The New GENCON 2022

The New GENCON 2022

The new GENCON 2022

BIMCO has just released a new version of its most popular and most widely accepted contract in the voyage charter market: GENCON 2022. We will in this article highlight the main novelties of this new version of the charterparty and analyse how it will impact shipowners and charterers.

 

A mere revision of the previous version?

The new 2022 version of GENCON contains so many new aspects compared to its predecessor of 1994 that some wonder if what we are facing is a mere revision of that previous version, or if we are rather facing a totally new contract.

If we consider the many novelties that have been included, as well as the extension of the contract (it has 10 pages more and twice as many clauses as GENCON 1994), it does not seem unreasonable to say that we are facing a brand new contract. But we must not forget in any case that this new version is still an evolution of all its previous versions, which tries to embody the thousands of arbitration awards and court resolutions which in the last almost twenty years have been published in London resolving disputes in the voyage charter market.

 

Balance between the parties

Those of us who work in the resolution of disputes arising in a voyage charter, are aware of the frustration of many charterers who see the lack of balance in the regulation of the rights and duties that the 1994 version contemplated between shipowner and charterer.  It seemed commonly accepted that GENCON favoured Owners and we all had to live with that.

In fact, BIMCO’s preferred comment when asked about the 2022 version is to say that this new contract offers a better “balance” between the parties. BIMCO, we are told, wanted to balance the respective positions of shipowner and charterer.

But when one goes into the detail to read the new clauses, many doubts arise as to whether this is really the case. The shipowner, as we shall explain, enjoys a much stronger position, with more and new rights, which do not seem to benefit the charterer in an equal manner.

Perhaps BIMCO understands this “balance” between the parties, in having offered the charterer greater clarity, since many of the rights of the shipowner, which have been granted over the years by judges and arbitrators, are now expressly incorporated into the contract. But beyond clarifying the difficult position of the charterer in the contract, we do not really see a benefit for the charterer or a greater real balance of forces between the parties.

 

The liability of the shipowner

This is perhaps the biggest novelty of GENCON 22. In the previous version of 94, the shipowner enjoyed a somewhat vague general protection, against loss, damage or delay in the goods, but limited only to the transport of the goods. The shipowner was left unprotected against any other incident, such as an accident suffered on the way to the loading port.

 

The new clause 2 greatly extends protection to the shipowner. For starters, the shipowner is obliged to provide a “seaworhty” vessel at the beginning of the voyage. It is a pity that BIMCO has not taken the courageous step already taken by legislative instruments such as the Rotterdam Rules, which require maintaining that obligation throughout the voyage. It is somewhat striking that GENCON 22 is branded as modern and updated, when in aspects like this it has remained stagnant in the last century. Similarly, the obligation for the vessel to be “cargoworthy“, while clearly distinguished, is limited to the commencement of the loading operation.

 

The Paramount clause is now incorporated into the contract by default, therefore incorporating the Hague Rules and so allowing the shipowner to limit its liability. Previously, it had to be agreed on a case-by-case basis. Now, by default, the shipowner may enjoy this limitation even if the parties have not expressly negotiated it during the fixture process.

 

Cargo

GENCON 22 includes a new clause, under the name of “Cargo“, which provides regulatory requirements as well as various obligations of the parties with respect to the goods. It is a new clause not to be found in its previous version which should be well received, since it is well known that the goods are a main source of multiple disputes arising between shipowner and charterer.

Thus, for example, the charterer is obliged to describe the goods clearly and to use appropriate mechanisms for stowage and lashing.

Also for the first time, cargo in bulk is considered as it also is “part cargo”, both so common in voyage charters. In this sense, the right of the shipowner to load more goods at his own convenience, before or after those of the charterer, without this implying a breach of contract, is included. The charterer must therefore ensure the inclusion, for example, of a “last in, first out” clause if it wants to have certain advantage over the other charterers of the same vessel.

It is a pity in this regard that no mention has been made as to how demurrage should be distributed among the various charterers, since, as we know today, the law allows shipowners to charge the same demurrage to as many charterers as there are on the same voyage. This undoubtedly creates a somewhat unfair situation, which some describe as an unjust enrichment.

 

Loading and discharging

New clause 4 reflects the reality of today’s industry in which the master supervises these operations. But, again, it seems that far from regulating it to offer a fair balance between the parties, it rather clarifies how to resolve the execution of loading and discharging operations, when the master is ultimately responsible for the safety of the maritime adventure, to the benefit of the owner.

It thus imposes liability for those operations on the charterer. Both its cost, as well as its risk and responsibility are for charterers. And it also clarifies that this will always be the case, even if the master is the one who supervises these operations.

This new version therefore does not help resolving the common situation in which it is the master who demands certain security measures in loading operations, which are at a later stage proven erroneous or unnecessary. In these cases we are told by the new GENCON that it must be the charterer who bears all the expenses and risks associated with following these instructions.

The clause also makes clear that should any “shifting” for security reasons take place, all the expenses incurred are to be borne by the charterer. We are not told what should be considered a security reason. A fact that, unfortunately, will surely be interpreted very broadly by the shipowner and that the charterer will have to fight at a later stage with the high costs that this will entail.

A new aspect that greatly benefits the shipowner is that it links the amount to be paid for demurrage with the shipowner’s loses in repairing any possible damage caused to the vessel by stevedores. Previously these costs had to be established, but now the contract allows the shipowner to apply the agreed daily cost for demurrage in box 19 to the time lost in repairing these damages. A undoubtedly creative technique that, again, seems to benefit the owners.

 

Deck cargo

GENCON’s previous edition included only a phrase indicating that the goods on deck were carried at the risk of the charterer. And it was even so mentioned in brackets, as a mere clarification in the first clause of the contract.

Now, however, the starting point is that the shipowner is not obliged, nor can it be forced to, transport goods on deck. Only if owners expressly agree to it, the charterer may do so, but making the charterer responsible not only for the risk of such transport, but for all the costs that the master deems necessary to ensure a safe transport.

It is also clarified that the shipowner will never be responsible for the fate of the goods carried on deck. Not even if the cause of the damage is attributable to the shipowner or has anything to do with the fact that the goods were carried on deck. If the cargo is carried on deck, the shipowner is given a total and absolute protection.

 

Freight

The new GENCON 2022 provides clarification as to when freight is earned and when it is payable. In the previous version both concepts were somehow diluted, but now they are more clearly distinguished. With the same token, it clarifies what should be understood to be pre-paid freight and freight payable at destination.

 

ETA Notices

A new clause 8 imposes an duty on the owners to send the ETAs agreed with the charterer, and also requires it to inform the charterer of any change in the position of the vessel.

 

Notice of Readiness

Two new boxes are included in Part I of the contract, and a new clause 9 in Part II, which allow the parties to agree to whom the Notice of Readiness will be given to, both at origin and destination. This is good news since there are many arbitrations that have had to resolve the question of to whom exactly the NOR should have been delivered. This is indeed an important factor since on it depends whether or not laytime has commenced to run. With the inclusion of these boxes, it is clear that the obligation will therefore be to notify the parties identified in them, thus offering security to the parties, which should always be welcome.

 

Laytime

The main novelty here lies in the incorporation by default of the BIMCO Laytime Definitions for Charter Parties 2013, which previously had to be expressly incorporated. These definitions are in some respects an advantage and in others a disadvantage, but at least there is already clarity about the meaning of the main terms in a dispute regarding laytime and demurrage.

Clarifications on the acronyms most commonly used here, such as “SHINC” and “SHEX”, are also included, which is always welcome.

 

Suspension and Termination of the contract

BIMCO has included a new clause 16 named “Suspension and Termination“. This is a real novelty that puts the owner in a clear position of advantage over the charterer.

First, if the charterer does not pay the shipowner, the shipowner may suspend the contract. Thus, for example, it can stop the vessel in the middle of the ocean and not continue to the port of discharge until it receives payment, without this meaning a breach of contract.

This right is given to owners not only for the non-payment of freight, but it extends to the non-payment of any dead freight, demurrage or any other amount to which the shipowner believes it is entitled to. It is a position of strength that the charterer will have no choice but to accept and fight at a later stage. It is however an incorporation of the maxim that says that freight is first paid, and then argued, and not the other way around. This leaves the charterer without any room for negotiation in these difficult situations that so commonly occur.

The clause also indicates that, if within 96 hours after the suspension, the charterer does not pay all what is claimed to it, the owner has the right to terminate the contract and claim against the charterer all damages and losses suffered.

The power of this clause even calls into question whether the charterer can rely on the shipowner’s obligation to proceed to the port of destination promptly. It certainly seems that, once again, far from offering a balance between the parties, the shipowner has been protected in an almost indestructible way.

 

Bills of Lading

BIMCO recently published the CONGENBILL 2022, the use of which is encouraged in this new version of the GENCON charterparty. This is contemplated in clause 19, by which the master is not obliged to sign a bill of lading that worsens the rights of the shipowner under what CONGENBILL 2022 states.

In this sense, the use of the electronic bill of lading is also regulated, which, although it has been available to users for more than twenty years now, seems not to be taking off. If it were to do so in the near future, GENCON 22 is already there to embrace it.

 

Sub-let and Assignment

An interesting new clause 24 allows the charterer to sub-let or assign the charter to a third party, always with the permission of the shipowner, who may not refuse it unreasonably. This is a good option that can give life jacket to freight forwarders or logistics operators whose customers have breached their commitment to carry out the contracted transport.

 

Agents

A new clause 26 tries to make some sense of the peculiar situation that, as it is well known, the chartering world experiences with ship’s agents. The agent of the vessel in port is nominated by the charterer, but its cost is borne by the shipowner, whom it also represents in port.

Until now it was therefore peculiar that the shipowner had an agent that he had not chosen and who could therefore have a greater interest in defending the charterer, because thanks to it he obtained the business. The shipowner, in some disputes, was in an awkward position to see how his agent could even testify against him in litigation.

The shipowner improves its situation with this new clause, because we are told that although it will be the owner’s agent that who was appointed by the charterer, for anything related to the goods, their loading, unloading and delivery, including what is related to bills of lading, that agent will be considered the charterer’s agent.

In this way it is established, although without expressly saying it, that the agent in port will be the shipowner’s agent only for what refers to the entry and departure of the vessel in and out of port and perhaps to ancillary tasks such as food and equipment provisions and bunkers.

 

Sanctions

The new GENCON 22 includes a new clause 32 that regulates the rights and obligations of the parties in the face of the sanctions which are so commonly imposed today.

Shipowner and charterer have the obligation to ensure that they are not subject to any type of sanction, and to respond to the other in case of breach of this obligation. A strict obligation of verification of the parties involved in the transport is therefore imposed, whether with respect to shipowners, charterers of any type and level, managers, persons, entities and goods.

 

Piracy

Although in certain areas of the planet piracy has experienced a clear decline, or even its disappearance (such as at the Indian Ocean area), piracy is a risk that usually materialises at different times and for different reasons.

That is why in the event of reasonable doubt by the owners or the master of encountering a risk of piracy, the shipowner may disobey the charterer’s orders, deviate from the agreed route, follow the instructions of any authority in charge of the situation and discharge the cargo in a port other than the one agreed.

 

What happens to the thousands of court decisions and arbitration awards published under the previous version of GENCON?

There was a certain fear that both members of the sector and maritime lawyers would lose huge vault of knowledge and legal certainty with the publishing of this new version of GENCON. But the truth is that, while it is something that time will slowly but surely confirm, we should not have that fear.

Many of the clauses that seem to benefit the shipowner and prejudice the charterer were in fact already being imposed, as implicit rights and obligations, by courts and arbitral tribunals. What BIMCO has done is simply compile them in this new version, so that there is no longer any doubt, if ever, how pro-shipowner maritime law is.

It is therefore reasonable to think that it will be possible to continue to make use of all previous knowledge gained at court and London arbitration and that this new version, if anything, will contribute to try to reduce the number of disputes that are brought before arbitral tribunals, providing greater legal certainty to maritime industry players.

 

Dr. Miquel Roca

Written in London, the day of St. Simon and St. Jude Thaddeus of 2022.

Published at MG News, November 2022.

mroca@lmalegal.co.uk