A newly set-up BIMCO drafting team involving a cross-section of shipowners, charterers, financing and leasing institutions and private practice lawyers from Asia, Europe and the US began work to develop a standard letter of quiet enjoyment (LQE) for use in long term charter and leasing structure financings.
There is currently no standard form of LQE available in the market and while LQEs have long been a feature of ship financing transactions, the lack of a standard form means that the wording of an LQE may often vary significantly from one transaction to another.
In most cases, an LQE will be beneficial to all parties involved, namely by preserving the charterers’ uninterrupted use and enjoyment of a ship – and thereby ensuring a regular income for the owner, as well as an opportunity for the lenders to secure rights of their own.
By bringing together all the relevant stakeholders, we are planning to develop a balanced standard that can be used in various types of structures, as always with the possibility of the parties tailoring it to their specific needs
says Catherine Smith of Hong Kong based Wah Kwong, who is chairing the drafting team.
At its first meeting on 7-8 September, the drafting team in charge of the project discussed the scope and objectives of the project. The overall aim is to develop a standard that is workable both for time and bareboat charter contexts as well as leasing.
Several versions might be developed, namely in the form of unilateral and multilateral party LQEs. The standard will not cater for more complex project financings and similar structures as these will typically be very deal specific and therefore have to be tailormade.
The drafting team will continue its work on 24-25 October.
