BIMCO Releases New Contract Template for Commercial Vessel Sales and Purchases
The Baltic and International Maritime Council (BIMCO) has released SHIPSALE 22, a new standard contract form for use by commercial sellers and purchasers of vessels. SHIPSALE 22 is intended to replace the popular SALEFORM 2012 contract form.
The new SHIPSALE 22 form follows the contents of SALEFORM 2012, but is expected to be easier to use. SHIPSALE 22 adds the "box" format of most other BIMCO forms, which aggregates the key deal-specific inputs in boxes on the first page; the sale clauses have been rearranged to appear in a sequence that follows more closely the manner in which many ship sale transactions are conducted; and several clauses have been updated to reflect modern practices and issues (e.g., conditions precedent, international sanctions and electronic signatures).
Cautions and Considerations
Although SHIPSALE 22 does not dramatically depart from the substance of SALEFORM 2012, there are a number of changes in details, rights and obligations, and time frames that should be carefully reviewed. One specific point for clarification pertains to the changes to applicable law and dispute resolution.
The posted sample form of SHIPSALE 22 appears to materially change the format for selection of applicable law and forum for dispute resolution.
The prior SALEFORM 2012 allowed parties to select one of three clauses and cross out the two unused clauses, with the first option being choice of English law, the Arbitration Act of 1996 and London Maritime Arbitrators Association (LMAA) arbitration in London; the second option being New York law and arbitration in New York under the Society of Maritime Arbitrators (SMA); and the third option being a general choice of law clause with no arbitration provision. Of course, the parties could also modify these clauses, or substitute different agreed language or select a designated court in lieu of arbitration.
In SHIPSALE 22, the language of Box 26, Part I states: "26. Law and arbitration (choose law and arbitration venue. If alternative (g)(Other) is chosen, Clause 26 must be appropriately filled in or replaced, failing which alternative (a)(English law/London arbitration) shall apply)." Clause 26, Part II, however, just gives the first option of English law and LMAA arbitration in London. And there is no "alternative (g)" in Clause 26. The language in Box 26, Part I, or the language in Clause 26, Part II, may be subsequently clarified or revised, and/or it may be BIMCO's intent that designating a choice in Box 26 would generate alternative language in Clause 26 based on one of the versions of the "BIMCO Law and Arbitration Clause 2020" that BIMCO has developed for four venues – London, New York, Singapore and Hong Kong.
Ultimately, the form should facilitate election of applicable law and dispute resolution provisions that are appropriate for the parties and the circumstances of the vessel and transaction at issue. Certainly providing for New York is an option of the prior form that should be retained. It may be useful to provide optional model clauses for arbitration in other leading locations, such as Singapore, and a model choice of law clause such as option "c" in SALEFORM 2012 for parties that elect not to use arbitration, in addition to the "supply your own" option.
After this Holland & Knight alert was published, the authors received a welcomed note from BIMCO Director of Standards, Innovation and Research Grant Hunter. Mr. Hunter further addressed the optionality as to forum selection, which is now being shared with BIMCO's permission as it benefits the industry:
SHIPSALE 22 offers a much wider choice of law than previous iterations: Users can choose from 7 options: 1) English law, London arbitration; 2) U.S. law, New York arbitration; 3) Singapore law, Singapore arbitration; 4) English law, Singapore arbitration; 5) Hong Kong law, Hong Kong arbitration; 6) English law, Hong Kong arbitration; and, finally, 7) a free choice that allows the parties agree on any other law and forum. Readers should be mindful that in a PDF sample copy or treatise publications, it shows a “snapshot” of a dynamic electronic copy of SHIPSALE 22 taken from the contract editing system, SmartCon. In the “live” version of SHIPSALE 22, when users make a selection of one of the law and forum options from the drop-down list in the Part I box layout section, the law and arbitration clause for that chosen venue will automatically be inserted into Part II of the agreement. If users choose U.S. law and New York arbitration, for example, then the wording agreed upon with the Society of Maritime Arbitrators in New York will replace the "default" English law, London arbitration clause. This further exposition will assist users with considering the optionality with a printed copy of SHIPSALE 22.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.