Law of Tug and Tow and Offshore Contracts

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The BIMCO/ISU standard form contracts for wreck removal and marine services: “wreckhire 2010”; “wreckstage 2010” and “wreckfixed 2010”

Part A. Introduction

10.1 An important element of the services rendered by the towage and salvage industry and the offshore services industry consists of wreck removal or similar activities following a collision or other casualty, or upon the cessation of hostilities. The importance of wreck removal in the offshore sector has been increased by the International Convention for the Removal of Wrecks 2007, also known as the Nairobi Convention or “ICRW” (as to which see: Professor N. Gaskell and C. Forrest, “The Wreck Removal Convention 2007” [2016] LMCLQ 60). This enables coastal states to take proportionate measures to remove wrecks which are located in their Exclusive Economic Zone or EEZ (see Article 2), if those wrecks constitute a danger to navigation or to the marine environment (see Articles 1(5) and 6). The Convention in addition to establishing the liability of the shipowner for his wreck and its removal (Articles 9 and 10) requires shipowners to obtain insurance cover for the costs of wreck removal (Article 12) and coastal states have the power of direct action against insurers. The insurance provisions apply to vessels of 300 GT and over and the definition of wreck includes objects that have been on board ships (Article 1(4)). Contracting states have the option under the Convention to extend the convention to wrecks within their territorial waters (Article 3). This is an attractive option and has caused more states to adopt the convention, because of the provisions for compulsory insurance and the right of direct action against the insurer. In the United Kingdom, the Wreck Removal Convention Act 2011 received Royal Assent on 12 July 2011 and entered into force on 14 April 2014, 12 months following the date on which 10 member states have signed it; at the date of writing some 16 states have adopted the Convention. The first report on the functioning of the Act (by the Secretary of State for Transport to the Transport Select Committee: Post-Legislative Assessment of the Wreck Removal Convention Act 2011 (July 2016)) offers a useful perspective into the importance of the powers given to a state party under the Convention in the event of a major maritime casualty. For a forthcoming major modern work on the Convention (in addition to his existing article at [2016] LMCLQ 60) and the law of wreck, see Professor N. Gaskell, Wreck Law, publication of which is due in 2018. 10.2 Such services can be long, highly complex and operationally demanding and therefore usually very costly (for an admirable short account, see James Herbert, The Challenges and Implications of Recovering Shipwrecks in the 21st Century (2016)). Often the chief person footing the bill for such services is the P&I Club of the vessel concerned, either the victim of the casualty or the cause of it. In addition to wreck removal and clearance services, pollution aspects can render the services more difficult and with potentially wide liabilities. The International Salvage Union (ISU), with assistance from BIMCO, addressed the need in relation to these services for a standard form contract similar in form and conception to that drawn up for ocean towage operations (ie “Towcon” and “Towhire”). In 1993, two standard form contracts were adopted for use for such services by the ISU: these were the “Wreckcon” and “Wreckhire” forms. The former was a contract that provided for lump sum stage payments in respect of the service, while the latter was a daily (or other) fixed rate contract for the same. In broad ethos, the two forms corresponded to the “Towcon” and “Towhire” forms drawn up by BIMCO.

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10.3 The two forms were almost uniformly taken up by the leading towage, salvage and offshore industry operators and became the principal basis upon which they agreed to render wreck removal and associated marine services. However, in use various difficulties arose over the effect of certain of the terms of “Wreckcon” and “Wreckhire.” In particular, the parties usually responsible either for engaging these services or for paying for them, namely the P&I Clubs were dissatisfied with:
  • a what they perceived as a lack of balance between the interests of the hirer and the contractor with the contract being skewed in favour of the contractors in a way which had been avoided in the BIMCO towage forms “Towcon” and “Towhire”; and
  • b the unavailability in a standard form contract of a “no cure-no pay” type of lump sum contract where remuneration was earned only on the completion of the specified service with no remuneration being earned if the service did not produce the contractually stated completed result.
10.4 While attempts were made to amend the “Wreckcon” form to this end on an ad hoc basis, the “Wreckcon” form did not prove to be very comfortably adapted and uncertainties and points of dispute were introduced. As a result, non-standardised contracts had to be drafted on a casualty-by-casualty basis, which was unsatisfactory from the Clubs’ and operators’ points of view, as well as confusing. In 1998, the International Group of P&I Clubs requested the ISU to consider the development of a new standard form contract in simple “no cure-no pay” terms. 10.5 As the BIMCO/ISU official release accompanying the new forms which resulted from this initiative by the P&I Clubs stated:

The original Wreck Removal and Marine Services Agreements, developed jointly by the International Salvage Union (ISU) and BIMCO, have served the industry for over six years. However, during the course of this period the International Group of P&I Clubs expressed its concern that the lump sum version, “Wreckcon’, was balanced too much in favour of the Contractors. The P&I Clubs have emphasised that they support the concept of standardised agreements and recognise the benefits to be gained in terms of saving of time and legal costs from the adoption of such agreements. However, in the Clubs” view, there remains a number of circumstances in wreck removal operations where there is still a place for a traditional lump sum “no cure-no pay” agreement.

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