Many oil and gas terminals require the Master to sign ‘Conditions of Use’ before being admitted to berth at the terminal. These COUs are often presented at short notice and contain onerous terms that are balanced against shipowners.
This publication highlights the difficulties this may cause and provides a number of tools designed to produce fair and balanced contractual terms in order to promote a safety culture in port.
COUs often contractually seek to deprive owners of their statutory right to limit liability. Generally, and for crude trades in particular, COUs are rarely provided to owners in advance. As a consequence, the Master is often placed in a difficult position – agree the terminal’s asymmetric and unilateral conditions in a time sensitive environment or face the prospect of being denied entry to the port and/or terminal. In addition, if the Master agrees to the COU, owners may be held liable for matters controlled by the terminal. This is a problematic position for owners contractually, in terms of their own risk management and from an insurance perspective.
The practice is being followed by an increasing number of terminals around the world. If the Master does not agree to the COU, in most instances, this will also have immediate consequences under any applicable charterparty.
INTERTANKO is concerned about the risk that:
i. owners may prejudice their statutory right to limit their liability through agreement to the terminal COUs and in doing so potentially also prejudice their P&I cover; and
ii. owners may be exposed to unsafe terminal practices for which they may bear unrestricted liability.
In light of the foregoing, one could ask where the incentive is for the terminal to meet stringent safety standards, if the owner is responsible for any incident regardless of fault. COU terms should not expose owners to liabilities beyond those contractually agreed to in any applicable charterparty; or to liabilities that, properly considered, are the responsibility of the terminal, or to risks that cannot be insured in a viable manner consistent with the well-established international liability regimes.
INTERTANKO has prepared this guide to:
i. raise awareness of the issues; and
ii. provide owners/operators and Masters with a number of tools designed to produce fair and balanced contractual terms in order to promote a safety culture in port.
The Guide also considers how charterers ordering vessels to terminals that impose onerous COUs may not only share the risk but may also indemnify owners for any uninsured liabilities or losses arising from the COU.
The Guide considers both the crude and LNG sectors as there are some notable differences in approach for each sector, in particular on the part of P&I Clubs. The Guide may equally apply to product, bulk and other trades where COUs are used.
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