The new Barecon 2017 insurance clause

By Prof. Dr. Dieter Schwampe, Partner, and Dr. Maximilian Guth, Salary Partner, Arnecke Sibeth Dabelstein, IUMI Professional Partner,

BIMCO recently published the new 2017 standard Bareboat Charter Party Barecon. Various amendments were made and of particular note the insurance clause was redrafted. This was mainly changed following the decision of the UK Supreme Court in the Ocean Victory case (Gard Marine Energy Limited v. China National Chartering Co Ltd and another [2017] UKSC 35).

Clause 17 (a) (ii), (iii) and 19 (a) Barecon 2017 are to ensure that irrespective of the Ocean Victory decision, a recourse claim by the owners and/or their insurers against the Bareboat Charter and third parties is to survive a payment under the hull insurance, even if the Bareboat Charterer is co-assured. In the last sentence of clause 17 (ii) it is specifically stipulated that the payment of the loss insurance proceeds:

“…is no bar to a claim by the owners and/or their insurers against the charterers to seek indemnity by way of subrogation.”

Insurers should be aware that the effect of this new stipulation will depend on the law applicable to the Bareboat Charter as well as to the insurance contract:

1.       The law governing the Bareboat Charter will be decisive on (a) whether owner and charterer in their contract can avail any rights to the insurer as a third party which is not party to the Bareboat Charter. If the governing law does not allow such benefitting agreements, then the insurer will not acquire any rights under the Charter Party, regardless of what the clause says. And (b) it is decisive on whether payment of the insurance proceeds satisfies potential claims also against the Bareboat Charterer. If so, again there would be no room for any claim against the Bareboat Charterer.


2.       The law governing the insurance contract will be decisive (a)  on the question whether claims of the owner against the bareboat charterer are assigned to the insurer or whether the insurer can become subrogated to the owner’s claims in a situation in which the bareboat charterer is protected by the insurance policy as a co-assured, and (b) on the question whether the parties to a Bareboat Charter party can agree the waiver of the  protection provided for the bareboat charterer in an insurance policy. If, under the governing law of the insurance contract, the first question is answered in the negative, then there is no room for a claim of the insurer at all, simply because they did not acquire any rights. If the second question is answered in the negative, then the insurer may have acquired rights, but would not be able to pursue them against the Bareboat Charterer.

Insurers are, therefore, well advised to consider the laws governing the Charter and the insurance contract in order to determine if and to what extent the new clause in the Barcecon 2017 affects their position.