On Knock-for-Knock Principle:Analysis of SUPPLYTIME 2017 Clause 14(a)

HAN Yunfei

Abstract:In June 2017,the Baltic and International Maritime Council launched a revised version of its standard time charter party for offshore support vessels,codename as SUPPLYTIME 2017.SUPPLYTIME 2017 contains several changes based on SUPPLYTIME 2005,especially in the Clause 14(a)(Liabilities and Indemnities -Knock-for-Knock).SUPPLYTIME 2017 makes the knock-for-knock clauses better adapted to the current shipping market by extending the range of“Owners’ Group”and“Charterers’ Group”respectively,reducing the content of Proviso,and expanding the content of“Cause of Loss”.Through reviewing the history of knock-for-knock clauses,analyzing relevant legal precedents in British judicial practice,and comparing SUPPLYTIME 2005 with SUPPLYTIME 2017,this paper makes it clear that the knock-for-knock clauses of SUPPLYTIME 2017 shall not be boldly used nor unreasonably resisted or excluded.

Key Words:SUPPLYTIME 2017;Knock-for-knock clauses;Offshore support vessels (OSVs)

In June 2017,the Baltic and International Maritime Council (BIMCO)issued a standard time charter party for offshore support vessels (OSVs),code-named SUPPLYTIME 2017.This version has been long in the making and its release has given rise to a strong response in the chartering market of OSVs.BIMCO SUPPLYTIME is in widespread use in OSVs chartering.It acts as the“master contract”in a series of offshore exploration and service vessels charter contracts,such as the Standard Barge Charter Party (BARGEHIRE),the Standard Heavylift Charter Party (HEAVYCON),the International Ocean Towage Agreement(TOWCON and TOWHIRE),the Special Projects Charter Party (PROJECTCON).1Natalya Dolgikh,Chartering of survey Vessels on Terms of sUPPLYTIME 2005:some Legal Implications,Norway:University of Oslo,2010.SUPPLYTIME differs from other common time charter parties,such as the Uniform Time Charter (BALTIME,issued by BIMCO for the first time in 1909)and the New York Produce Exchange Form (also known as“Government Form”,published by the New York Produce Exchange for the first time in 1913).2SI Yuzhuo ed.,Maritime Law,Beijing:Law Press China,2003,p.221.(in Chinese)Marine support vessels refer to the special vessels offering service to natural resources exploitation,providing transit of supplies,materials and personnel for Offshore Units,and engaging in towing,anchoring,external firefighting and oil spill recovery operations.3CHEN Jun,CHEN Weiqiang,ZHENG Mei and HUANG Haibo,On the Classification of Offshore Support (Supply)Vessels’ Registration,China Maritime safety,Vol.11,2016,p.50.(in Chinese)With further development of offshore oil and gas resources exploitation,the challenges facing marine support vessels are increasingly severe.4ZHU Weilin,Advancements of Oil and Gas Exploration in China Offshore Area:Overview and Perspective,strategic study of CAE,Vol.5,p.22.(in Chinese)The offshore oil and gas exploration has been developing rapidly since the 1970s,and the requirements for OSVs such as offshore supply vessels have been increasing accordingly.5Simon Rainey,The Law of Tug and Tow,London:Informa Law,1996,p.121.Amended liabilities of parties in SUPPLYTIME 2017 may serve as a benchmark for future development of the same series of offshore resource exploration support vessels standard forms,and even impact the specific business segments of the shipping market.

A partial revision of the knock-for-knock clauses contained in SUPPLYTIME 2017“Liabilities and Indemnities”section was conducted based on the relevant clauses in the SUPPLYTIME 2005.6“Knock-for-knock”can be translated into“互相免赔”or“互撞免赔”in Chinese.The author believes that the former translation can better reflect the meaning of this principle in the charter party;therefore,“knock-for-knock”in this paper is translated into“互相免赔”in Chinese.In essence,the knock-for-knock clauses entail an allocation of risk and responsibility,7BIMCO Explanatory Notes (6 November 2017),at https://www.bimco.org/contracts-andclauses/bimco-contracts/supplytime-2017#Clause%2014%20(Liabilities%20and%20 Indemnities),30 May 2019.which are important clauses based on the demand of the OSVs chartering practice.In this paper,the author explores the history of the knock-for-knock clauses and the philosophy behind them,analyzes the interpretation and application of knock-for-knock clauses in judicial practice,and clarifies the reasons for and the attitude of coping the amendment of Clause 14(a)of SUPPLYTIME 2017 by comparing SUPLYTIME 2017 and SUPPLYTIME 2005.

There are two important changes in the knock-for-knock clauses of SUPPLYTIME 2017 in relation to the 2005 version of the time charter party:first,the content of Proviso,as the Charterers’ exemption clauses,was reduced from twelve to three clauses,and the Owners’ exemption clauses from four to two clauses;second,the wording of“Cause of Loss”has been partly refined with the addition of the expressions deployed to clarify and expand the scope of application of this clause,such as“breach of duty (whether statutory or otherwise)”,8SUPPLYTIME 2017 Clause 14(a)(i).“nonperformance”,9SUPPLYTIME 2017 Clause 14(a)(i)(ii).and“under any circumstances”.10SUPPLYTIME 2017 Clause 14(a)(i).Besides,the definitions of“Owners’ Group”and“Charterers’ Group”differ in SUPPLYTIME 2005 and SUPPLYTIEM 2017 respectively.These differences will be analyzed later for a better understanding of the knock-for-knock clauses.However,before making a detailed comparison of its abovementioned changes,it is crucial to explain the meaning of knock-for-knock clauses.

I.The History of Knock-for-Knock Clauses and the Philosophy behind

“Knock-for-knock”can be interpreted as a mutual exclusion of liability.It is closely related to the motorcycle insurance industry where the knock-for-knock clauses first appeared.Today,the knock-for-knock principle is acknowledged as being at the very core of the SUPPLYTIME by BIMCO.11Simon Rainey QC,The Law of Tug and Tow,3rd edition,London:Informa Law,2011,p.259.The knock-forknock clauses in SUPPLYTIME mean that each party should bear responsibility for any damage or loss to its own property,or injury to its own personnel,even if the damage,loss or personal injury is caused by the act,neglect or breach of duty (whether statutory or otherwise)of the other party.When the other party compensates the claimant,even if the loss of compensation filed by the claimant is caused by the other party’s act,neglect or breach of duty (whether statutory or otherwise),the party shall still indemnify the other party for the compensation submitted by the claimant,and the compensation made by the party against the other party shall be called“knock-for-knock”indemnity.The essence of knockfor-knock clauses is that the parties,based on simple apportionment of risks and liabilities,replace the original fault liability by mutual agreement on a number of exemption and non-exemption items.12Simon Rainey QC,The Construction of Mutual Indemnities and Knock-for-knock Clauses in Baris Soyer and Andrew Tettenborn eds.,Offshore Contracts and Liabilities,London:Informa Law,2015,pp.70～71.

The usual rule under most systems of law is that“the guilty party pays”,13Richard W.Williams,Knock-for-knock Clauses in Offshore Contracts:The Fundamental Principles in Baris Soyer and Andrew Tettenborn eds.,Offshore Contracts and Liabilities,London:Informa Law,2015,p.53.if loss or damage or personal injury is caused by the negligence,breach of statutory duty,etc.,of a particular party,that party is ultimately liable to compensate.However,whilst such a structure makes commercial and practical sense in dayto-day cases where there is a limited number of affected parties,such a structure becomes increasingly unattractive where the incident arises during activities that involve a large number of affected parties engaging in complex operations pursuant to complex contractual relationship.The desire to avoid such complexities and to reduce risks and uncertainties of all parties involved has long been recognized,especially for support vessels chartering involved in high-risk offshore oil and gas exploration.The pragmatism has been heavily weighted in favour of one party,as has been the case,for example,Clauses 3 and 4 under the UK Standard Conditions for Towage and Other Services,which have been in use since 1933.14See 1986 UK Standard Conditions for Towage and Other Services.Obviously,this liability regime is not acceptable to most participants in commercial activities.Thus a more balanced liability allocation has been developed to distribute specific risks or liabilities among the parties.The liability allocation system was born out of the motorcycle insurance industry and is as follows:the vehicle insured by the insurer collides with other vehicles and suffers damage.Even if the damage is caused by the fault of other vehicles,the insurer shall also bear the cost of the damage to the vehicle.The allocation mode of risks and liabilities was soon applied to the shipping industry.For example,in the New York Produce Exchange Interclub Agreement,it was applied to specific claims.In smit International(Deutschland)GmbH v.Josef Mobius Baugesellschaft GmbH &Co.,15[2001]EWHC 531 (Comm).Mr.Morison described the knock-for-knock principle as“a crude but workable allocation of risk and responsibility”.16[2001]EWHC 531 (Comm),p.19.With the rise of offshore oil and gas exploration,the principle of“knock-for-knock”has been widely applied to this type of business because of the large number of contracting parties and sub-contracting parties involved (for example,in The Piper Alpha,17[2000]1 SLT 1123;[2000]Lloyd’ s Rep IR 249 (CA).dozens of different contracting parties were involved in the death lawsuit).In order to avoid excessive complexity in commercial disputes resolution,the parties agree to be respectively liable for the loss or damage of their owned property as well as the death or injury of their own employees.In The Piper Alpha,Judge Bingham described this agreement between parties as“a market practice that has evolved to take into account the characteristics of offshore operations”.18[2002]UKHL 4;[2002]1 Lloyd’ s Rep 553 (HL),p.7.Subsequently,the principle of“knock-for-knock”was gradually extended from offshore oil and gas exploration contracts to other service contracts in exploration industry.It is adopted by BIMCO in a series of OSV chartering contracts,such as BARGEHIRE,HEAVYCON,PROJECTCON,SUPPLYTIME,TOWCON,and TOWHIRE.

The knock-for-knock clauses are embodied in SUPPLYTIME 2005 as Clauses 14 (b)(i)and (ii),and in SUPPLYTIME 2017 as Clauses 14(a)(i)and (ii).The application of the knock-for-knock clauses generally has the following specific purpose and meaning:first,the primary parties and their employees and subcontractors constitute a“group”;19SUPPLYTIME 2005 Clause 14(a):“Owners’ Group”and“Charterers’ Group”;SUPPLYTIME 2017 Clause 1“Definitions”:“Owners’ Group”and“Charterers’ Group”.second,loss,damage or personal injury suffered by a member of the primary party’s group is borne by that primary party regardless of fault even if the loss,damage or personal injury is caused by the faults of any member of the group;third,group members (including employees,subcontractors and members of the primary party)have the same protection as the primary party by virtue of a Himalaya clause,in order to minimise the risk of conflicts in agreement between the sub-contractors and other members of the primary party group by compensation claims;20SUPPLYTIME 2005 Clause 14(e):“Himalaya Clause”;SUPPLYTIME 2017 Clause 14(d):“Himalaya Clause”.fourth,the allocation of risk is accompanied by an indemnity of other primary parties and their groups against any liability for claims,irrespective of fault.Where possible,the indemnity covers liability for employees and property of all parties for whose benefit the work is being undertaken;fifth,primary parties have insurance coverage to protect against losses or injuries and to underwrite their obligation to indemnify other primary parties and their groups.The insurers are generally required to waive their rights of subrogation against the other primary parties and their groups.

For example,the legal relationships can be seen in the chart below:

As shown above,employment relationship exists between the Owner and the Staffs on board,as well between the Charterer and the Charterer’s employees.If personal injury of the Staffs on board is caused by the improperly lashed petroleum reconnoiter equipment on the vessel due to the negligence of the Charterer’s employees,then:(a)there is legal relationship of tort compensation between the Charterer’s employees and the staffs on board;(b)Staff on board claims compensation for personal injury to the Charterer;(c)the Charter indemnifies the staffs on board for personal injury;(d)the Charterer claims compensation according to the knock-for-knock clauses;(e)the Owner indemnifies the Charterer for the compensation on personal injury of the staffs on board according to the knock-for-knock clauses;(f)the Owner claims to the insurer for the knock-for-knock indemnify that he has made;(g)the insurer indemnifies the Owner according to the insurance contract.

Therefore,the knock-for-knock clauses operate both as a shield (the exclusion of liability)and as a sword (the right to enforce an indemnity).21BIMCO Explanatory Notes (6 November 2017),p.58,at https://www.bimco.org/contractsand-clauses/bimco-contracts/supplytime-2017#Clause%2014%20(Liabilities%20and%20 Indemnities),30 May 2019.The knock for knock scheme has the following advantages:first,it reduces the cost of enquiry and litigation;second,it facilitates the early resolution of claims;third,it enables the insurance industry to provide higher level of cover;fourth,it encourages cooperation in the establishment of good and safe work practices.

II.Effect and Interpretation of Knock-for-Knock Clauses in British Judicial Practice

A.British Courts’ Affirmative Attitude towards the Force of the Knockfor-Knock Clauses

In the early stage of judicial practice,mutual indemnities are merely species of exemption or exclusion clauses under a contract which a party seeks:(a)to exclude its liabilitiesto the other partyfor specified loss even where that loss results from its own negligence or breach of contract;and (b)to compel the other party to indemnify it in respect of any claims or liabilities to employees of the other party or third parties,again even in circumstances where the claim or liability results from a breach of contract or negligence.The elements of a standard knock-forknock clause simply correspond to the typical forms of indemnity clauses22“赔偿条款”in Chinese normally refers to“Indemnity Clause”in English.in contract which are generally regarded as comprising two broad categories.The first category consists of clauses where one party agrees to indemnify the other against liability which that other may have towards him.In such a case,the indemnity is merely a reinforced exemption clause and has for this reason been described (by Judge Fraser in smith v.south Wales switchgear Co.Ltd.)23[1978]1 WLR 165.as“the obverse of an exemption clause”.24[1978]1 WLR 165,p.168.The second part includes the following content:one party agrees to bear the liability for the third party that the other party might otherwise incur.Although this is not an exemption,it can be seen as an extension of the exemption.24[1978]1 WLR 165,p.168.The general rule applicable to this clause is that the clause must be constituted in clear and unambiguous language to ensure its validity.25[1978]1 WLR 165,p.168.It is no different in nature from a simple exemption clause.The second category consist of clauses in which one party to the contract agrees to indemnify the other party against liability which that other party may incur towards third parties.This,too,while not as such an exemption,is regarded as an extension of an exemption clause.

The general rule applied to such clauses is that,in order to be effective,clear and unambiguous language must be used.This is particularly the case where the indemnity is sought to be applied in relation to a loss caused by the negligence of the party to be indemnified by the other party.In smith v.south Wales switchgear Co.Ltd.,Judge Fraser held that“when considering the meaning of the clause,it should be essentially impossible for one party to agree to relieve the other party of the liability caused by the act of the other party”.25[1978]1 WLR 165,p.168.In smith v.south Wales switchgear Co.Ltd.,which focuses on the compensation in favor of one party unilaterally,when considering the nature of each indemnity separately,the mutual indemnity agreement has a negative effect on the court’s interpretation in judicial practice.It is only when the clause is constructed by clear and unambiguous language that the court’s attitude towards the determination of mutual indemnity becomes better.Although the knock-for-knock clauses may be interpreted by the court in consistent with business practice,it still needs to meet the requirements of ordinary contract terms.It can be seen that under common law,the knock-forknock clauses are not completely excluded by the court.However,there are certain restrictions and requirements which apply to the cases in which the parties of the charter party opt to employ the clause smoothly.

Investigating the interpretations of similar clauses in judicial practice will contribute to a further analysis on knock-for-knock clauses in action.On 6 June 1988,an explosion happened on the Piper Alpha,an oil platform in the North Sea.The accident killed or injured 226 people and caused huge property loss and damage.The accident was caused by an employee of the oil platform operator who started a pump without noticing that a pressure safety valve had been removed for maintenance by a specialist valve contractor.Due to the negligence of both the operator and the valve contractor,hydrocarbons escaped and ignited when the pump was engaged.Subsequently,the insurer instituted a series of subrogated proceedings in England and Scotland against contractors seeking indemnity under the knock-for-knock provisions in the respective contracts.In Caledonia North sea Ltd.v.British Telecommunications PLC,26[2002]1 Lloyd’ s Rep 553.there were 37 employees of the oil platform operator with 189 employees of different contractors.After the insurer of the oil platform operator indemnified the survivors or their families,the oil platform operator claimed to the court according to the knock-for-knock clauses,requiring the contractor to bear the liability for the death or injury of its employees.The court found that the contractor was not liable for any infringement or breach of contract by the oil platform operator,and the oil platform operator’s claim was based solely on the knock-for-knock clauses.

The court of first instance denied any validity of the mutual indemnification clause involved in the case and thus dismissed the oil platform operator’s claims accordingly.In subsequent appeals,however,Scotland’s highest civil court and the House of Lords,which has exercised jurisdiction on behalf of the highest civil court since 2009,gave opposite opinions.Judge Bingham explained the commercial importance behind the mutual indemnification clauses based on the analysis of a series of academic works,such as Offshore Oil and Gas Insurance by David W.Sharpe,Manual of United Kingdom Oil and Gas Law by Terence Daintith and Geoffrey Willoughby.Judge Hoffmann held that“the existence of the crossindemnity and the findings of industry practice made by the Lord Ordinary dispel any concern that it would be unreasonable to require the contractors to indemnify the operator against loss for which the contractors were not responsible.”27[2002]1 Lloyd’ s Rep 553,p.81.In judicial practice,due to the consideration of commercial importance,the court chooses to affirm the effect of mutual indemnification clauses or knock-forknock clauses more often.In addition,the means to restrict the application of the knock-for-knock principle through defining specific noncompliance acts etc.were opposed in other cases.In smit International (Deutschland)GmbH v.Josef Mobius Baugesellschaft GmbH &Co.,Judge Morison held that“introducing argument about seaworthiness into this blunt and crude regime would lessen the effectiveness of the knock-for-knock agreement”.28[2001]EWHC 531 (Comm),p.20.

B.British Courts’ Cautious Attitude towards the Interpretation of the Knock-for-Knock Clauses

Excessive interpretation and application of the knock-for-knock clauses should be avoided although its validity has been affirmed in judicial practice.In E.E.Caledonia Ltd.v.Orbit Valve Co.,29[1994]1 WLR 221.the court acknowledged the clauses’ risk allocation of the parties in commercial activities,but took a conservative attitude on whether negligence was included in the cause of property loss or personal injury.The court agreed with the commercial purpose behind the knock-for-knock principle,and Judge Hobhouse made it clear that“it is entirely reasonable to see Clause 10(b)as a broader provision based on knock-for-knock in consistent with business practice.”30[1994]1 WLR 221,p.228.However,the court made a negative evaluation on the cause of loss by negligence,based on the general interpretation principle of exemption or exclusion clauses in the contract.Judge Hobhouse thought that drafting of commercial contract reflected the basic principles of statute laws and court decisions.Certainty and fairness are the basic principles of contract formulation.The parties may choose different wording to express different meanings of the terms.But highly ambiguous general terms are insufficient to identify liability for negligence,thus nobody need not bear it.31[1994]1 WLR 221,p.229.

Similarly,in The Ekha,32[2010]1 Lloyd’ s Rep 543the focus of dispute by the court was on the application of general principles of contract interpretation in the liabilities allocation clauses under common law.Judge Moore-Bick in trial on appeal held that there was nothing wrong with the parties in commercial activities seeking certainty in law and contract,but there were many different practices affecting the achievement of the above purpose.Traditionally,the precise scope of obligations of the parties will be determined first,then the liability for loss under the general principles of law.This is different from the liability distribution clauses in SUPPLYTIME.It is inappropriate to allocate liability for loss only by enacting liability clauses rather than determining the precise scope of obligations of the parties.33[2010]EWCA Civ 691,p.18.Thus,although the British courts hold that the knock-for-knock or mutual indemnification clauses are made for necessary commercial purposes and do require different interpretations,the same basic principles that apply to general exemption or exclusion clauses need to be applied to such clauses as well.

III.New Developments in the Knock-for-Knock Clauses of SUPPLYTIME 2017

A.Knock-for-Knock Clauses of sUPPLYTIME 2017 and sUPPLYTIME 2005

According to the standard form issued by BIMCO,the knock-for-knock clauses in SUPPLYTIME 2005 are embodied in Clause 14 (b),where Clauses (i)and (ii)are for Owners and Charterers respectively.The wording of Clauses (i)and (ii)is similar while the exceptions to liability and the wording details are not exactly the same.Clause 14 (b)(i)refers to the knock-for-knock liability to be borne by the Owners,in which there are 12 subclauses in total concerning the exceptions to the Owners’ liability:

Clause 6(c)(iii):“The Charterers shall indemnify the Owners in respect of any loss,damage or liability whatsoever and howsoever arising from explosives and dangerous cargo”;

Clause 9(b):“At all times the Charterers shall provide and pay for the loading and unloading of cargoes”;

Clause 9(e):“The Charterers shall pay for any replacement of any anchor handling/towing/lifting wires and accessories which have been placed on board by the Owners or the Charterers”;

Clause 9(f):“The Charterers shall pay for any fines,taxes or imposts levied on the goods as part of the cargo and/or in containers on board”;

Clause 10(d):“The Charterers shall be liable for any loss or damage to the Owners caused by the supply of unsuitable fuels or fuels which do not comply with the specifications and grades”;

Clause 11:“BIMCO IsPs or MTsA Clauses for time charters parties”;

Clause 12(f)(iv):“The Charterer shall indemnify the Owners in respect of any liability incurred by the Owners under the Bill of Lading or any other contract of carriage as a consequence of the Owners’ proper suspension of and/or withdrawal from any or all of their obligations under this Charter Party”;

Clause 14(d):“Limitations”;

Clause 15(b):“Pollution”;

Clause 18(c):“saving of life and salvage”;

Clause 26:“General Average and New Jason Clause”;

Clause 27:“Both-to-Blame Collision Clause”.

Clause 14(b)(ii)is about the knock-for-knock indemnity the Charterers should bear.There are four exception circumstances of the Charterers’ liability:

Clause 11:“BIMCO IsPs or MTsA Clauses for time charters parties”;

Clause 15(a):“Pollution”;

Clause 16:“Wreck Removal”;

Clause 26:“General Average and New Jason Clause”.

There are far more exceptions to the liability of the Owners than of the Charterers.Such construction of clauses indicate that BIMCO was more in favor of the Owners when formulating SUPPLYTIME 2005,so these clauses are more beneficial to the Owners.

There are differences in the wording between the main body of Clause 14(b)(i)and (ii):first,the scope of the“Owners’ Group”and the“Charterers’ Group”in Clause 14(b)varies;the“Owners’ Group”includes Owners,contractors and subcontractors,employees of any of the foregoing,while the“Charterers’ Group”includes Charterers,contractors and sub-contractors,co-ventures and clients.In other words,when the Charterer and its group members undertake the knock-forknock indemnity for the Owner,the scope of subjects involved is larger.Second,the exceptions to the Charterers’ liability are the loss or damage of properties or personal injury of the Owner’ group,while the exceptions to the Owners’ liability are the loss or damage of properties or personal injury of the Charterer’ group.Property abovementioned refers to any cargo laden upon or carried by the Vessel or her tow,including their Offshore Units.And the subject of personal injury in this clause includes any member of the Charters’ Group or of anyone on board anything towed by the Vessel.In comparison,the scope of exemption for the Owners is wider than that for the Charterers.

According to the standard form issued by BIMCO,the knock-for-knock clauses in SUPPLYTIME 2017 are embodied in Clause 14(a),where subclauses(i)and (ii)are for Owners and Charterers respectively.The wording of subclauses(i)is similar to that of (ii)while the exceptions to liability and body details are not worded in the same way.Clause 14(a)(i)refers to the knock-for-knock liability to be borne by the Owners,in which there are three subclauses in total concerning the exceptions to the Owners’ liability:

Clause 9(e):“The Charterers shall pay for any replacement of any anchor handling/towing/lifting wires and accessories which have been placed on board by the Owners or the Charterers”;

Clause 14(d):“Limitations”;

Clause 18 (c):“saving of life and salvage”.

Clause 14(a)(ii)refers to the knock-for-knock liability to be borne by the Charterers,in which concerning the exceptions to the Charterers’ liability amount to 2 subclauses:

The second half of Clause 9(e):“The Charterers shall pay for any replacement of any anchor handling/towing/lifting wires and accessories,should such equipment be lost or damaged as a result of the Owners’ negligence”;

Clause 16:“Wreck Removal”.

In contrast to exceptions to the Owners’ liability,the ones to the Charterers’liability are slightly more.Apparently,the exclusion clauses are not one-to-one,mainly because the Owner and the Charterer play different roles,enjoy different rights and exercise different obligations in the OSVs chartering business.

The wording details in the body of Clause 14(a)(i)and (ii)differ:first,the exceptions to the Charterers’ liability are the loss or damage of properties or personal injury of the Owners’ group,while the exceptions to the Owners’liability are extended to the loss or damage of properties or personal injury of the Charterers’ group.Property abovementioned refers to any Charterers’ cargo laden upon or carried by the Vessel or her tow,including their Offshore Units.And the subject of personal injury in this clause includes any member of the Charters’ Group as well as anyone on board anything towed by the Vessel.Second,exceptions to the Charterers’ liability were described as“in any way connected with the performance or non-performance of this Charter Party whatsoever or in any circumstances …caused wholly or partially by the act,neglect,breach of duty (whether statutory or otherwise)or default of the Charterers’ Group”.Exceptions to the Charterers’liability were described as“in any way connected with the performance or nonperformance of this Charter Party whatsoever or in any circumstances”.

B.Comparisons between Knock-for-Knock Clauses of sUPPLYTIME 2005 and sUPPLYTIME 2017

1.Comparison of“Owners’ Group”and“Charterer’s Group”

In SUPPLYTIME 2005,“Owners’ Group”and“Charters’ Group”are defined in Clause 14(a):“Owners’ Group”refers to the Owners,and their contractors and sub-contractors,and employees of any of the foregoing.34SUPPLYTIME 2005 Clause 14(a)(i):“the Owners,and their contractors and sub-contractors,and employees of any of the foregoing”.“Charters’ Group”refers to the Charterers,and their contractors,sub-contractors,co-ventures and customers,employees of any of the foregoing.35SUPPLYTIME 2005 Clause 14(a)(i):“the Charterers,and their contractors,sub-contractors,co-ventures and customers,and employees of any of the foregoing”.In SUPPLYTIME 2017,the definitions of“Owners’ Group”and“Charters’ Group”are embodied in“Definitions”.“Owners’Group”means Owners,Owner’s affiliates,contractors and sub-contractors,employees of any of the foregoing.36SUPPLYTIME 2017“Definitions”:“(i)Owners;and (ii)Owners’ affiliates;and (iii)contractors and sub-contractors;and (iv)employees of any of the foregoing”.“Charters’ Group”means Charterers and Charterers’ clients,co-ventures of any of the foregoing,affiliates of any of the foregoing,contractors and sub-contractors,employees of any of any of the foregoing.37SUPPLYTIME 2017“Definitions”:“(i)Charterers and Charterers’ clients;and (ii)coventures of any of the foregoing;and (iii)affiliates of any of the foregoing;and (iv)contractors and sub-contractors;and (v)employees of any of the foregoing”.

Compared with SUPPLYTIME 2005,a significant change in SUPPLYTIME 2017 in terms of“Owners’ Group”and“Charters’ Group”is that the definitions which originally were in Clause 14(a)are moved to“Definitions”at the beginning of the time charter party.It clarifies the definitions of and the philosophy behind the subjects and highlights their importance.Types of specific subjects increased under the amended definition.Such addition in the new version comes along with the diversification of participants in offshore natural resources exploration and marine engineering service activities as well as the increase of subjects involved after disputes have occurred.Allowing more subjects to enjoy the knock-for-knock clauses is more consistent with the original intention and purpose of the clauses.

2.Comparison of Proviso Contents

Proviso of SUPPLYTIME 2005 Clause 14(b)(i)provides twelve liabilities that the Charterers are not exempt from the knock-for-knock scheme,as stated in the previous section.Proviso of SUPPLYTIME 2017 Clause 14(a)(i)provides three liabilities.SUPPLYTIME 2017 Clause 14(a)(i)mainly describes the liabilities to bear by the Owner.

The main part of the clause is about the loss to be borne by the Owner,while the Proviso is about the liability which the Charterer shall not be exempt from,that is,the exceptions to the Owners’ liability.

Compared to SUPPLYTIME 2005,the amount of clauses in SUPPLYTIME 2017 has reduced from twelve to three,with the following remaining:

Clause 9(e):“The Charterers shall pay for any replacement of any anchor handling/towing/lifting wires and accessories which have been placed on board by the Owners or the Charterers”;

Clause 14(d):“Limitations”;

Clause 18(c):“saving of life and salvage”.

In SUPPLYTIME2005,there are four liabilities in the Proviso of Clause 14(b)(ii),and two in the Proviso of Clause 14(a)(ii).In SUPPLYTIME 2017,only the following remained:

The second half of Clause 9(e):“The Charterers shall pay for any replacement of any anchor handling/towing/lifting wires and accessories,should such equipment be lost or damaged as a result of the Owners’ negligence”;

Clause 16:“Wreck Removal”.

The author of this paper holds the opinion that,for the subclauses (i)in these two versions,the content of Proviso has sharply reduced for two reasons.First,the expanded definitions of“Owners’ Group”and“Charters’ Group”allow more participants to be involved in the knock-for-knock clauses,which amendment will help by balancing the chartering market and the relationship between the Owner and the Charterer.Second,the reduction of the Proviso means that the liabilities that the Owner should assume to the Charterer through knock-for-knock regime increases,reflecting the positions of both abovementioned subjects in the chartering market.

Since the global economic crisis in 2008,due to the high number of ships and the sharp decline in demand,the chartering market has gradually changed from Owners’ market to Charterers’ market,forcing the Owners to expand the scope of their responsibilities in order to comply with the changes in market supply and demand.For the two versions of the subclauses (ii),the reduction of Proviso content attributes to similar reason to that of subclauses (i).Out of the balance philosophy behind the BIMCO contracts,fairness and balance are characterized by BIMCO when developing its ethics so as to maintain a healthy development of the chartering market.38Grant Hunter,BIMCO’s Offshore Contracts in Baris Soyer and Andrew Tettenborn eds.,Offshore Contracts and Liabilities,London:Informa Law,2015,p.5.

3.Comparison of“Cause of Loss”

In SUPPLYTIME 2005,property loss,damage or personal injury is“arising out of or in any way connected with the performance of this Charter Party […]caused wholly or partially by the act,neglect,or default of the Charterers’ Group”.39SUPPLYTIME 2005 Clause 14(b)(i):“……arising out of or in any way connected with the performance of this Charter Party,even if such loss,damage,injury or death is caused wholly or partially by the act,neglect,or default of the Charterers’ Group……”.In SUPPLYTIME 2017,property loss,damage or personal injury is“arising out of or in any way connected with the performance or non-performance of this Charter Party whatsoever or in any circumstances […]caused wholly or partially by the act,neglect,breach of duty (whether statutory or otherwise)or default of the Charterers’ Group”.40SUPPLYTIME 2017 Clause 14(a)(i):“……arising out of or in any way connected with the performance or non-performance of this Charter Party whatsoever and in any circumstances,even if such loss,damage or personal injury or death is caused wholly or partially by the act,neglect,breach of duty (whether statutory or otherwise)or default of the Charterers’Group……”.

The words“breach of duty (whether statutory or otherwise)”,“nonperformance”,and“in any way”were added to SUPPLYTIME 2017 in order to prevent application disputes arising out of provisions with similar wording as the SUPPLYTIME 2005.In the A Turtle,41[2009]1 Lloyd’s Rep.177.regarding the knock-for-knock clause,Judge Teare said that“the wording of the Clause was sufficiently wide that,construed literally […]the Clause would protect the tug Owner provided it was actually performing their obligation under the TOWCON,albeit not at the required standard.”In other words,when contractual obligations are no longer being performed,such an act would exclude the operation of a knock-for-knock clause.As stated in the Clause that“arising out of or in any way connected with the performance or non-performance of this Charter Party whatsoever or in any circumstances,even if such loss,damage or personal injury or death is caused wholly or partially by the unseaworthiness of any vessel”,it helps to determine that“act,neglect,breach of duty”actually amounts to a breach of contract.Nevertheless,clearer conditions shall be imposed for application to“breach of contract”.In Clause 14 of SUPPLYTIME 2005,the word“perform”is often given priority.The Clause explicitly refers to the loss or damage that occurred in the performance of the Charter Party,rather than what Judge Teare considered in the A Turtle that“was actually performing their obligation under the TOWCON,albeit not at the required standard”.

Thus,the addition of“breach of obligation (statutory or otherwise)”and“nonperformance”in SUPPLYTIME 2017 clarifies the context that which used to be ambiguous.It further expanded the scope of application of the knock-for-knock clauses and helps to reduce the disputes in shipping andjudicial practice.

C.Evaluation of sUPPLYTIME 2017 Clause 14(a)

No matter how special the business SUPPLYTIME applies to,it is still a time charter party.As a type of contract by which“the Owner provides ships to the Charterer according to contract with crew equipped,the Charterer uses the ships and pays the rent within the prescribed period according to the purposes established upon reaching the agreement,42FU Tingzhong,Matitime Law,Beijing:Law Press China,2007,p.275.(in Chinese)it is essentially“a legal form reflecting transaction”43WANG Liming ed.,Civil Law,5th edition,Beijing:China Renmin University Press,2010,p.360.(in Chinese)as well as“an consensus with joint effect on the civil law”.44WANG Liming,CUI Jianyuan and WANG Yi,Contract Law,3rd edition,Beijing:Peking University Press,2004,p.2.(in Chinese)Therefore,SUPPLYTIME cannot be separated from the basic application and interpretation of the contract.In the chartering practice,the parties usually modify some clauses in a small scope on the basis of the standard form they agree on,and finally formulate a“legal lock”connecting the parties.Evaluation of the definitions of“Owners’ Group”and“Charters’ Group”comes before the one on SUPPLYTIME 2017 Clause 14(a)due to the change in the definition of the subjects.The expanded definition of both subjects is good for the offshore natural resources exploration industry and the OSV chartering industry.Knock-for-knock clauses are originally designed for commercial convenience to deal with complex relationships between the parties in the industry.With the continuous development of ship science and technology,the continuous refinement of social work division,and the increasing subjects participating in this field,expanding scope of applicable subjects of knock-for-knock clauses actually strengthens its effectiveness,and contributes to smoother business practice.

The contents of Proviso in SUPPLYTIME 2017 Clause 14(i)and (ii)are less than the previous version.In SUPPLYTIME 2017,the difference in capacity between these two subjects is slight,indicating that the position of Owner and Charter in the market tends to be balanced.It should be noted that the Proviso items corresponding to different subjects are different.BIMCO removes other items liabilities except the existing ones.The parties should pay attention to the removed contents of Proviso.The liability originally borne by the other party shall be borne by one party after the modification of the contract terms.Additional attention shall be given to the specific business involved in the change so as to reduce the sense of inadaptability and lower the risks borne by one party.

For the changes to the“Cause of Loss”in SUPPLYTIME 2017,the addition of“breach of duty (whether statutory or otherwise)”,“non-performance”,“in any circumstances”:(a)expands the scope and strengthens the effectiveness of the knock-for-knock clauses by adding the liability condition;(b)is consistent with the requirement of the knock-for-knock clause with the judicial practice.The wording of SUPPLYTIME 2017 is clearer and more unambiguous,providing the parties a more transparent and understandable expression for commercial behavior,which reduces the probability of misunderstanding due to ambiguous wording of the contract and lowers the possibility that the court might take a negative attitude towards knock-for-knock clauses which do not conform to the basic principles.

IV.Conclusion

The knock-for-knock clauses of SUPPLYTIME 2017 have been better adapted to shipping practices by expanding the range of bodies and applicable conditions as well as reducing the content of Proviso.Such modification plays a positive role in promoting the development of the industry,increasing the wealth of the whole society,deceasing litigation costs,reducing disputes over the liabilities of parties,and saving judicial resources.However,whether the knock-for-knock clauses could accurately solve problems in responsibility distribution depends on the commercial ability,risk prevention awareness and risk resolution ability of the parties.At present,the knock-for-knock clauses of SUPPLYTIME 2017 should be cautiously and optimistically treated.Aggressive use and unwarranted resistance or exclusion to the clause should be avoided.The effectiveness will be tested in the shipping practices.