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“Lo, I am a herald of the lightning, and a heavy drop out of the cloud: the lightning, however, is the SUPERMAN”

(Friedrich Nietzsche – Thus Spoke Zarathustra)

Any new publication from BIMCO is eagerly awaited by the maritime industries as their standard form contracts have gained wide acceptance across the industry. Their latest publication is the charmingly named “SUPERMAN” or more prosaically, the “Standard Agreement for the Supervision of Vessel Construction”.

This new contract form does fill a gap in the market as the contract forms used for newbuild supervision contracting have never so far been standardised and many different forms are in circulation.

BIMCO have approached the task by adapting their well-known SHIPMAN 2009 shipmanagement contract for this purpose. Modelling new contracts on existing forms used in similar industry sectors makes perfect sense of course and the creating of WINDTIME out of SUPPLYTIME is another recent example. However, it does have its pitfalls and from a practical perspective shipbuilding supervision is quite a different exercise from shipmanagement – whilst they both concern the application of technical expertise and delivery of services to the maritime sector, and it is also often the case that shipmanagement businesses will have supervision affiliates, there the similarity perhaps stops.

BIMCO have issued its usual and very helpful set of explanatory notes with SUPERMAN and the intention of this article is not to replicate what those notes achieve or to describe in detail all the various terms, but merely to point out a few parts of the contract form that might benefit from amendment in actual use;

1. Clause 8 – The proviso in the final paragraph of this key provision on Supervisors’ Obligations comes straight out of SHIPMAN 2009 and allows the Supervisors to be entitled to have regard to their responsibility across all vessel builds that they are supervising in terms of allocating supplies and manpower, just as a shipmanager would in terms of all the vessels he manages. It is questionable whether this proviso is appropriate in the case of supervision services as opposed to the managing of large fleets of vessels where the owners are getting benefits of scale in terms of management fees and the quid pro quo is that the manager cannot be expected to give a totally bespoke service on each vessel. One would expect that in most cases owners would seek to have this proviso deleted;

2. Clause 11 – Budgets and Management of Funds – is again simply out of SHIPMAN 2009 and one questions its relevance here. Supervisions do not usually need to have a working capital float in the same manner as shipmanagers do. They are unlikely to be paying out significant disbursements on their counterparty’s behalf – unlike shipmanagers paying for spares, supplies etc. This provision could therefore in most cases be simplified to just an acknowledgement that the Supervisor’s fee is payable monthly or quarterly in advance so they are not “committing their own funds”;

3. Clause 14 will perhaps be of most interest to Supervisors as it contains their limitation of liability for negligence at 10 times their fee or at such figure as may be inserted in Box 14. One imagines that it most cases the parties will agree to insert the Supervisors’ PI cover limit in Box 14. The phraseology of this liability provision is well accepted in the marine sector and in this regard SUPERMAN will bring some greater legal certainty to the liability position of Supervisors. It should be noted that the counterparty’s liability to the Supervisor is not limited under the indemnity provision in Clause 14(d) and this may cause issues with the ability of buyers to obtain full insurance cover for the build project as underwriters will have no maximum liability to quote for, hence this is an aspect which may require attention on a case-by-case basis;

4. Currently Clause 14 only requires the Supervisors to maintain professional indemnity insurance and no other form of cover – e.g. employer’s liability or D&O cover. This will doubtless be subject to negotiation in any individual case;

5. Clause 16 requires the parties not to do anything or permit anything to be done which might cause an infringement of the laws of the Flag State or the place of construction. This provision seems slightly odd for a supervision contract – in most cases, and other than in the context of the technical compliance aspects (note the election of the “Flag State” in Box 8), there will be no Flag State as such until the vessel is delivered and hence the supervision exercise is essentially over (subject to what is said in point 6 below). In some jurisdictions of course it is possible to register a vessel under construction (e.g. Germany) but in that case the jurisdiction of the Flag State would be the same as the that of the place of construction so the wording seems rather otiose;

6. Under Clause 17(a) termination of the contract is deemed to occur on delivery of the Vessel – this may not be appropriate in some cases where Supervisors are also contracted to assist with post-delivery warranty claims and procedures;

7. Separately, as a more general point on Clause 17, the parties may also wish to include a term entitling them to terminate the contract for convenience; and

8. In the context of superyacht build supervision, the SUPERMAN form presently lacks wording dealing with the Supervisors’ confidentiality obligations, so this issue will also need careful attention.

In conclusion, it is to be expected that SUPERMAN will soon gain wide acceptance – it is a creditable addition to BIMCO’s stable of precedents. We would expect however some tweaks over time (just as SHIPMAN or SALEFORM have been successfully tweaked and updated as industry practice becomes clearer) and some areas requiring negotiation on an individual basis.

The content of this article is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content herein.

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