First of all, it is necessary to underline the particular environment for which the introduction of a clause, instructing the ship to proceed at average speed (below the design speed), was essential to limit fuel consumption. During the 1970s, the crisis of bunker’s market was characterized by a high price of fuel and low freight rates,  thus, many ships started to proceed at moderate speed in order to preserve fuel consumption^[1]. Furthermore, this behaviour continued during the financial crisis occurred during the 2008-2009: the slow steaming became more spread among the contract of affreightment^[2]. The main purpose for reducing the speed is not only related to the “volatile market” of bunker cost, but also to the possibility of saving other expenditure (such as ports’ dues and taxes), low freight rates and overcapacity^[3]. However, we should take into account the balance between the economical reasons stated above and the modern sensibility for global environment. The aim is to highlight the possibility to increase the profits and, at the same time, to reduce the CO2 emission^[4]. Especially, according to the mandatory regulations, the “cut-off” CO2 emission is coupled with the purchase of a more expensive bunker in order to control the gasoline vapours^[5]. Owing to this balance between environment and economy, BIMCO (Baltic and International Maritime Council) has developed a specific clause for time and voyage charterparties in order to harmonize these needs^[6].

1. Time Charters

Generally, the Time charter is a contract of carriage where the charterer uses the vessel and his crew for a determinate period of time in correspondence for the payment of a fixed hire^[7]. Under this factis species of contract, the cost’s allocation is quite balance between the parties, since the owner pays for the crew and the insurance, whilst the charterer pays for bunkers and other specific costs ^[8]. Consequently, the adventure’s risks are divided between the parties whereas, the owner holds the operational risks, the charterer only the commercial risks. Furthermore, this balance is emphasized by a double feature of charterer’s and owner’s rights and duties that would be regulated by terms agreed into the contract and, by international regulations and agreement (such as Hague-Visby Rules). It seems clear that one of the shipowner’s duties is to proceed the voyage with reasonable despatch^[9]. However, instead of the voyage charter where deviation assumes a different and harsh role, in time charter it is dubious if it is possible to apply the same criteria ^[10]. The shipowner has the traditional duty to prosecute with utmost despatch^[11] and if the Master decides unreasonably to diverge from the agreed route, the owner would be liable for breaching the obligation. Therefore, in this instance, the shipowner fails to comply with the charterer employment instructions and it gives rise to an indemnity (express or implied)^[12]. As is stated in The Aquacharm^[13] , there shall be a casual link between the loss and the employment order^[14]. The utmost despatch’s obligation could be qualified as an exception clause (conforming to the contra proferentem rule) for which the shipowner could rely in order to discharge his liability^[15]. However, in the Hill Harmony case^[16 the owner could not rely in the exception clause given by the incorporation of the Hague-Visby Rules (Paramount Clause)^[17]. On the other hand, the charterer has the commercial control of the vessel and could instruct the owner to proceed at slow steam. This statement regarding “speed and consumption” would usually constitute an intermediate term, in which case the termination of the contract would depend on the nature of the breach^[18]. However, there are some divergences of view regarding the nature of the term, since in some cases, such as Lorentzen v White Shipping,^[19] it could be a continuing warranty. The most common clause for speed and consumption was developed by NYPE, deeply; clause 12 provides a warranty of performance upon the shipowner. Due to this clause, the owner guarantees the vessel’s speed and the daily consumption during good weather condition^[20]. This ‘performance warranty’ could be used as a measure where the owner decides illegitimately to slow steam (perhaps for marketing reasons), this consequence could be evaluated in the Pearl C case^[21] where the court held that the owner was in breach of clause 8 NYPE, regarding the utmost dispatch obligation^[22]. Differently from the shipowner, the charterer has a commercial purpose to reduce the vessel’s speed and proceed in slow steaming; in this instance it is necessary to introduce a specific clause incorporated into the contract. For that purpose, BIMCO produced an appropriate clause in order to balance the charterer’s rights to reduce the speed and the owner’s apprehension to slow steam. Moreover, the Slow Steam clause has been implemented in NYPE 2014 (clause 38)^[23].

According to BIMCO slow steaming clause for Time charter parties:

a) Charterer may instruct the owner to adjust the speed in order to meet the designed destination in a particular time

1) Slow Steaming; the Charterer may give instruction to the Master to operate above the cut-out point of the vessels’ engines, in respect of the Master’s obligation about safety of the ship, crew, cargo and environment.

2) Ultra-Slow Steaming; the Charterer may give instruction to the Master in order to proceed above or below the cut-out point of the vessels’ engine, in respect of the obligations stated above. Moreover, if the instructions require an additional modification of the vessel, the master shall not oblige to comply with the employment order.

b) The Owner shall exercise due diligence in order to ensure that the vessel shall minimise the fuel consumption.

1) The Owners’ warranties related to the vessels’ speed and consumption

2) Charterers’ instruction regarding particular destination and time

3) Owner shall exercise due diligence in regard of the optimal use of the vessel’s equipment, navigation routes.

c) The above-mentioned instructions shall not constitute any breach of the due/utmost dispatch’s obligation

d) Charterer shall ensure that these instructions do not constitute any breach of others contract of carriage, additionally, the Charterer shall indemnify the Owner for any consequent liability for the breach of the above-mentioned contract of carriage^[24].

Firstly, it is necessary to highlight the main elements of clause 38, which describes the process for slow steaming. The head of the clause introduces the general idea of the shipowner’s duty to comply with the employment instructions (Hill Harmony), however the wording ‘particular time’ should not be read as a warranty but only an indication^[25]. Moving on the two different aspects of the slow steam as it is stated in (1) and (2), the clause provides the “Slow Steaming” and “Ultra-Slow Steaming”. The first one is the default average of speed which operates above the cut-out point, and for which the engine would not be damaged by the speed reduction. Differently, the Ultra-Slow Steaming provides a reduction below the cut-out point and the engine could have to be adapt for this reduction^[26]. Furthermore, Clause 38 (a) is subjected to the Master’s duty to reject the charterer instructions insofar this instructions could affect the safety of the ship (or unseaworthy)^[27]. However, the courts held a different point of view and it defines this duty more as a right^[28]. If the instruction to slow steam below a certain speed could affect the safety of the ship, the Master shall refuse this order; moreover, he shall decline any direction that can affect the safety of the crew and cargo. Consequently, the owner could be entitled to an indemnity, if expressly incorporate into the contract^[29]. This indemnity is provided by Clause 38 (d) and should encourage the parties to conclude a BIMCO slow steaming clause. Furthermore, the final provision of the clause states the exercise of due diligence that, as long as the Master complies with such instructions, there would not be a breach of due despatch obligation. Moreover, in order to avoid any liability of the owner in respect of others contract of carriaget, he charterer shall indemnify the owner^[30].

2. Voyage Charters

Differently from the time charter, the voyage charter is a contract for the use of the vessel in respect of an agreed voyage in correspondence for the payment of freight. Whereas the shipowner takes the costs for bunkers, the charterer only the commercial costs emphasized by the freight^[31]. Due to this allocation of costs, the shipowner would be more interested in slow steaming (reduction of bunker consumption might mean lower freight). However, in this instance the risk of delay could shift between the parties, due to the charterer obligation regarding the cargo^[32]. Under the voyage charterparty, the COGSA 1992 provides the incorporation of the terms of the contract into the bill of lading and it will link the shipowner with the bill of lading holder^[33]. Consequently, if the contract contains the ‘cesser’ clause, the charter is discharged from any obligation after the cargo has been loaded^[34]. Indeed, the contract usually provides a clause that gives to the charterer the option of cancellation if the ship has not offered: ‘Notice of Readiness’^[35]. Furthermore, ‘due despatch obligation’ is an absolute duty for which the owner would be bound to perform and any breach entitles the charterer to claim damages^[36]. In the contest of voyage charter, the doctrine of deviation finds its purpose, since it provides a specific laden voyage^[37]. Traditionally, the consequence of deviation gives to the innocent party the right to terminate the contract or, otherwise, the right to purely claim damages^[38]. Deviation could be allowed only in few cases such as agreement or when it is not intentional^[39]. Consequently, if the loading/discharging operations exceed the laytime (set of time for such operations), the shipowner would be entitled to demurrage^[40]. Due to this structure, the demurrage shall be taken into account in the slow steaming clause, since the shipowner would perform the voyage as soon as possible in order to achieve the maximum benefit.

According to the BIMCO Slow Steaming clause for Voyage Charterparties:

a) The Owner shall be entitled to give instruction to the Master in order to reduce the speed of the vessel.

b) Whereas the vessel proceeds at reduce speed, this shall not constitute any breach of due/utmost despatch’s obligation.

c) Charterer shall ensure that this instructions do not constitute any breach of others contract of carriage and also, the Charterer shall indemnify the Owner for any consequent liability for the breach of the above mentioned contract of carriage.

d) This clause shall not prejudice any other rights (implied or express) un der the charterparties^[41].

This clause tries to find a balance between the party who pays for the bunker and the commercial purpose of the contract, for this reason, the clause entitles the shipowner to slow steam. The parties should collaborate in order to adopt the required speed, addittionally, the clause emphasizes that this decision of slow steam will not be a breach of the due despatch obligation. Consequently, the charterer shall indemnify the owner for any breach of other contracts of carriage as a result of the delay^[42]. On the other hand, BIMCO (and INTERTANKO) has drafted a clause in order to improve the charterer position, especially regarding the congestion in port^[43]. BIMCO virtual arrive clause would be incorporated into the contract when the shipwoner is entitled to slow steam and tries to avoid any prejudice to the charterer, where a speed reduction could affect consequent events^[44]. Therefore, the parties agreed on a new time of arrival in case of delay and also a compensation to the shipowner for the lost of time in accordance to the demurrage rate^[45]. The compensation shall be realised before the final discharge; in addition, the extra time shall be computed regarding relevant evidence such as weather and other data^[46]. As is stated in the clause, the agreement incorporated into the contract shall not constitute any breach of the due despatch’s obligation, as long as the master exercises due diligence^[47].

The slow steaming clause has been introduced by BIMCO, could present some difficulties regarding other contracts of carriage such as bill of lading. As is clear in the commercial practice, the bill of lading operates as evidence between the carrier and the shipper but additionally, it entitles third party holder of an original bill of lading to claim for any loss or damage to the cargo^[48]. These difficulties are highlighted by the possible discordance between the terms of the contracts, although this could be overcome by the incorporation of the charterparties terms into the bill of lading^[49]. However, this incorporation might generate legal uncertainty due to the possible lack of indications of the slow steaming clause. It is necessary to underline that the introduction of the clause could affect the main obligations of the parties. The fundamental issue regarding the due despatch obligation is the third party rights under other contracts, since the carrier is obligated to perform his obligation within a reasonable time^[50]. Then, the carrier would be liable in case of delay unless, as is stated in the BIMCO clause, the slow steaming is incorporated in the contract, he exercises due diligence and also, he complies with the charterer’s orders^[51]. If all of these requirements would be fulfilled, the carrier could rely on the indemnity^[52]. Moreover, the Charterers P&I Club has stated that the slow steaming clause shall be included as a precise provision into any bills of lading issued, in order to protect the carrier against any breach of the due despatch obligation^[53]. Additionally, this obligation is coupled by the duty to ‘proceed without deviation in the usual and customary course’^[54]. According to Scaramanga v Stamp,^[55], deviation includes even a deliberate reduction of speed.^[56]. However, BIMCO liberty and deviation clause tried to improve this condition and allows a reasonable deviation in accordance with Article 4 of the Hague-Visby Rules ^[57].

3. Conclusion

To conclude, the main purpose of the BIMCO slow steaming clause for charterparties is to find an efficient balance between economical reasons and the modern sensibility for the environment. According to this last issue, it is necessary to state that this become more and more important in the international carriage of goods. On the other hand, the slow steaming clause has a vital importance in the contest of a ‘volatile market’ of bunkers. However, the real challenge is the equilibrium between parties’ obligations, especially when deriving from mandatory legislation, and the possibility to reduce the speed of the vessel. For these reasons, particular attention shall be given to the performance warranty as well as the due despatch obligation.

______________

References

·      Carriage of Goods by Sea Act 1992

·      Directive 2008/1/EC

·      Hague-Visby Rules

·      Julian Cooke, Voyage Charterers, (3rd Ed. Informa London 2007)

·      Micheal Wilford, Time Charters (5th Ed. LLP London 2003)

·      Martin Stopford, Maritime Economics (3rd Ed. Routledge Oxon 2009)

·      Simon Baughen, Shipping Law (6th Ed. Routledge Oxon 2015)

·      Bulk Ship Union SA v Clipper Bulk Shipping Ltd (The Pearl C) ^[2012] 2 Lloyd’s Rep. 533

·      Balian v Joly ^[1890] 6 TLR 345

·      Court Line v Canadian Transport (1940) AC 934.

·      Davis v Garret (1830) 6 Bing. 716, 725

·      ER Hamburg (2006) 2 Ll. Rep 66

·      Glynn v Margeston ^[1893] AC 351, HL

·      Hill Harmony ^[2001] 1 Lloyd’s Rep. 147

·      Hain v Tate&Lyle (1936) 41 Com. Cas. At 345

·      Imvros (1999) 1 Ll. Rep 848

·      Lorentzen v White Shipping (1943) 74 Ll.L.Rep.161.

·      London Arbitration 10/00

·      Leduc v Ward (1888) 20 QBD 475, CA

·      Panaghia Tinnou (1986) 2 Ll.Rep. at 591

·      Portsmouth Steamship v Liverpool & Glasgow Salvage Assosiation (1929) 34 Ll.L.Rep.459

·      Scaramanga v Stamp (1880) 5 CPD 295, CA

·      The Hounda ^[1994] 2 Lloyd’s Rep. 541

·      The Aegeon Dolphin ^[1992] 2 Lloyd’s Rep 178 and

·      The Diana Prosperity ^[1976] 2 Lloyd’s Rep 60, CA

·      The Democritos ^[1976] 2 Lloyd’s Rep 149

·      The George Christos Lemos ^[1991] 2 Lloyd’s Rep. 107

·      The Island Anchor ^[1994] 2 Lloyd’s Rep 287

·      The Baleares (1993) 1 Lloyd’s Rep. 215

·      The Athanasia Camminos ^[1990] 1 Lloyd’s Rep 277

·      The Aquacharm ^[1] (1999) LMCLQ 461; ^[1999] QB 72

·      Tafaka ^[1990] 1 Lloyd’s Rep 536,

·      BIMCO, Slow Steaming Clause for Voyage Charterparties https://www.bimco.org/Chartering/Clauses_and_Documents/Clauses/Slow_Steaming_Clause_for_Voyage_CP.aspx

·      BIMCO, Virtual Arrive for Voyage Charterparties https://www.bimco.org/Chartering/Clauses_and_Documents/Clauses/Virtual_Arrival_Clause_for_Voyage_Charter_Parties.aspx

·      BIMCO, Slow Steaming clause for Time Charterparties https://www.bimco.org/Chartering/Clauses_and_Documents/Clauses/Slow_Steaming_Clause.aspx

·      BIMCO, Liberty and Deviation Clause https://www.bimco.org/Chartering/Clauses_and_Documents/Clauses.aspx

·      The Charterer P&I Club ^{[online] [January 2006]} http://exclusivelyforcharterers.com/docs/The%20Charterers%20P&I%20Club%20T&C%202012.pdf

·      Neil Handerson, The Price of Slow Steaming

 http://www.stonechambers.com/download-documents/articles---the-price-of-slow-steaming---neil-henderson.pdf

·      Christos Kontova & Harilaos Psaraftis, The Economic and the Environmental impact of Slow Steaming

http://www.maritimecenter.dk/public/dokumenter/EMUC/Konferencer/2014/Blue%20Business/Christos%20Kontovas.pdf

·      StoneChambers, Slow Steaming

http://www.stonechambers.com/download-documents/articles---slow-steaming-update---neil-henderson-and-tom-burdass.pdf

·      Intertanko, Emission reduction clauses,

http://www.intertanko.com/Funtional-Pages/User-Login/?ReturnUrl=%2fTopics%2fLegal-and-Documentary-%2fINTERTANKO-Model-Clauses%2fINTERTANKO-Model-Clauses1%2fDocumentary-Committee-launches-model-INTERTANKO-Emissions-Reduction-Clauses%2f

·      Christos Kontovas & Harilaos Psaraftis, Maritime Policy and Managment, http://www.martrans.org/documents/2011/MPM2011.pdf

·      ASBATANKVOY, Clauses

·      BALTIME, Clauses

·      BIMCO, Liberty and Deviation Clause

·      BIMCO, Slow Steaming Clause for Voyage Charterparties

·      BIMCO, Virtual Arrive for Voyage Charterparties

·      BIMCO, Slow Steaming clause for Time Charterparties

·      BPVOY, Clauses

·      INTERTANKO, Emission reduction clauses

·      NYPE, Clauses