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.
b. Charterers’ warranties
4. Charterers warrant that throughout the duration of the charterparty they shall not:
(i) request owners to operate the vessel’s AIS other than in accordance with the SOLAS Guidelines; and
(ii) give orders to conduct a ship-to-ship cargo transfer with a vessel whose AIS has not been operated in accordance with the SOLAS Guidelines in the six months prior to such orders.
5. In the event of a breach of 4(i), owners may reject the request and/or terminate the charterparty and/or claim damages.
6. In the event of a breach of 4(ii), owners may refused to conduct the STS cargo operation and request new orders.
Analysis
The guidance accompanying the BIMCO switch off clause emphasises that the primary function of AIS is not as a sanctions tool. However, in light of the focus of the OFAC Maritime Advisory on illicit AIS manipulation as a means of concealing sanctioned activity and the subsequent adoption of AIS clauses, BIMCO has clearly felt it necessary to publish a clause dealing with the matter.
Owners’ warranty
To be entitled to terminate the charterparty, charterers must, in effect, be able to show that a vessel’s AIS was switched off and/or manipulated “knowingly” by owners, in violation of the SOLAS Guidelines, during the charterparty or in the six months prior.
The extension of the warranty to a period preceding the charterparty is to protect charterers against the risk of enforcement action against the vessel during the charterparty due to historic sanctionable trading activity. The period of six months is recommended by BIMCO, as it is stated to be a period in which a pattern of AIS switch offs can be identified. However, it is made clear within the guidance accompanying the clause that a “pattern” of AIS switch offs or manipulation is not required and a single incident may be sufficient to give rise to termination rights, provided charterers can show the switch off or manipulation was “malicious”.
To avoid the potential of 'snap terminations', the clause provides owners a 72 hour window to respond if charterers assert a potential breach. However, the guidance accompanying the clause makes clear that a mere failure from owners to respond to such assertion will not necessarily permit charterers to terminate. Charterers will need to be able to show to an objective standard that owners “knowingly” operated the AIS in a manner inconsistent with the SOLAS Guidelines. A failure by owners to provide a reasonable explanation may contribute towards this, but on its own may not be sufficient. BIMCO suggests charterers may need to rely on evidence from third party providers (i.e., AIS tracking software) to establish this.
Charterers’ warranties
Of the two warranties provided by charterers, the warranty relating to Ship To Ship (“STS”) transfers is likely to be the more controversial.
It is not difficult to imagine a scenario where an owner refuses to conduct an STS operation due to the STS vessel having an AIS gap, i.e., due to uncertainty as to whether the AIS gap is legitimate or malicious. In such a scenario, it is unclear which party may bear liability for any resulting loss of time. This is likely to depend on the wider terms of the charterparty, or may be an area where the parties look to agree terms.
Whilst six months is again the recommended period, BIMCO states that parties may wish to extend this period in high-risk areas.
It should also be noted that BIMCO has clarified that stemming bunkers is not intended to be covered by the clause. Therefore, parties may also wish to include similar contractual provisions in relation to this activity.
Conclusion
Although many will welcome a standardised clause addressing AIS manipulation, it will not be without its detractors. As BIMCO observes, there are a number of legitimate reasons why AIS may not be broadcasting, and many more occasions where a vessel’s AIS is broadcasting but the transmission is not received by due diligence databases. Determining why AIS gaps are identified by software, and therefore whether contractual rights can truly be said to have been triggered, will no doubt give rise to its own challenges.
Client Alert 2021-209
