Bimco’s new towcon & towhire 2021 charterparties

2021 has seen two new versions of BIMCO's standard form offshore contracts, with the new TOWCON / TOWHIRE and BARGEHIRE forms being released earlier this year.

In this edition of our Marine Client Advisor, Alex McCooke, Claims Syndicate Manager at Shipowners P&I Club in London offers his insight into some of the key revisions to the TOWCON / TOWHIRE contracts, which aim to increase the effectiveness of the wording and make sure the forms keep pace with current commercial practice.

Introduction

The former versions of BIMCO's ocean towage forms TOWCON and TOWHIRE were released in 2008. TOWCON is intended to be used where a lump sum price is agreed for a towage operation, whereas TOWHIRE applies when a daily rate has been agreed. For the purposes of this article we will refer only to TOWCON. The updates to TOWCON and TOWHIRE are generally uniform but the numbering and wording differs in places.

The principal changes to the insurance regime in the 2021 form are:

Naming of H&M insurers

In part 1 the boxes formerly required the P&I insurers of tug and tow to be declared. Now they require both the P&I and H&M insurers of the tug and tow to be named. This is helpful because, for example, in the event a tow is lost and requires salvage services, you may have the identity of the tow’s P&I insurers, but they will suggest that salvage work is a matter for the tow’s H&M insurers.

Ice transit

Clause 8(d) of the 2008 form required the hirers to meet any additional insurance costs payable to the Tug’s insurers where the tug was required to enter ice bound ports or areas. This wording is retained in a new Clause 18(d) of the 2021 form, but it is now also specified that, to the extent the tug interests subsequently receive any refund of premium or no claims bonus, this must be repaid promptly to the Hirers. This is because the tug’s insurers may charge additional premium for the extra risk but agree that a partial refund – or bonus – is payable if no claims arise. Where the Hirers are required to reimburse the Tug interests for the premium charged it stands to reason that they should also benefit from any rebate on that same sum.

New insurance clause

A new Clause 23 is intended to solve several problems which can arise with insurance in ocean towage scenarios. Sometimes the owner of a tow, in particular a scrap tow, may indicate they have insurance in place when they do not. Even where insurance is evidenced, there have been cases where the policy has been voided or cancelled prior to the operation taking place. And even where insurance for the voyage duration is confirmed, it will be of little assistance if it is placed with a facility which is unlikely to respond to the sort of claims which may arise.

Clause 23 of TOWCON 2021 addresses these points head on, and requires the Tugowner and Hirer to warrant that the tug and tow have:

• P&I, H&M and basic war risks insurance in place,
• that such insurance is in place for the duration of the voyage, and
• that any P&I risks’ coverage is on terms equivalent to the cover provided by International Group of P&I Clubs.

The parties are also required to provide each other, on request, with copies of the insurance policies.

War Risks / Piracy

In addition to the references to war risks’ insurance at Clause 23, the form has a new war risks’ clause at Clause 26, which is more tailored to how these risks would occur in tug and tow scenarios. Unlike in TOWCON 2008 (which had a catch-all war and ‘other risks’ provision), piracy has been separated from war risks, in its own Clause 27, with infectious and contagious diseases similarly being moved into its own section at Clause 28.

The mechanics of TOWCON 2008’s Clause 10 (War Risk Escalation Clause) are now deemed to be incorporated in the general Clause 26.

Excluded losses

Clause 22(c) of TOWCON 2021 now provides that:

“Excluded losses – Notwithstanding anything else contained in this Agreement (save for subclause 15(c)) neither party shall be liable to the other for: … cost of insurance.”

This wording is intended to update the consequential loss clause and make it more all-encompassing. It is now clear that neither party shall be liable to the other for their costs of insurance.

However, as noted above, the intention of Clause 18(d) is to allow the owner of a vessel to recover certain insurance premium costs from the Hirers related to ice transits. Also, under Clause 27 the Tugowner may claim additional insurance costs related to Piracy (e.g War Loss of Hire, maritime K&R) from the Hirers. Accordingly, Tugowners may wish to consider adding a reference to clauses 18(d) and 27(d)(iii) to the “(save for subclause 15(c))” carve out text above, to avoid arguments that such claims may be impeded by Clause 22.

Final thoughts

The Club's view is that the new form undoubtedly offers considerable improvements on the previous version, in particular with respect to clarity of obligations, and transparency in terms of the insurance arrangements of both parties. The Club therefore hopes that the industry will be swift to adopt TOWCON 2021.

Our special thanks to Alex McCooke at the SOP for his insight and contribution on this project.

Resources: Link to TOWCON 2021 and Link to TOWHIRE 2021 charterparty contracts at BIMCO.

For any questions regarding the contents of this Marine Client Advisor or for any other marine insurance enquiries please do get in touch. 

Howden Insurance Brokers is not a technical, commercial or legal adviser. Any commentary made in this document should not be construed as such, and we do not guarantee in any way the accuracy of the resources used or referenced in this document. In case of doubt, formal advice should be obtained that is directly relevant to your circumstances.