In response to the evolving challenges facing the shipping industry in 2019, BIMCO has released new standard sanctions clauses for time and voyage charter parties. The release attempts to respond, in particular, to the United States' more aggressive sanctions regimes for Iran and Venezuela, which have strained the previous BIMCO language. BIMCO states that the updates are designed to address the high risk of violation, incidental to the "complex, imprecisely drafted, often changing" sanctions rules.

BIMCO Sanctions Clause for Time Charter Parties 2020

The new time charter party clause is intended to replace BIMCO's previous Sanctions Clause for Time Charter Parties 2010 and the Designated Entities Clause for Charter Parties 2013.

The principal features of the new clause are:

  1. Definitions of "Sanctioned Activity," "Sanctioning Authority" and "Sanctioned Party" which BIMCO states provide an "objective test."
  2. The inclusion of warranties from owners and charterers with the effect that, at the date of the charter party and throughout the duration of the charter, neither they nor their contractual counterparties are deemed to be Sanctioned Parties. For owners, this includes the vessel's registered owners, bareboat charterers, intermediate disponent owners, managers, the vessel and any substitute. For charterers, the warranty extends to any sub-charterers, shippers, receivers and cargo interests.
  3. An express right of termination for owners and charterers in the event the other party breaches those warranties.
  4. An express obligation on charterers not to issue orders which involve a Sanctioned Party or Sanctioned Activity. This replaces the wording in the 2010 clause whereby owners were not obliged to comply with orders which, in their reasonable judgment, would expose vessel interests to sanctions.
  5. A right for owners to refuse to proceed with employment, and a requirement for charterers to issue alternative voyage orders within 48 hours, if during the performance of a voyage a party or activity becomes sanctioned, failing which owners may discharge any cargo loaded at any safe port or place. The vessel is to remain on hire throughout with charterers responsible for all costs and expenses.

BIMCO Sanctions Clause for Voyage Charter Parties 2020

This is BIMCO's first sanctions clause for voyage charter parties. It largely shares the same key features as the time charter clause.

  1. It contains the same definitions and warranties as those included in the Sanctions Clause for Time Charter Parties 2020, as well as the related rights of termination.
  2. If performance of the charter party involves a Sanctioned Party or Sanctioned Activity, without prejudice to the right of termination, owners may cancel the charter party if loading has not commenced. If loading has commenced, owners have similar rights to demand alternative voyage orders.


The most notable changes under the new clauses are: i) the extension of warranties to include third parties; and ii) the move away from owners' judgment to an "objective test" of what constitutes a Sanctioned Activity.

The warranty extensions demonstrate the recent shift in owners' and charterers' expectations as to the level of due diligence required by their counterparties to ensure sanctions compliance. That, in turn, comes as the authorities responsible for enforcing sanctions, such as the U.S. Department of the Treasury's Office of Foreign Asset Control (OFAC), have put increased focus on KYC and due diligence practices for those operating in the maritime industry. The importance of this is reflected in the rights of termination for breach of the warranties, while the right to also (or alternatively) claim damages allows for flexibility, depending on whether the breach can be remedied.

The shift to an objective test is said by BIMCO to be an attempt to "avoid uncertainty" in the parties' operation of the clauses. However, given the uncertain landscape of U.S. secondary sanctions and conflicting sanctions regimes (e.g., the EU Blocking Regulation), there remain "grey areas," which are not comprehensively addressed.

The position of owners has also arguably been weakened where the right to refuse orders posing a sanctions risk is no longer subject to their "reasonable judgment." The removal of this discretionary element arguably limits an owner's right to protect its position should its view on the sanctions risk of certain trade change due to non-legal factors (e.g., where there is no change in the law, but the governing authority takes a more aggressive enforcement strategy).

Accordingly, while the updated clauses should offer more sanctions protection to charter parties envisaging trade between non-sanctioned countries, they are unlikely to provide sufficient certainty (or flexibility) to parties who continue legitimate trade with jurisdictions subject to comprehensive sanctions programs (e.g., Iran and Venezuela), for which more bespoke wording is advisable.

BIMCO sanctions clauses for ship sale and purchase agreements, ship management agreements, contracts of affreightment and container trade are expected to follow in the coming months.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.