant liability.

4.  Clause 37 (BIMCO Stevedore Damage Clause)requires notification of stevedore damage by the owner within 24 hours of its discovery or when it should have been discovered (whereas the 1993 form stipulated 48 hours).

5.  Clauses 39, 46 and 47 (BIMCO Piracy Clause,Sanctions Clause and Designated Entities Clause) give the owner the right of refusal/an indemnity/reimbursement in the case of employment orders to transit piracy waters or which breach sanctions.

6.  Clause 54 allows a choice of U.S. law/New York arbitration; English law/London LMAA Terms arbitration; and Singapore SCMA arbitration. U.S.law/New York arbitration applies in the absence of an express choice; and English law applies in Singapore arbitration unless Singapore law is expressly chosen.

Comment

The 2015 revision brings the NYPE form up to date, in line with current industry practice, and many of its changes will be welcomed for this reason. However, some of its revisions will be controversial and it, therefore, remains to be seen if and/or to what extent it will be adopted in practice.

Jamila Khan

Jamila Khan Partner and Head of Office, Piraeus

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