BIMCO Publishes Sanctions Clause For The Container Trade

A new time charter sanctions clause specifically designed for the container shipping sector has been published by BIMCO. The BIMCO Sanctions Clause for Container Vessel Time Charter Parties 2021 is part of an initiative to create a library of sanctions clauses that reflect the individual needs and characteristics of different trades and operations.

The shipping industry has recently come under increasing sanctions pressure from regulators. To help manage sanctions compliance companies should incorporate adequate sanctions clauses in their contracts.

“Our aim was to draft a clause which reflects the needs of the liner trade and is in line with the practical reality by not imposing unfulfillable requirements on the parties. We wanted a clause which is fair and balanced and will be accepted by owners and charterers,” says Frank Sanford, General Counsel of MSC.

Under the BIMCO sanctions clause for the container industry, the container operator is in control if a sanctions problem occurs. In most cases, neither the operator nor the shipowner will have knowledge of the cargo or its destination beyond the shipper’s declaration. Because knowledge is the regulator’s test for liability, if containers with prohibited content are found on board a ship, this will not normally result in the ship being impounded. The specific containers carrying the prohibited cargo may be confiscated by the authorities, or are returned to the port of loading by the charterers.

The clause obliges an operator not to knowingly carry sanctioned cargo. It is under the obligation to exercise the required due diligence to ensure that it does not ship such cargo. The owner has the right to reject sanctioned cargo and, if the operator is in breach of its warranty, this triggers a wide-ranging indemnity for the owner.

Due to the legal complexity of the sanctions environment – which is constantly changing – and the potentially severe consequences of breaching sanctions, the clause comes with a “health warning”. Parties planning to incorporate the clause into their contracts are strongly advised to read the accompanying guidance notes and seek legal advice.

The clause was written by representatives of key stakeholders with expertise in the container sector including A.P. Møller – Mærsk A/S and MSC, the North P&I Club and the UK P&I Club and lawyers specialising in sanctions from Crowell& Moring LLP.