BIMCO’s Documentary Committee issued two charter party sanctions clauses to help owners and charterers manage due diligence policies and navigate an increasingly challenging environment of economic and trade sanctions imposed by governments.
Given the increase of sanctions the last moths, BIMCO revised, combined and replaced the existing BIMCO Designated Entity Clause and the Sanctions Clause for Time Charter Parties.
Both clauses, one for charters and the other for voyage charters, will help interested parties navigate sanction risks and could possible be the base of a company’s due diligence policy to manage those risks.
The advantage of using clauses is firstly, the ability to terminate the contract and to claim damages in limited circumstances when the counterparty and/or the third parties listed in the warranties are sanctioned.
Moreover, the clauses provide an objective test for whether an activity or person is sanctioned to avoid uncertainty about operating the clause.
Alan Mackinnon, Chief Claims Officer, UK P&I Club and chairman of the sanctions subcommittee stated that
The new BIMCO sanctions clauses are the product of many, many hours of careful thought and deliberation. It’s not possible to cover every possible sanction-related scenario in a charter party clause without being overly prescriptive, but we believe these clauses will strike the right balance for most people.
Nackinnon further commented that it was of great importance that the clauses were user friendly and straight-forward, without any difficult assessment of potential risk exposure to the parties.
Concluding, it is reported that BIMCO has chosen termination as the appropriate right in this context because that is often a breach which is incapable of being remedied. That changes however, when the performance of the charter party involves a sanctioned activity or third party. A right to change voyage orders and/or suspend performance is a more appropriate remedy when the performance involves a sanctioned activity or person.