UK: Contractual Pitfalls Relating To The Ballast Water Management Convention

Last Updated: 7 February 2014
Article by Fionna Gavin and Richard Hickey

With the Ballast Water Management Convention 2004 (the "Convention") likely to enter into force in the near future, the industry has understandably been focused on meeting its practical requirements. Nonetheless, the importance of considering the impact of the Convention on contractual arrangements should not be forgotten.


The Convention will enter into force 12 months after ratification by 30 States representing at least 35% of world merchant shipping tonnage. As of 2 December 2013, 38 states equalling 30.38% had signed up. The imminent entry into force of the Convention has been announced somewhat prematurely on more than one occasion in the past few years. Nevertheless, it would be prudent to expect the above requirements to be met in the not so distant future.

As such, interested parties should consider reviewing and amending key contracts that are likely to be impacted by the various requirements of the Convention. This article explores some examples.


The potential for the provisions of the Convention to impact the contractual division of liability under charterparties is clear. For example:


Strictly speaking, it is arguably unnecessary for charterers to push for express contractual provisions whereby shipowners warrant that the various requirements of the Convention will be met. This is because owners will, in any case, need to comply in order to pass the various surveys required by the Convention and avoid detention.

That said, prudent charterers are nevertheless likely to desire the additional protection granted by such clauses. Owners, on the other hand, may well argue that a reasonable endeavours obligation is more appropriate.

Another important point to consider during charter negotiations is whether owners warrant only that a chartered vessel meets the requirements of the Convention at the time of entering into the contract, or that it will continue to do so for the duration of the charter.

Ultimately, subject to commercial bargaining power, most parties are likely to agree on compromise clauses. Various model clauses have been produced that attempt to deal with this issue. For example, Ince & Co assisted with the drafting of the pro forma Intertanko ballast water management clauses, which seek to strike a fair balance between charterers and owners.

Laytime and demurrage

Dealing with the simple but important example of laytime and demurrage, it may be prudent for owners and charterers to make provision for the changes introduced by the Convention. For example, the ASBATANKVOY tanker voyage charterparty 1990 provides that:

"7 . . . Time consumed by the vessel in moving from loading or discharging port anchorage to her loading or discharge berth, discharging ballast water or slops, will not count as used laytime." (our emphasis)

Whilst this clause deals with discharging ballast water and cargo tank slops, it is worth bearing in mind that, under the Convention, ballast water tank sediments must be discharged into suitable facilities. Whether time should continue to run during such discharge is worth agreeing at the start of the charter, in the interests of avoiding unnecessary dispute in due course.

Port state control

Article 9 authorises port state control inspections for the purposes of determining whether a ship is in compliance with the requirements of the Convention. Under Article 12(1), all possible efforts are to be made to avoid undue detention or delay. In the event that a vessel is nevertheless unduly detained or delayed, it shall be entitled under Article 12(2) to compensation for "any loss or damage suffered".

Owners and charterers may wish to consider appropriate charter amendments in light of the above. For voyage charters, should any time lost due to an inspection count towards laytime/demurrage? For time charters, should the vessel remain on hire? In the case of both, should the answer depend on whether owners have fully complied with the requirements of the Convention?

Furthermore, what happens if, for example, time lost is for charterers' account, but owners have a right to claim compensation for "any loss or damage suffered"? If this provision is to be interpreted as including any loss or damage suffered by charterers, should owners be obliged under the charter to bring such a claim?

BIMCO has recently commenced the drafting of a clause aimed at allowing a shipowner to recover costs involved in port state control inspections if sampling and testing reveals the vessel to be in compliance with the Convention and national regulations.

Trading limits

Close attention needs to be paid to local and regional rules concerning ballast water.

For example, whilst the situation remains in a state of flux, in future all vessels operating in US waters will need a ballast water treatment system that has been approved by the US Coast Guard. Approval will be required regardless of whether or not the system in question has been type-approved by another maritime administration. There is of course no guarantee that systems approved by another flag state and installed on vessels will pass the US requirements.

Another risk factor to bear in mind is the possible introduction of local rules requiring the treatment of ballast water to standards higher than that mandated by the Convention. For example, New York had been due to bring in rules for the start of 2012 stipulating that owners must purify ballast water to 100 times the standard required by the Convention. This was pushed back due to a recognition that the requisite technology was not yet available, but may still be introduced if and when this is no longer an issue.

Trading limits clauses need to be carefully considered prior to the signing of relevant charterparties, and then regularly reviewed in light of the changing patchwork of international, regional, national, and state regimes.

From the point of view of owners, subject to questions of bargaining power, perhaps the optimum solution is to include a bespoke clause whereby charterers agree to only order the chartered vessel to suitable ports.

Leasing agreements

In the current constrained lending environment, some shipowners are facing difficulties in persuading their lenders to extend finance to cover the sizeable sums required to purchase and install ballast water treatment systems. Increasingly, the potential for third-party leasing companies to provide finance is being explored. However, such deals must be carefully structured in order to avoid potential difficulties arising.

The central issue relates to the status of a ballast water treatment system after installation in a vessel's engine room. Does it remain a chattel i.e. an item of personal property separate to and distinct from the vessel? Or does it become a fixture i.e. part of the vessel?

Whilst much of the case law concerning the annexation of chattels is concerned with land, it is generally accepted that the rules set out in the case law apply where one chattel is attached to another. As such, it is necessary to consider in each case the following questions:

What is the degree of annexation i.e. can the item be physically severed and, if so, how difficult would that be?

This is likely to depend on the type of system installed. Those treatment systems that fit inside a container and are designed to be self-contained should be capable of being relatively easily removed from a vessel. At the other extreme, systems that have been specially designed to fit a particularly crowded engine room may well be difficult to remove.

What was the purpose of the annexation?

In this respect, it is necessary to consider why the treatment system is being installed. Is the intention to permanently and substantially improve the vessel, or simply for a temporary purpose? In the case of specialised vessels used in the offshore oil industry, for example, equipment is often installed by charterers for the duration of a charter and removed at the end of the charter period. The better view in such a case is that, subject to the terms of the specific charterparty in question, the equipment is likely to remain a chattel.

In the case of ballast water treatment systems, the likely answer is that they are intended to provide ballast water treatment for the remainder of the lifetime of the vessel, a factor suggesting they may be classified as fixtures.

Lessors contemplating financing ballast water treatment systems need to take into account the above. In an ideal world, they would wish to protect their position through a mortgage or similar security over the system itself. However, not only is this likely to be barred under the terms of the loan agreed between the shipowner and its finance banks, difficulties arise if the system has become part of the vessel itself.

In our experience, assuming that it is not possible for the leasing company to take security over assets unrelated to the vessel, the safest course of action available to it is to negotiate with the lending banks as to whether the lessor's interest can be adequately secured.

Manufacturers' liability

It might be imagined that once a ballast water treatment system has been released onto the market, it is guaranteed to work. However, caution should be exercised in this regard. According to trade press reports, at least one system has been withdrawn from the market after it failed an evaluation test, despite the fact that it had already been installed on a number of newbuildings.

In terms of attempting to avoid being left in a similar situation, shipowners and their managers will be aware of the need to work closely with Class in order to identify which of the 30+ type-approved systems is suitable for the particular vessel in question. Nonetheless, the question remains whether a manufacturer might be liable for the supply of defective equipment.

In short, the answer very much depends on the terms of the supply contract i.e.:

  • What guarantees is the manufacturer prepared to give concerning the performance of the equipment?; and
  • Is the manufacturer offering a contractual warranty covering the repair or replacement of defective parts?

Needless to say, in most cases, the manufacturer's standard terms are likely to exclude many of the types of loss and damage that a shipowner might expect to suffer in the event that a treatment system fails to operate as advertised, for example loss of hire and other consequential losses such as drydocking costs. Owners may, in certain circumstances, be able to fall back on a claim in tort, although the position in this regard varies significantly depending on the applicable national law.

In this case, prevention is definitely better than cure and well-advised shipowners will concentrate on selecting good quality treatment systems from top-quality manufacturers. Nevertheless, it is at least worth bearing in mind that the terms on offer from manufacturers in respect of the limitation/exclusion of liability, as well as the value of repair warranties, are likely to be variable. Furthermore, in a buyers' market, with many manufacturers vying for trade, and bearing in mind the high cost of some of the treatment systems on offer, shipowners should not discount the potential to negotiate more favourable terms in respect of manufacturers' liability.

Newbuilding contracts

From a legal point of view, the most important point to be emphasised in relation to newbuilding contracts and ballast water treatment systems is the need for planning, clarity and certainty.

For example, owners need to consider whether they want a treatment system installed during the newbuilding process, or whether they want to leave their options open and carry out installation at a later date. If the latter, points to be aware of include:

  • The need to ensure sufficient space is left in the engine room to allow installation of a treatment system in due course; and
  • The engine room plans must take into account the likely need for retrofitting of a treatment system in the future, and should be designed with sufficient flexibility to make this possible.

Ince has reviewed draft clauses in some shipbuilding contracts that indicate an apparent failure on the part of owners (or their advisers) to properly get to grips with the requirements of the Convention. For example, clauses that simply require a vessel to have installed on board a fully functioning Ballast Water Treatment System that complies with the requirements of the Convention, and that is approved by a Class Society. Left unamended, such a clause is arguably inadequate as owners need to make an informed choice regarding which treatment system is most suitable for the vessel, with the help of technical managers and Class. This choice should take into account a long list of factors such as cost, the vessel's intended trading pattern, ease of operation and maintenance requirements.


The challenge posed by the Ballast Water Management Convention is primarily one of ensuring compliance with the new obligations it imposes on vessels, their managers, owners and crew. However, the potential for significant claims for loss and damage to arise out of the areas highlighted above, amongst others, should not be underestimated. The introduction of the Convention will undoubtedly affect the balance of risk and reward in relation to various types of contract, and contracting parties should be alive to this.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions