Norwegian owner first to use Newbuildcon

An undisclosed Norwegian owner has become the first shipowner to use BIMCO?s newly launched global shipbuilding contract, which is believed to have been signed this month with a Chinese yard. Under the first Newbuildcon deal, Singapore was chosen as the jurisdiction, and English law the applicable law. “Chinese shipbuilders are studying the document with a great deal of interest,” said BIMCO deputy secretary-general S?ren Larsen.

BIMCO today held the European launch for Newbuildcon, a global standard contract, described as the most complex and politically charged task the world?s largest shipowners? group has ever undertaken. Although the world?s shipyards snubbed BIMCO?s overtures to help draft the global contract, Larsen yesterday estimated that broader take-up would occur within four or five years.

“We have no reason to come up with a one-sided contract. We want a contract that will be used, it is balanced,” he said. Newbuildcon was “long overdue”, a seminar in London was told today, attended by around 80 European-based lawyers, insurers and owners.

The contract aims to cut disputes and provide a more balanced and transparent alternative to regional Japanese, European or Norwegian-based contracts currently in use. BIMCO said these contracts contained “totally unsatisfactory provisions”, while participants criticised the “cut and paste” mentality they gave to the drafting of shipbuilding contracts.

“Newbuildcon is a global standard shipbuilding contract that?s in the interests of the entire shipbuilding industry,” said BIMCO counsellor and chairman of the steering group and drafting team, Nils-Gustaf Palmgren. “It?s a basic form pre-supposing input from the parties? but I think we start from a higher platform? It definitely facilitates the negotiation process,” he said.

The contract provision that provoked the strongest interest at the seminar allows buyers to communicate directly with classification societies during a newbuilding?s construction. Normally sub-contracted by the yard, class societies are reluctant to deal with buyers to advise them on technical issues during the construction phase.

Also, under Newbuildcon, shipbuilders are liable if the buyers? representative does not notify them that something is wrong during the construction phase. Buyers also have greater protection if the newbuilding order has to be changed to meet new or pending regulations.

“Even if the buyer thinks the new cost quoted is very high [to change the order], he has the authority to say ?go ahead? even if he doesn?t accept the price, and let an arbitration panel accept what is a fair price,” said Chris Kidd, a lawyer with Ince & Co, who was on the BIMCO drafting panel. If a buyer takes delivery of a ship with defects, the builder assumes all risks and liability for the defect, including cost and time, under Newbuildcon.

Larsen said yards were “repeatedly invited” to participate “but chose not to do so”. However, yards did send along observers, who provided “invaluable assistance from the sidelines”. Drafts of Newbuildcon were distributed to shipyards, which did not provide comment, although law firms representing them did.

Newbuildcon includes so-called “green clauses” on recycling and coatings, based on IMO?s guidelines and standards BIMCO is now embarking on a global sales and marketing campaign focusing on Europe, China and Vietnam, as officials admit that there will be a battle to convince yards in Asia that the contract is balanced, not biased.

Japan, South Korea and China attract approximately 80% of the world?s commercial shipbuilding activity. Explanatory notes have been translated into Chinese, Spanish and Japanese.