Knock-for-knock
As to liability, the situation changes where the charter provides for a knock-for-knock regime akin to those widely adopted in the offshore industry and seen, perhaps most often, in the heavy lift trade in the Heavycon 2007 form. This standard form contract does not appear so frequently but, when it is, is most often used where a singularly large cargo is to be loaded with no other separate parcels carried concurrently. Clause 22 sets out the knock-for-knock terms, which provide for a simple mechanism by which, amongst other things, the charterers are relieved of responsibility for damage to the ship and, by equality of arms, the owners are not responsible for damage to cargo. Aside from assessing whether such a liability regime is suitable for the contract, charterers should confirm that, should these knock-for- knock terms be agreed, their insurance remains in place as regards potential cargo damage during loading, discharge and any re-stowage operations.
Considerations for charterers
In summary, careful and precise stowage of project cargo is paramount; mistakes can be expensive. A charterer as the Merchant should ensure cargo documents are accurate, including the description as to dimensions and weight, to avoid the financial consequences of, amongst other things, shut-out cargo, whereas a charterer as Operator will rely on their expertise in drawing up an appropriate stowage plan.
In addition to operational care, charterers may benefit from negotiating their contract terms prudently. At all times, a clear allocation in the contract of the responsibility for cargo loading and the accompanying costs is vital. Further, whilst providers of heavy lift tonnage were in a stronger negotiating position during the pandemic, market forces have tilted this balance away from the ship to cargo. As such, in less adverse
conditions, a charterer may consider it expedient to deny the owner any option for a part cargo. This would preclude the risk of the charterer becoming liable for lost earnings and other claims arising out of a shut-out part cargo. Further, charterers would be wise to assure themselves of the appropriate form of the contract, including the suitability of any proposals for a knock- for-knock regime, which can create an exposure if the position is not carefully aligned up and down the contractual chain.
As is known, Skuld requires certain approved terms in contracts for the carriage of cargo, as set out in Appendix 6. For heavy lift carriage, Skuld has approved the use of the Heavycon form, provided that it is not materially amended (Section 4 of Appendix 6).
Finally, as cargo operations in this trade are complex and damage is potentially very expensive, we would emphasise the necessity of accurately clausing bills to reflect any pre-existing damage and referring to any remarks in the mate’s receipts; and where cargo is carried on deck, this needs to be stated in the bills. Charterers should always refer in good time questions of cover arising out of unorthodox clauses and restowage operations at an intermediate port to their underwriting contact in Skuld.
How can Skuld help?
As described above, the handling and transport of project and heavylift cargoes can be quite complex and may lead to both P&I and FD&D disputes, as well as more practical questions regarding the operations’ impact on P&I cover. Skuld’s claims handlers and underwriters are available to assist the assured with practical advice and potential additional covers if needed, and ensure that the operations are not interrupted and can continue without cover being prejudiced.
Article prepared by Skuld.
78 | ISSUE 109 | SEP 2024 | THE REPORT
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