For those of you involved in buying or selling ships, there will shortly be available on the market an alternative form to rival the commonly used Norwegian Sale Form (NSF). The NSF has been the ship sale contract of choice for ship owners, brokers and lawyers since its adoption by the Baltic and Maritime Council (BIMCO) in 1956. Since then it has been amended and updated four times, most recently in 1993. The NSF is currently the clear market standard for the vast majority of ship sale transactions.
As part of its continued drive to promote itself as both a shipping and an international dispute resolution centre, the Singapore Maritime Foundation is imminently set to launch a rival to the NSF, the Singapore Ship Sale Form (SSF). The SSF is designed with the Asian market in mind, envisaging, as it does, that disputes will be heard in Singapore rather than the more traditional locations of London or New York.
For the SSF to displace one of the most widely used forms in the shipping industry will be no small feat. However, we welcome this initiative as it is in tandem with the continued recognition of Singapore as an established centre for dispute resolution.
Currently, the precise wording of the new SSF remains a closely guarded secret as final revisions are still being made to the form. Concerns have been expressed in the shipping industry about the risk of adopting differing regional forms and judgment on the SSF will need to be reserved until it is published and used.
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The NSF has become so widely recognised and accepted that it is often overlooked that there were concerns upon its revision in 1993 that it was too buyer friendly. As a result of this perception, the earlier 1987 version of the NSF, the NSF 87, continued to be used even after 1993 and is in fact still currently available on the BIMCO website.
Possibly as a response to the development of the SSF, BIMCO, together with the Norwegian Shipbrokers’ Association (NSA), conducted an enquiry in early 2010 and consulted with the major interested parties in the industry to determine whether changes needed to be made to the 1993 version of the document.
In our practice and experience, the main issues or areas of concern with the NSF which we have come across include the following:
- clause 7 of the NSF provides that everything on board (and on shore) at the time of the inspection is to be included in the sale, except for personal belongings, spares on order and the remaining bunkers and unused lubricating oils. The onus is, therefore, on the sellers to identify and negotiate any items that are to be excluded from the sale. Otherwise, these items will become the subject of the sale and be transferred to the buyers.
- clause 3 of the NSF provides that payment of the purchase price must be made “on delivery of the Vessel, but not later than 3 banking days after the Vessel is in every respect physically ready for delivery”. There is a common perception in the market that this rather broad wording may allow a reluctant buyer to reject the ship on the basis of a relatively minor defect. This has been of particular concern recently given the fluctuations in vessel prices over the past year or two.
- it is fairly standard for parties to strike through clause 8 of the NSF which details the documentation that needs to be exchanged prior to delivery and to agree a new addendum with a more detailed list of documentation. Whilst clause 8 details the basic sale documents other documents such as commercial invoices, notarised and legalised corporate authorities and certificates of good standing are often required and it would be useful to revise clause 8 to specifically include it .
- one practical issue we see concerns the crew. Our experience suggests that parties do not always discuss the issue of crew until very late in the day, possibly because this is not highlighted for consideration in the NSF. For example:
- Have the buyers arranged for their crew to be on standby to take over the ship at the scheduled time of delivery?
- Are the sellers willing to leave certain key members of their crew (such as the master and chief engineer) on board after delivery to assist the buyer’s crew with the familiarisation process?
That said, consultation undertaken in relation to the NSF concluded that users were generally happy with the document and only relatively small changes were proposed. A joint working group between BIMCO and the NSA is currently looking at these revisions and we expect to hear back on developments in the near future.
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From recent discussions with the Singapore Maritime Foundation, we understand that the target date for publication of the SSF is early 2011. Between now and then, the Singapore Maritime Foundation is conducting road shows in Asia to publicise the launch of the SSF.
The exact wording of the SSF is not yet publicly available, however the one major known difference between the SSF and the NSF relates to the dispute resolution provisions. Clause 16 of the NSF provides users with three options:
- arbitration in London;
- arbitration in New York; or
- arbitration in another jurisdiction as agreed.
In contrast, the SSF will provide, by default, for disputes to be referred to arbitration in Singapore.
The legal system in Singapore is well-respected, reliable and based on familiar common law principles. Singapore possesses world class arbitration institutions such as the Singapore International Arbitration Centre (SIAC) and the Singapore Chamber of Maritime Arbitration (SCMA). In addition, the Singapore courts are supportive of arbitration and hesitate to interfere in arbitration proceedings except in certain clearly defined circumstances.
The importance of Singapore as a global centre for dispute resolution continues to increase and it is hoped that usage of the SSF will promote this trend, particularly for those buyers and sellers based in Asia for whom Singapore would be a more convenient and familiar venue than London or New York.
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The future / conclusion
It remains to be seen just how far the SSF will differ from the NSF. In any event the SSF has already been beneficial as a catalyst to the current review of the NSF and it will be interesting to see whether we will see a new NSF 2011/12 in the near future.
Whilst increased choice can be a good thing, particularly to the extent that the form is tailored to the Asian market, there are concerns about the uncertainty which might result from the introduction of a competing form, especially if the provisions are materially different to NSF.
Definitive conclusions cannot be drawn until the SSF is actually published and no doubt at that time, ship sale practitioners will put the document under the microscope to establish whether, as it is to be hoped, the SSF will match the high standards set by the NSF. We await developments with interest.
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