Ship Lay-up management: LAYUPMAN contract from BIMCO

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(www.MaritimeCyprus.com) It is unfortunately a sign of the times that vessels are entering layup. A useful form for such cases is the BIMCO "LAYUPMAN" contract which is designed primarily for vessels which will be placed in cold layup with minimal or no owners’ personnel on board. The contract provides for the de-activation process on arrival at the layup site, which will involve the ship’s personnel as well as the managers, and also the re-activation process at the end of the layup period. The contract is modeled on the "Shipman" 2009 ship management agreement.

LAYUPMAN creates a relationship of agency, where managers carry out their responsibilities ‘for and on behalf of the owner’. There is a crucial area in LAYUPMAN, however, where the manager may agree to provide services as a contractor to the owner. Managers should carefully consider their position before agreeing to do so. In layup management it is vital to clearly apportion activities between the manager and owner. Annex B and Annex C of LAYUPMAN do exactly that. In Annex B, the services will be carried out as agent for and on behalf of the owners. Consequently, if in Annex B the manager agrees to be responsible for the installation of the sea valve blanks, this installation will be arranged by the manager acting in an agency capacity only.

In Annex C, however, the manager can agree on a lump-sum basis for the installation of the blanks. A lump-sum agreement will mean that managers are contracting to provide their services as a contractor. This changes the relationship completely and has a significant impact on the insurance of the manager.

LAYUPMAN requires the owner to procure insurance policies for the vessels, including hull and machinery and protection and indemnity, and it is essential that layup managers are named as joint assured with full cover. The manager will only be joint assured when acting as a layup manager. This may sound obvious. Layup managers, however, will be defined by the H&M and P&I insurers as managers acting as agents but not as contractors. Therefore, if you agree to act as a contractor physically to provide maintenance, repairs, or installation, you may have to take out additional insurance.

Moreover, BIMCO states in its explanatory notes to LAYUPMAN: “It is important to note that such insurance can be costly and is likely to affect the size of the management fee or other fees charged to the owners as such costs cannot normally be absorbed by the managers. For this reason owners and managers should consider their options carefully before agreeing to additional services [Annex C], in particular repair work. Should the managers agree to undertake repair work (on a larger scale than standard maintenance tasks), such work will not be covered by the owners’ insurances.”

It is of interest to note that LAYUPMAN differs from SHIPMAN in its insurance provision as it specifically requires the manager to hold professional indemnity insurance.

LAYUPMAN sample copy of the contract: (click below image to download) Explanatory Notes to LAYUPMAN: (click below image to download)

Other useful resources:

Loss Prevention – Laid-up Vessel Reactivation Guide Loss Prevention – Lay-up and re-commissioning of ships and mobile offshore units

https://youtu.be/J7txa08tsgI

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