Revised Charter Party Guarantee adopted by Documentary Committee

Published: 24 November 2022

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The Charter Party Guarantee 2022, as its predecessor from 2012, is broader in scope than just covering the charterers’ monetary obligations under the time charter. Thus, the guarantee also covers the charterers’ other debts, including costs of bunkers, port charges, stevedoring costs and any other costs arising during the course of the charter party which would properly be the responsibility of the charterers. The guarantee has been drafted as a flexible instrument which, although based on English law, can be adapted to work in other jurisdictions.

“As a new feature, unlike the 2012 version of the guarantee, there is no time limit for when a demand on the guarantor shall be made. The reason for this is that the guarantee simply mirrors the terms and payment requirements of the underlying charter party,” says Ian Gaunt, Arbitrator and former LMAA President, who led the team of experts in charge of drafting the revised Charter Party Guarantee. 

The form also no longer includes a reference to a maximum liability figure which would cap the guaranteed amounts.

The drafting team included Charlotte Grandjean (CMA-CGM), Ralf van der Zalm (Anthony Veder Chartering B.V.), Peter Eckhardt (Martini Chartering), Suzanne Byrne (West) and Richard Lord KC (Brick Court Chambers).

The nature of the guarantee is a so-called “see-to-it” guarantee which is dependent on the validity and enforceability of the underlying contract guaranteed. In practice, this means that the counterparty should check for example the due authorisation of the charter party, as well as of the guarantee. The revised guarantee includes a “health warning” at the top which recommends that owners request the guarantor to deliver a legal opinion from a lawyer qualified in the place of incorporation of the guarantor confirming due execution.  

“It is key that the guarantor confirms that it has the necessary power and has taken all necessary corporate actions and obtained all necessary approvals to perform its obligations under the guarantee,” says Mr Gaunt. “Recent cases have highlighted what can happen if the relevant internal steps to authorise the guarantee have not been taken in accordance with the law of the place of incorporation of the guarantor and its corporate constitution and the result can be an unpleasant shock for the party receiving the guarantee”.

The guarantee is accompanied by an optional clause which it is recommended should be included in the charter party if it is agreed, at the time when the charter party is concluded, that a guarantee should be issued. The clause sets a deadline of seven days for the provision of a guarantee in substantially the form of the revised Charter Party Guarantee. 

Important projects ahead

At its meeting, the Documentary Committee also adopted the much-awaited CII Operations Clause for Time Charter Parties 2022 and reviewed a number of ongoing contracts and clauses related projects. These include, amongst other, the revision of the widely used tanker charter party ASBATANKVOY and BIMCO’s wreck removal agreements, as well as the review of the French Union for Grains and Seeds Trade’s revised charter party SYNACOMEX which BIMCO has been requested to approve. Work to develop an LNG specific annex to the BIMCO Bunker Terms 2018 is also nearing its conclusion. 

The Committee also gave the green light to a number of new projects, including the drafting of other relevant “carbon clauses”, an offshore installation contract and an additional annex to SUPPLYTIME 2017 regarding ocean towage and salvage support. It was also agreed to revise HEAVYLIFTVOY 2009, BIMCO’s standard voyage charter party for the mid-sized heavy lift sector carrying specialist cargo. The development of an in-water hull cleaning contract has previously been discussed by the Committee and a subcommittee is currently being established to look into this project. An overview of upcoming contracts and clauses is available here.

The revised Charter Party Guarantee is available as sample copy accompanied by explanatory notes on the BIMCO website and in an editable version in SmartCon.