Reed Smith Client Alerts

Earlier this month BIMCO published its Automatic Identification System (AIS) Switch Off Clause for Time and Voyage Charter Parties 2021, representing the latest in a string of recent clauses bolstering sanctions protection. The clause follows the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) ‘Sanctions Advisory for the Maritime Industry, Energy and Metals Sector, and Related Communities’ of 14 May 2020 (the OFAC Maritime Advisory), which identified AIS manipulation as a common practice used to conceal illicit activity and placed considerable emphasis on AIS monitoring as a sanctions due diligence tool.

In line with these observations, in its guidance to ship owners, operators and charterers, OFAC recommended the incorporation of AIS switch off clauses, allowing for termination where a vessel demonstrates a pattern of multiple instances of AIS switch off, disablement or manipulation that is inconsistent with the Safety of Life at Sea Guidelines (the SOLAS Guidelines).

With the proliferation of ‘ad hoc’ AIS clauses in the market, some of which fail to recognise that in certain circumstances AIS can be switched off for a legitimate purpose, the BIMCO clause aims to achieve a unified approach and “ensure that when this is done legitimately, it does not give rise to termination rights and ensures a balance of the rights and responsibilities between owners and charterers in preventing AIS manipulation to evade sanctions.”

AIS Switch Off Clause for Time and Voyage Charterparties 2021

a. Owners’ warranties

1. Owners warrant that for the six months prior to the arrival of the vessel at the first (or sole) port of loading and throughout the duration of the charterparty, they have not knowingly operated and will not knowingly operate the vessel’s AIS other than in accordance with the SOLAS Guidelines.

2. If charterers reasonably believe owners are in breach of this warranty, they can request owners to explain the breach, with owners having 72 hours to respond.

3. If owners are in fact in breach of this warranty, charterers may terminate the charterparty following expiry of the 72 hour period.