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VETTING CLAUSES: A REVIEWVETTING CLAUSES: A REVIEW

MUMBAIMUMBAIOctober 3, 2006October 3, 2006

William J. HonanWilliam J. Honan

Holland & Knight LLPHolland & Knight LLPNew YorkNew York

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DEFINITIONDEFINITION

A vetting clause is a charter provision under which the owner warrants as of the date of the vessel's delivery and throughout the charter term that third party oil and/or chemical companies have accepted, and will accept, the vessel.

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SAMPLE VETTING CLAUSESAMPLE VETTING CLAUSE

Owner warrants that, at the time of delivery, the vessel is approved for use by all major oil and chemical companies and will remain so during the currency of this Charter.

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Stellar HopeStellar Hope

Owners warrant that the vessel will Owners warrant that the vessel will be in all respects able to pass safety be in all respects able to pass safety vetting inspections conducted by vetting inspections conducted by Charterers and cargo interests such Charterers and cargo interests such as – not limited to – Shell, Mobil, as – not limited to – Shell, Mobil, Exxon, BP, Texaco, etc.Exxon, BP, Texaco, etc.

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Harold K. HudnerHarold K. Hudner

Off-hire clause 21(a)Off-hire clause 21(a)On each and every occasion that there is loss of On each and every occasion that there is loss of time. . . .time. . . .

Oil Company AcceptanceOil Company AcceptanceOwners warrant that they will arrange for Owners warrant that they will arrange for inspection and have vessel approved and inspection and have vessel approved and maintain such approvals during the Time Charter maintain such approvals during the Time Charter by major oil companies included but not limited to by major oil companies included but not limited to Shell/BP/Mobil/Texaco/Exxon/ Chevron within 90 Shell/BP/Mobil/Texaco/Exxon/ Chevron within 90 days of delivery . . . . Should Owners fail to obtain days of delivery . . . . Should Owners fail to obtain or maintain such approvals. . ., then Charterers or maintain such approvals. . ., then Charterers have the option to take vessel off-hire. have the option to take vessel off-hire.

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Opal SunOpal Sun

The vessel is to hold at all times during this time The vessel is to hold at all times during this time charter the vetting approvals of EXXON, SHELL charter the vetting approvals of EXXON, SHELL (PECTEN), MOBIL, TEXACO, CHEVRON, BP, (PECTEN), MOBIL, TEXACO, CHEVRON, BP, PHILIPS 66, SUN OIL and DOW Chemical. In the PHILIPS 66, SUN OIL and DOW Chemical. In the event that the vessel loses any of the event that the vessel loses any of the aforementioned vetting approvals, the Owner is to aforementioned vetting approvals, the Owner is to undertake immediate corrective action to have the undertake immediate corrective action to have the vetting approval reinstated. Failure to have any vetting approval reinstated. Failure to have any such vetting approval reinstated within five working such vetting approval reinstated within five working days of its loss gives the Charterers the option to days of its loss gives the Charterers the option to call the vessel into an off-hire status.call the vessel into an off-hire status.

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SeaflowerSeaflower

Vessel is presently MOBIL (expiring 27/1/98) CONOCO Vessel is presently MOBIL (expiring 27/1/98) CONOCO (expiring 3/2/98) BP (expiring 28/1/98) and SHELL (expiring (expiring 3/2/98) BP (expiring 28/1/98) and SHELL (expiring 14/1/98) acceptable. Owners guarantee to obtain within 60 14/1/98) acceptable. Owners guarantee to obtain within 60 days (sixty) days EXXON approval in addition to present days (sixty) days EXXON approval in addition to present approvals. On delivery date hire rate will be discounted approvals. On delivery date hire rate will be discounted USD 250. . . for each approval missing . . . If for any USD 250. . . for each approval missing . . . If for any reason, Owner would lose even one of such acceptances reason, Owner would lose even one of such acceptances they must advise Charterers at once and they must they must advise Charterers at once and they must reinstate same within 30 (thirty) days from such occurrence reinstate same within 30 (thirty) days from such occurrence failing which Charterers will be at liberty to cancel charter failing which Charterers will be at liberty to cancel charter party . . . Hire rates will be reinstated once Owner will party . . . Hire rates will be reinstated once Owner will show written evidence of approvals from Major Oil show written evidence of approvals from Major Oil Companies.Companies.

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The effect of the SIRE program is threefold:

1. It reduced, but did not eliminate, the number of entities conducting vessel inspections.

2. It created a uniform set of standards, almost all of which were objective.

3. The results were immediately available to shipowners for comment and were available generally to the SIRE participants, which includes oil and chemical companies, traders and other charterers.

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12.12. StoltStolt

'Owners warrant that, at all times, the vessel, owners and/or managing 'Owners warrant that, at all times, the vessel, owners and/or managing agents will be acceptable to all shippers, chemical companies and agents will be acceptable to all shippers, chemical companies and petroleum companies. Without prejudice to charterer's rights to seek petroleum companies. Without prejudice to charterer's rights to seek damages in the event there is a breach of this warranty, and if the vessel is damages in the event there is a breach of this warranty, and if the vessel is not acceptable for any reason whatsoever, charterer will be entitled to put not acceptable for any reason whatsoever, charterer will be entitled to put the vessel off-hire until these defects are remedies and the vessel is the vessel off-hire until these defects are remedies and the vessel is accepted by the party whose vetting inspection she failed. Any grounds accepted by the party whose vetting inspection she failed. Any grounds shall include without limitation, condition of the vessel and her machinery, shall include without limitation, condition of the vessel and her machinery, competence of crew and officers, adequacy of operational and safety competence of crew and officers, adequacy of operational and safety standards and other items encompassed in safety and vetting inspections standards and other items encompassed in safety and vetting inspections conducted by shippers, chemical companies and petroleum companies. conducted by shippers, chemical companies and petroleum companies. Costs for inspections to be for owners account. Owners to promptly send a Costs for inspections to be for owners account. Owners to promptly send a complete copy of all inspections to the charterer, whether or not the ship is complete copy of all inspections to the charterer, whether or not the ship is found acceptable. Owners warrant that prior to commencement or as soon found acceptable. Owners warrant that prior to commencement or as soon as possible, but not more than three (3) months after commencement of as possible, but not more than three (3) months after commencement of charter party the ship will undergo a chemical distribution institute (CDI) charter party the ship will undergo a chemical distribution institute (CDI) inspection, and promptly send a complete copy of the inspection report to inspection, and promptly send a complete copy of the inspection report to the time charterer.'the time charterer.'

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13.13. VitolVitol

VITOL OIL MAJOR APPROVALS CLAUSEVITOL OIL MAJOR APPROVALS CLAUSEOwners advise that as far as they are aware at time of fixing is approved by Owners advise that as far as they are aware at time of fixing is approved by ___________. Owners also advise that the vessel was inspected by ____ on _______ with ___________. Owners also advise that the vessel was inspected by ____ on _______ with no further information required.no further information required.In case Charterers encounter a problem with the vessel during the charter period due In case Charterers encounter a problem with the vessel during the charter period due to the vessel being unacceptable by any of the aforesaid major oil companies, to the vessel being unacceptable by any of the aforesaid major oil companies, Owners undertake to rectify such deficiencies on the vessel so that the vessel will be Owners undertake to rectify such deficiencies on the vessel so that the vessel will be acceptable to the related party as soon as possible but in any event within sixty (60) acceptable to the related party as soon as possible but in any event within sixty (60) days after Charterers have given written notice to Owners.days after Charterers have given written notice to Owners.If the Owners are unable to restore the vessel's acceptance to the related party as If the Owners are unable to restore the vessel's acceptance to the related party as described above and as a consequence of such non-acceptance, Charterers shall described above and as a consequence of such non-acceptance, Charterers shall have the right to put the vessel off-hire for the actual time lost. It is understood that have the right to put the vessel off-hire for the actual time lost. It is understood that Owners shall not be held responsible if they can show that all possible efforts have Owners shall not be held responsible if they can show that all possible efforts have been made to invite the related party to inspect the vessel but the related party fails been made to invite the related party to inspect the vessel but the related party fails to do so and the vessel remains unacceptable to that party.to do so and the vessel remains unacceptable to that party.Should the Charterers require other approvals, sufficient time and notice is to be Should the Charterers require other approvals, sufficient time and notice is to be given to the Owners who will then arrange for the vessel's inspection. Failure to pass given to the Owners who will then arrange for the vessel's inspection. Failure to pass inspection shall not be considered as off-hire. Approvals at time of fixing to be inspection shall not be considered as off-hire. Approvals at time of fixing to be maintained by Owners. Time and cost for maintaining existing and obtaining maintained by Owners. Time and cost for maintaining existing and obtaining additional approvals to be equally shared between Owners and Charterers. additional approvals to be equally shared between Owners and Charterers.

Expiry dates of each approval are as follows: __________________Expiry dates of each approval are as follows: __________________

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15. Westport Petroleum clause15. Westport Petroleum clause

'Westport clause 7'Westport clause 7Owner warrants that the vessel is in all respects eligible for Owner warrants that the vessel is in all respects eligible for trading within, to and from ranges and areas specified in trading within, to and from ranges and areas specified in the charter party and that at all times she shall have on the charter party and that at all times she shall have on board all necessary certificates, records and other board all necessary certificates, records and other documents required for such services.documents required for such services.Furthermore, to the best of owner's knowledge, the vessel Furthermore, to the best of owner's knowledge, the vessel is completely free to trade within IWL and is not in anyway is completely free to trade within IWL and is not in anyway listed as unacceptable by any major oil company, listed as unacceptable by any major oil company, government, or other organisation whatsoever, nor is she government, or other organisation whatsoever, nor is she deterred of any activity by any port within load or deterred of any activity by any port within load or discharge areas within agreed ranges.'discharge areas within agreed ranges.'

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VETTING CLAUSE GUIDELINESVETTING CLAUSE GUIDELINES

1. Never say anything in a vetting clause unless 1. Never say anything in a vetting clause unless you know it to be true.you know it to be true.

2. Avoid, if possible, words that make compliance 2. Avoid, if possible, words that make compliance a "condition" of the charter.a "condition" of the charter.

3. Be specific as to the inspections that have 3. Be specific as to the inspections that have been obtained and their expiration dates, if applicable.been obtained and their expiration dates, if applicable.

4. Avoid, if possible, a provision requiring 4. Avoid, if possible, a provision requiring compliance in the future or the obtaining of future compliance in the future or the obtaining of future inspections. If such provisions cannot be avoided, couch inspections. If such provisions cannot be avoided, couch owner's obligation in terms of exercising "due diligence."owner's obligation in terms of exercising "due diligence."

5. If the vessel is a newbuilding, provide a liberal 5. If the vessel is a newbuilding, provide a liberal allowance of time to obtain any inspections.allowance of time to obtain any inspections.

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VETTING CLAUSE GUIDELINESVETTING CLAUSE GUIDELINES

6. The vessel should remain on-hire when it is being 6. The vessel should remain on-hire when it is being inspected and any expense should be for charterer's inspected and any expense should be for charterer's account.account.

7. Avoid, if possible, a clause that provides that a 7. Avoid, if possible, a clause that provides that a vetting failure would lead to the vessel being placed off-vetting failure would lead to the vessel being placed off-hire.hire.

8. Avoid, if possible, a provision specifying that hire 8. Avoid, if possible, a provision specifying that hire would be reduced by a specific amount if the vessel were to would be reduced by a specific amount if the vessel were to fail a vetting inspection; Charterer's remedies would be fail a vetting inspection; Charterer's remedies would be those that are available under the general maritime law of those that are available under the general maritime law of the jurisdiction specified in the charter.the jurisdiction specified in the charter.

9. If the Owner must include a description of the 9. If the Owner must include a description of the monetary consequences of a vetting failure, it should be monetary consequences of a vetting failure, it should be limited, if possible, to the loss of time and additional limited, if possible, to the loss of time and additional expenses incurred by the Charterer.expenses incurred by the Charterer.

10. If in doubt seek advice from INTERTANKO, 10. If in doubt seek advice from INTERTANKO, lawyers or a defense club.lawyers or a defense club.

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VETTING CLAUSES: A REVIEWVETTING CLAUSES: A REVIEW

MUMBAIMUMBAIOctober 3, 2006October 3, 2006

William J. HonanWilliam J. Honan

Holland & Knight LLPHolland & Knight LLPNew YorkNew York