Although the Hong Kong Convention on the Recycling
of Ships is not yet in force, there are a number of shipowners who are already
seeking recycling yards with “green” credentials where their ships can be
dismantled in an environmentally safe manner. The RECYCLECON contract
voluntarily incorporates many of the requirements of the Convention such as the
Inventory of Hazardous Materials and the Ship Recycling Plan. It provides a practical
contractual solution for commercial parties and a useful stepping stone towards
Convention requirements in the interim period before the Convention comes into
force.
In view of the fact that much of the administrative
infrastructure required under the Hong Kong Convention is not yet in place,
RECYCLECON incorporates a number of commercial “work-rounds” to take care of
certain procedural and certification requirements to be consistent with the
objectives of the Convention.
As RECYCLECON is effectively a sales contract it
shares similar characteristics to SALEFORM. In developing the contract BIMCO
has incorporated provisions from the newly published SALEFORM 2012 where appropriate to the recycling business.
Where there are differences in approach or in documentary or other requirements
between RECYCLECON and SALEFORM, this has been done to reflect current industry
practice. It should be noted that for recycling purposes vessels are accepted
on the basis of detailed vessel descriptions – physical inspections are rarely,
if ever, conducted prior to the sale.
One of the major challenges to the widespread
adoption of RECYCLECON comes not from commercial restraints but from the
reluctance of some States (particularly in Europe )
to permit vessels beneficially owned in their countries to be sold for
recycling to developing countries. The IMO Secretariat has been particularly helpful in addressing this important issue by offering
assistance to explain to States that the objective of RECYCLECON is to provide
a workable voluntary commercial “green recycling” solution in the interim
period leading up to the Convention coming into force.
The following notes outline how RECYCLECON deals
with some specific aspects of the Hong Kong Convention:
Beaching:
Like the Hong Kong Convention,
RECYCLECON does not expressly exclude beaching but is simply silent on the
matter.
At present few of the major recycling states have
facilities that do not require the vessel to be beached for breaking up, and
this position is unlikely to change in the near future. So while RECYCLECON
does not endorse or encourage beaching, it is left to the parties to reach
mutual agreement on the issue and to amend the contract as necessary.
Ship Recycling Facility Plan (SRFP):
In accordance with the Hong Kong Convention, every
Ship Recycling Facility has to have a Ship Recycling Facility Plan (SRFP) in
place before it can get licensed as a “green” recycling yard. Although the official (state/government) approval
process will not be in place during the interim period, a prudent seller should
try to ensure that the Ship Recycling Facility has a SRFP in place. RECYCLECON provides for the sellers to
request a copy of the SRFP or an attestation that the yard has a SRFP in place.
It also allows the sellers to visit the yard to review the plan and verify that
the yard is compliant with the SRFP.
Inventory of Hazardous Materials (IHM)
The Hong Kong Convention requires the sellers to
provide the buyers with an Inventory of Hazardous Materials. While some yards
require Part I of the Inventory before giving a price quote on the cost of
recycling, other yards calculate the price based on vessel type and age.
RECYCLECON provides useful guidelines for the parties as to the appropriate time
for the sellers to provide the buyers with the Inventory (i.e. as soon as
possible after the date of the contract and latest upon delivery of the
vessel).
Ship Recycling Plan:
Once the yard has received the Inventory of
Hazardous Materials, they will issue a plan for the recycling of the vessel, the
Ship Recycling Plan. The contract gives the sellers with a right to visit the
yard to verify that the yard complies with this plan (i.e. that they are able
to carry out the recycling operation in a safe and environmentally sound manner
as set out in the Ship Recycling Plan). If the yard is not carrying out the
recycling process in accordance with the plan, the sellers will have a right to
claim damages.
Statement of Completion:
Once recycling has been completed the Ship
Recycling Facility is obliged to notify the relevant government authorities by
issuing a Statement of Completion. As with the Ship Recycling Facility Plan,
the state/government infrastructure is not yet in place to deal with such
information. For this reason, RECYCLECON requires the yard
to provide the shipowners with the Statement of Completion.
*************
The Drafting Team:
RECYCLECON was drafted by a team of industry
representatives with particular expertise in and experience of recycling ships
in an environmentally responsible manner. BIMCO is indebted to the following
individuals who devoted a great deal of their valuable time and energy to this
valuable project:
- Mr. Robert
Almström,
- Mr. Dimitris Ayvatoglu,
Leyal Ship Recycling Ltd,
- Mr. Wouter
Rozenweld, formerly of Maersk Ship Management, The Netherlands (now
Sea2Cradle)
- Mr. Henrik
Aadnesen, NORDISK,
- Mr. Briac Beilvert,
formerly of Eckhardt Marine
During the latter stage of development of
RECYCLECON the group was joined by Dr. Nikos Mikelis of the IMO Secretariat who
provided invaluable input and advice as to how certain key features of the Hong
Kong Convention could be incorporated into a commercial agreement bearing in
mind that much of the administrative infrastructure required by the Convention
is not yet in place.
Explanatory Notes:
The following notes are designed to provide readers
with a background to the thinking behind RECYCLECON and an explanation of the
intention of each clause.
Part I Box Layout:
Part I of RECYCLECON follows the usual BIMCO box
layout pattern providing a number of boxes which the parties must complete in
order to conclude the contract – such as the names of the parties and basic
vessel/delivery details. The contract also contains a number of supplementary
annexes which are referred to at the end of these notes.
Part II Terms and Conditions:
Part II of the contract begins with a preamble
outlining the purpose of the agreement, i.e. the sale of the vessel for recycling
in a safe and environmentally sound manner. Furthermore it includes an
undertaking that such recycling will be carried out in a manner consistent with
international and national law.
Clause 1 (Definitions):
The contract contains a number of defined terms
which appear in various clauses throughout the contract and which are listed in
Clause 1 for easy reference. It should be noted that these definitions are used
to define words and phrases for the purposes of the contract and are not
“legal” definitions. The definitions are important to the understanding of the
agreement and the key definitions are described below.
“LDT” is the
light displacement tonnage in tons. It should be noted that it should be stated
in Box 11
“Contractual Weight”
is a new concept, which has been created to allow for common deductions from
the light displacement tonnage (LDT) for permanent ballast and other weight
deductions, for instance waste. The purchase price will be based on the
contractual weight.
“Recycling” incorporates the definition of “Ship
Recycling” from the IMO Hong Kong International Convention for the Safe and
Environmentally Sound Recycling of Ships, 2009.
“Ship Recycling Facility”, “Ship Recycling Facility
Plan” and “Ship Recycling Plan” are all
Convention requirements, which have been thoroughly explained in relevant
guidelines adopted by the IMO. However, during the interim period the wording
of the Convention and the guidelines cannot be strictly applied, which means
that the definitions in this Clause and the use of the Convention terminology
throughout the entire contract is applied in a way that is consistent with
current commercial practice. An example of this is the reference to “authorised
site, yard or facility” in the definition of “Ship Recycling Facility”. Because
the state infrastructure for authorising recycling yards is not expected to be
in place during the interim period the reference to “authorised” is simply an indication
that the yard has to follow the IMO guidelines and the obligations under the
Convention, as far as this is appropriate and workable. This means that the
level of compliance with the Convention requirements will depend on the level
of infrastructure at the particular place of recycling.
Clause 2 (Outright Sale
This Clause emphasises that the sale of the vessel
is not subject to inspection and is based entirely on the detailed vessel
description found in Annex A (Vessel Details) as well as the description of the
vessel in Part I.
A pre-contractual inspection is normally carried
out because of waste material and inventory checking and for making a proper
description of the vessel. Unlike SALEFORM, the inspection in a green recycling
scenario is not part of the approval process, but will be carried out in
advance of agreeing to the contract.
Therefore, no reference to such inspection has been included in the contract.
Clause 3 (Purchase Price):
As mentioned under Clause 1 (Definitions), the purchase
price is linked to the “Contractual Weight” which is derived from the light
displacement tonnage, LDT. The price will be set out by the parties in Box 12
It is important to note that, unless agreed
otherwise, the purchase price is payable in United States Dollars.
Clause 4 (Deposit)
This Clause provides the Sellers with monetary
security for the due fulfilment of the contract in the form of a deposit lodged
by the Buyers into an account in the bank agreed in Box 14
Setting up a joint bank account can be a time
consuming process, in particular in the light of burdensome money laundering
legislation that require both parties to provide all the necessary
documentation in order to comply fully with the relevant regulations. It should
therefore be noted that it may take longer than 5 days to set up a joint account.
Consequently, the parties should be aware of possible delays and adjust the
figure if necessary to avoid problems if the deposit cannot be paid on time.
In respect of the payment of interest, it needs to
be agreed between the seller and the buyer as to how this is done.
An example could be that the interest is paid as a deduction
from the sales price.
Sub-clause 4 (d) sets out that costs (fees and
charges) of establishing and holding the deposit should be shared equally between
the Sellers and the Buyers.
In accordance with normal practice, the deposit
should be free of bank charges.
Clause 5 (Payment):
On delivery of the vessel the Buyers are obliged to
release to the Sellers the deposit mentioned in Clause 4 (Deposit) along with
the balance of the agreed purchase price. Again here, the payment should be
free of bank charges.
To allow for sufficient time for the banking
process to transfer funds, the Clause sets out that payment should be received
not later than three days from the tendering of the Notice of Readiness.
If the NOR is invalid because the vessel is
physically not ready for delivery, it will be void and the Buyers will not be obliged
to pay until the Sellers have tendered a valid NOR. It is important to note
that there is no requirement for a formal acceptance of the NOR by the Buyers.
Clause 6 (Documentation):
In exchange for the payment of the purchase price
the Sellers are obliged to provide the Buyers with a wide range of documents,
as listed in this Clause. These documents are to be delivered at the place of
closing and they should be in the English language or accompanied by a
certified English translation.
The types of documents and the number of copies
requested reflects what is commonly required in the trade without being
specific to any one country. Before agreeing to the terms and conditions, the
parties should ensure that it will be possible for them to comply with the types
of documents requested and within the time frame given – otherwise the
requirements should be adjusted to suit their circumstances. The same applies
to the documents mentioned in Clause 8 (Notice of Readiness for Delivery).
With regards to sub-clause 6(c) it has been duly
considered whether a reference to liens should be included. However, not all
registers include this in their certificate/transcript of registry and adding
such a requirement could therefore place an undue burden on the Sellers.
Clause 7 (Advance Notices of Arrival):
This Clause sets out pre-determined notices of 15,
10, 7 and 3 days before the expected time of arrival of the vessel, which the
parties can amend if they so wish. The notices provide the Buyers with a
running estimate of when they should be ready to receive the vessel. This is
particularly important for the Buyers and/or the Ship Recycling Facility in order
to have in place necessary arrangements concerning mooring, personnel and
relevant safety procedures.
Clause 8 (Notice of Readiness for
Delivery):
The terminology of delivery has been thoroughly
examined with a view to whether it would be more suitable to refer to
“physical” delivery, rather than “delivery”. Investigations of standard
practice have shown that the term ‘physical delivery’ is often the preferred
term within the sale and purchase industry, which was also the reason why it
was specified in SALEFORM 93 that the vessel should be physically ready for
delivery.
That the vessel has to be “physically ready for
delivery” means that the physical parts of the vessel must be ready for delivery
but that a valid notice of readiness can be tendered even though the
documentary requirements have not yet been fulfilled. However, it is important
to note that arrangements would have to be in place so that the relevant certificates
could be produced within a short time frame, for instance later the same day.
This approach to delivery is seen to strike a fairer balance between the
Sellers and the Buyers as well as avoiding unnecessary delay, as the Sellers would
otherwise be obliged to have in hand all certificates and documents required
for exchange at the place of closing already at the time when the notice of
readiness is tendered.
The practical effect of tendering notice of
readiness (NOR) is that it is given in good faith by the Sellers and that the Buyers
must accept it. However, since it is common practice in sale and purchase
transactions to require acceptance of the NOR, Clause 8 states that the Buyers
must either accept the NOR or give a reasoned rejection of it within one banking
day. If the Buyers do not react within the given time frame, the NOR will be deemed
accepted and the right to reject the NOR has been lost. It is important to note
that this provision does not make payment conditional upon acceptance of the
NOR – if this was to be done the Buyers could simply reject the NOR and never
be obliged to pay.
As with Clause 6, the documents listed in this
Clause reflects the documents commonly required in the trade without being
specific to any one country. It is known that some countries will request to
see both the original trim and stability booklet, meaning the first booklet
produced for the vessel at the time when it was built, and the current valid booklet.
However, considering that the more up-to-date booklet, i.e. the valid booklet,
would be the preference in most circumstances and that it may be very difficult
for the Seller to track down old booklets, Sub-clause 8(a) provides for the
Sellers to arrange for a surveyor certificate based on the valid trim and
stability booklet.
The certificate required under Sub-clause 8(b), stating
that the vessel, including cargo tanks, pump rooms and cofferdams, is safe for
entry and safe for hot work, deliberately sets a higher standard than what is
required by the Hong Kong Convention.
Following the wording of the Convention the parties can choose between the two
options, either safe for hot work or merely safe for entry. BIMCO and the
drafting group is in favour of promoting the “greener” version, i.e. both safe
for entry and for hot work, but it is acknowledged that this is a negotiation
point between the parties because standard practice differs from area to area.
Clause 9 (Delivery):
It is the intention that delivery takes place
alongside at the yard rather than at anchorage. However, the contract does not
expressly exclude beaching but merely stays silent on the matter in the same
way as the Hong Kong Convention. It is recognised that at present only few of
the major recycling states have facilities that do not require the vessel to be
beached for breaking up. This position is unlikely to change in the near future
so while the contract does not endorse or encourage beaching it has been left
to the parties to reach mutual agreement on the issue and to amend the agreement
as appropriate.
The contract provides for the parties to agree to
the operational condition of the vessel at the time of delivery and to place
such information into Annex A (Vessel Details). If this is not done, the
Sellers are obliged to deliver the vessel in a standard seagoing condition
within the requirements set out in Sub-clause 9(a).
If the place of delivery is inaccessible at the
time of delivery the Buyers have a right to nominate another safe place, provided
that this can be approved by the Sellers (approval not to be unreasonably
withheld). If the Buyers fail to nominate such safe place within a time frame
on 24 hours, the Sellers have a right to deliver the vessel at a place where it
is customary for vessels to wait following which the Sellers will be relieved
from their obligations.
Expenses are shared equally between the parties
with the Sellers being responsible for all expenses incurred prior to delivery
of the vessel, while expense incurred after delivery will be for the Buyers’
account. Further to this, the vessel will stay at the Sellers’s risk and
expense until it has been delivered to the Buyers.
Sub-clause 9(f) states that the vessel is to be
delivered without any stowaways, contraband or arms and ammunition on board.
This wording has been included to align RECYCLECON with the recent revision of
SALEFORM. The problem arises in practice where such persons or goods are on
board without the knowledge of the Sellers. Consideration was given to whether
the Buyers should be given an express right to reject the vessel if, for
instance, stowaways are on board.
However, it was decided that such a position would be too prescriptive because
it could create uncertainly as to whether the Buyers would be entitled to
reject the vessel altogether or whether they would be obliged to accept the
vessel when the stowaways had been removed by the Sellers. It should therefore
be noted that this sub-clause merely governs the condition of the vessel upon
delivery and that it has not been made a condition of the contract that no
stowaways, contraband or arms and ammunition are on board.
Clause 10 (Earliest Date of
Delivery/Cancelling Date):
This Clause deals with the event that it becomes
clear to the Sellers that the vessel will not be ready for delivery by the cancelling
date agreed by the parties and set out in Box 18
This approach to delivery reflects current practice
in sale and purchase. The reason for having such a Clause in the contract is to
relieve the Sellers from their obligation to proceed to the place of delivery
even though they will arrive after the agreed cancelling date. It also provides
the Buyers with an “early warning” of a delay to the vessel’s delivery.
If no such provision was included in the agreement,
the Sellers would be obliged to proceed towards the place of delivery until the
passing of the cancelling date and await cancellation by the Buyers. The
provision provides the Sellers with a possibility of mitigating costs while
arranging for the vessel to be recycled at a different yard and/or sold to
another interested Buyer.
Clause 11 (Post-Delivery Assistance):
If delivery takes place alongside at the recycling
yard, post-delivery assistance will not be required. However, as the contract
does not completely preclude beaching, this provision has been included to
ensure that the parties consider the issue. As is the case today, only a
limited number of yards have the capacity to recycle vessels without beaching and
therefore post-delivery assistance is provided in most instances.
The parties need to establish the extent of the
post-delivery assistance, including reaching agreement on the period of assistance
and the daily costs, which are to be stated in box 19
It is important to note that the Buyers’ request
for post-delivery assistance must be reasonable and is always subject to the
Sellers being able to arrange for appropriate crew as well as being able to
obtain the necessary crew insurance cover for such additional period. The crew
insurance part of P&I cover will normally extend to the crew even after delivery
has taken place, but for a short time only. Therefore the clause emphasises the
need for the Sellers to verify that insurance cover for the crew will be in
place for the agreed period. Furthermore, to ensure the safety of the crew, an
obligation has been placed on the Buyers to assist in the safe disembarkation
of the crew.
Clause 12 (Removals):
This Clause emphasises that the sale of the vessel
includes all parts belonging to the vessel. This means that the Sellers are
only allowed to remove ‘private’ items from the vessel, for instance crockery,
cutlery, linen, library, forms etc.
Allowed removals also include master’s, officers’
and crew’s personal belongings. Furthermore, the Sellers are allowed to remove
the vessel’s log book; statutory certificates; and special items as agreed
between the parties and listed in Annex B (Excluded Items).
Flag state certificates often need to be returned
to the flag state and therefore need to be excluded. For this reason sub-clause
12(c) permits copies to be given to the buyers instead of the originals.
If the Sellers have failed to list an item in Annex
B (Excluded Items), and the item is not one of the above mentioned excluded
items, the item will be deemed the property of the Buyers and the Sellers will
not be allowed to remove it.
Clause 13 (Verification of Light
Displacement Tonnage (LDT)):
This provision provides for the Buyers to verify
the vessel’s light displacement tonnage (LDT) prior to the signing of the contract.
The procedure for verifying the LDT is that the Buyers, or the Buyers’
representatives if applicable, inspect a copy of the vessel’s valid trim and
stability booklet. Furthermore, the Clause places an obligation on the Sellers
to ensure that the original and valid booklet (i.e. the original of the valid
trim and stability booklets of the vessel) is in fact on board the vessel once
the notice of readiness is tendered.
The relevance of having available the vessel’s LDT
history, for instance if the vessel has been converted or modified, has been
thoroughly examined. The Buyers are buying the vessel and paying the purchase
price based on the current LDT, therefore it is an absolute requirement of the
contract that the original of the valid trim and stability booklet is to be
found on board the vessel. Furthermore, such subsequent amendments to the
booklet could contain information of great importance to the recycling yard.
However, it is also acknowledged that in practice some yards will also ask for
the builders’ trim and stability booklet if they are not satisfied with the
revised booklet. Thus a third paragraph has been added to this Clause 13, which
allows the Buyers to request the builders’ trim and stability booklet and other
relevant documentation from the Sellers, provided that such information is
available.
Clause 14 (Charters, Encumbrances,
Maritime Liens, Debts and Claims):
This type of clause is often considered standard
within sale and purchase agreements. It provides the Buyers with certainty that
(1) the vessel is free from all charters, encumbrances and maritime liens or
any other debts and (2) should any claim be made against the vessel for
incidents which occurred prior to the time of delivery, the Sellers will be
under an obligation to indemnify the Buyers against all consequences of such
claims, provided that the Buyers can demonstrate that the claims are the
Seller’s responsibility.
This Clause is an extension of the requirement set
out in sub-clause 6(c) that the Sellers shall provide the Buyers with a certificate
or transcript of registry evidencing the ownership of the vessel as well as
evidencing that the vessel is free from registered encumbrances and mortgages.
Because this certificate/transcript is produced some days in advance of delivery
of the vessel and claims could arise due to the Sellers’ actions in the days
leading up to the delivery, and because the certificate/transcript will not, in
most jurisdictions, encompass maritime liens and other debts, a warranty and
indemnity provision has been included in Clause 14 to ensure that Buyers’ would
not be left without any course of action if they were held responsible for such
claims.
Clause 15 (Charges):
As the parties wish to share the costs of the
transaction between them as equally as possible, Clause 15 sets out that the
Buyers will be responsible for payment of taxes, dues, fees and expenses
connected to the purchase of the Vessel while similar charges connected with
the sale of the vessel, for instance charges connected with the closing of the Sellers’
register, will be for the Sellers’ account. This compromise reflects current
practice – it provides for less administration
than a 50/50 sharing would and at the same time it does not leave any room for
disputes over real costs, the content of invoices etc.
Clause 16 (Buyers’ Representatives):
The Buyers may wish to place personnel on board the
vessel to check for damage or removals after the deposit has been paid. This
Clause permits a maximum of three such representatives to enter the vessel and
related expenses will be for the Buyers’ account.
In order not to interfere with the Sellers’
business, the Buyers’ representatives should not be placed on board the vessel
earlier than 15 days prior to expected delivery and they must not in any way
interfere with the operation of the vessel.
It should be noted that the Clause contains an
exclusion of liability, meaning that the representatives are not the responsibility,
neither risk nor liability, of the Sellers while on board the vessel.
Furthermore, the Buyers are obliged to indemnify the Sellers against any claim
for loss and/or damages due to the presence of such representatives on the vessel.
As set out in the Clause, it is standard practice that the representatives sign
the Sellers’ letter of indemnity prior to embarkation.
Clause 17 (Purpose of Sale
To emphasise that the purpose of the contract is
recycling and that the vessel is sold for recycling only (i.e. not to be used
in the trade for some years before recycling), the Buyers warrant that the
vessel will be recycled at the Ship Recycling Facility and that it will be
recycled in accordance with the relevant Convention requirements (see Clause 18
for a more detailed explanation of Ship Recycling Facility Plan and Ship
Recycling Plan).
Clause 18 (Safe and Environmentally
Sound Recycling)
Ship Recycling Facility & Ship
Recycling Facility Plan:
If the Sellers so request, the Buyers are obliged
to provide them with a copy of the Ship Recycling Facility Plan (SRFP) or an
attestation that the yard (i.e. the Ship Recycling Facility) has such a plan in
place. The latter option is included because the SRFP is normally made out in
the local language of the place of recycling and therefore the Sellers might find
an attestation in a different language, for instance English, to be more
helpful. If the Sellers receive an attestation rather than the SRFP, such
attestation would not include the full information from the SRFP, but would
often include a short summary of the more important points. It should be noted
that the Buyers are only obliged to provide a copy of the SRFP, or the relevant
attestation, if the Sellers request it.
The SRFP is a plan for the technical
and operational management of the Ship Recycling Facility (the recycling
site/yard), which will ensure that the vessel is able to be recycled in a safe
and environmentally sound manner at this site. It is acknowledged that this plan may include information of a
confidential nature which should not be made public. However, it is equally
important for the Sellers to have reasonable means of ensuring that the
recycling facility is in fact capable of recycling their vessel in a safe and
environmentally sound manner. During the interim period, appropriate state
infrastructure will not yet be in place and therefore the Sellers should
exercise due diligence when choosing the recycling facility. For this reason,
the Sellers have been granted the possibility to visit the Ship Recycling
Facility, both to review the SRFP (in case only an attestation was received)
and to verify that the facility is in compliance with the plan.
Once the Convention comes into force, the Ship
Recycling Facility must be authorised as a ‘green’ recycling facility and the
approval process will be based on the information set out in the SRFP.
Therefore, such licence/certificate should provide the Sellers with sufficient
certainty that the facility is capable to ‘green’ recycle their vessel and
there will no longer be a need for the Sellers to receive a copy or an
attestation of the SRFP.
Inventory of Hazardous Materials:
The Sellers must provide the Buyers with a list of
the hazardous materials in the vessel’s structure and equipment, named the
‘Inventory of Hazardous Materials’ (IHM). Although it is now becoming standard
practice that the building yard produces such inventory and passes it on to the
buyers of the newbuilding, this is a new practice and only a minor part of the
trading vessels have such inventory readily available. Most vessels would have
to undergo a survey, and even after such survey the findings could not be
considered to give the full picture as this would require the surveyor to have
access to all concealed parts of the vessel. For this reason it has been stated
in Clause 18 that the information contained in the IHM is “given to the best of
the Seller’s knowledge, but always without guarantee”.
Having an IHM in place is a Convention requirement
- once the Convention comes into force it will become compulsory for all ships
weighing over 500 GT to carry such inventory.
The IHM consists of three parts: Part I is a
complete inventory of the hazardous materials in the vessel’s structure and
equipment, which is to be appropriately maintained and updated at all times;
Part II is a list of the unavoidable operationally generated waste generated in
the period prior to entering the Ship Recycling Facility – owners/Sellers are obliged to conduct
operations in a manner that minimises the amount of cargo residues, fuel oil
and wastes remaining on board; and Part III is a list of stores on board the
vessel, necessary for the vessel’s operations during its last voyage.
While some recycling yards require the Sellers to
provide Part I of the IHM before giving a price quote on the cost of recycling,
other yards calculate the price based on the vessel’s type and age. To provide
useful guidelines for the parties as to when would be the appropriate time for
the Sellers to provide the Buyers with Part I of the IHM and to avoid any undue
delay, the contract places an obligation on the Sellers to provide Part I as
soon as possible after the date of the contract. Parts II and III are normally
developed before the final survey of the vessel, which takes place before the
vessel takes off on its last voyage prior to entering the Ship Recycling
Facility. However, to give the recycling yard some indication of which level of
waste and stores they can expect upon delivery of the vessel the Sellers are
obliged to provide the Buyers with provisional parts II and III as soon as
possible after the date of the contract.
Ship Recycling Plan:
Once the Buyers have received Part I and
provisional parts II and III of the IHM they (meaning the recycling facility)
will prepare a plan for the safe an environmentally sound recycling of the
vessel which includes a description of how the materials identified in the IHM
will be managed and disposed of. The Buyers should provide the Sellers with
this plan, named the Ship Recycling Plan (SRP), as soon as possible after the
receipt of the IHM.
As with the Ship Recycling Facility
Plan/attestation described above, the Sellers or Sellers’ representatives are
allowed to visit the Ship Recycling Facility to verify that the recycling of
the vessel is conducted in accordance with the SRP.
It should be noted that the contract does not
provide the parties with a solution to the situation where the Sellers visit
the facility and during this visit discovers that the vessel is not being
recycled as per the requirements set out in the SRP. This is a breach of
contract and possibly a breach that goes to the root of the contract. However,
at this late stage of recycling it would be very difficult, if not impossible,
to terminate the contract. For this reason the Sellers’ remedy would be limited
to a claim in damages. It has been left to background law and the
court/arbitration tribunal to decide on the amount of damages to be paid. The
parties are free to agree to a suitable remedy should they so wish, however,
they should ensure that such remedy would be enforceable under the governing
law of the agreement.
Statement of Completion:
According to the Convention, the Statement of
Completion should be sent to the relevant authorities once recycling has been
completed. However, this requirement would not be applicable in the interim
period because state infrastructure would not
yet be in place to deal with such document. In acknowledgement that the
Sellers should receive some confirmation of the completion of the recycling
process, Clause 18 places an obligation on the Buyers to provide the Sellers
with a Statement of Completion once the
vessel has been recycled. For this purpose a standard form of the “Statement of
Completion” has been annexed to the agreement, Annex C (Statement of
Completion).
Clause 19 (Exemptions):
If the vessel cannot be delivered due to
circumstances beyond the Buyers’ or the Sellers’ control as described in the
Clause, then neither party will be liable to the other party for damages and
loss suffered as a consequence of such circumstances.
Clause 20 (Buyers’ Default):
This Clause sets out the conditions of the contract
and lists the events that can lead to cancellation of the contract by the
Sellers. It is emphasised that should the Buyers not lodge the deposit or pay
the purchase price in the manner provided for in the contract, the Sellers have
a right to cancel the contract and claim compensation.
It is important to note that the claim for
compensation will not be limited to the size of the deposit to be paid by the
Buyers. The Sellers are entitled to claim full compensation for their losses
(including interests) and expenses incurred as a consequence of performing
their obligations under the contract.
Clause 21 (Sellers’ Default):
This Clause is similar to Clause 20 but with
reversed parties. If the Sellers fail to give notice of readiness or fail to
execute a legal transfer or to deliver the vessel with everything belonging to
her by the cancelling date, the Buyers have the right to cancel the contract.
If the contract is cancelled, the Sellers must return the deposit in full
(including interests earned) to the Buyers.
It is important to note that, notwithstanding
cancellation, the Sellers would be obliged to compensate the Buyers for any
loss and/or expenses incurred as a consequence of the Sellers’ failure to
comply with the requirements set out in the first paragraph of this Clause.
However, in order to claim compensation the Buyers must prove that such failure
took place due to the Sellers’ negligence.
Clause 22 (BIMCO Dispute Resolution
Clause):
RECYCLECON incorporates the latest edition of the
BIMCO Dispute Resolution Clause.
It is important to note that 22(a), 22(b) and 22(c)
are alternatives and that the parties should indicate their choice in Box 20Box
20London
For a fuller description of the BIMCO Dispute
Resolution Clause, see Special Circular No. 1, 16 January 2002 available to
download from the Documentary section of www.bimco.org.
Clause 23 (Entire Agreement):
The purpose of the Entire Agreement Clause is to
limit the rights of the parties to the written terms of the contract. As
such it would exclude representations, written and
oral, not intended to be part of the final concluded agreement.
Clause 24 (Notices):
This Clause anticipates that the parties will wish
to send notices and documents between them, either by traditional mail/paper or
by electronic means. It sets out that the address for giving notices should be
the address set out in Boxes
21
From the point of view of evidence it would be
necessary to prove that the notice has been given in a proper way and to the
right address and for this reason any notice should be given in writing and to
the address chosen by the parties.
This is also the reason why any subsequent change
of address should be given in writing as well.
Annex A (Vessel Details):
This annex contains a detailed description of the
vessel and complements the short description of the vessel in Boxes 5 -
Annex B (Excluded Items):
This annex is to be filled in by the parties if the
Sellers want to remove particular items from the vessel, which are not normally
considered as ‘standard’ removals. Unless the annex is filled in, the Sellers
would not be allowed to remove from the vessel any other items than those
listed in Clause 12.
Annex C (Statement of Completion):
This annex is to be filled in by the recycling
yard/Buyers upon completion of the recycling process. The Statement of
Completion serves as a confirmation to the Sellers that the vessel has been
recycled at the agreed Ship Recycling Facility in accordance with the Ship
Recycling Plan.
Copyright and availability of RECYCLECON:
Copyright in RECYCLECON is held by BIMCO who are
also the publishers.
Sample copies of RECYCLECON are available free of
charge from BIMCO’s website at www.bimco.org.
To use RECYCLECON we recommend BIMCO’s web-based
charter party editing system, idea, which provides access to a secure Microsoft
Word version of the contract that can be filled in and edited online and then
exchanged by e-mail.
For details of how to sign up to use idea please
click on the Products tab on the BIMCO homepage at www.bimco.org or contact idea@bimco.org.
Source: BIMCO
https://www.bimco.org/~/media/Chartering/Document_Samples/Sundry_Other_Forms/RECYCLECON_Explanatory_Notes.ashx
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