Disputes between owners and managers generally relate to whether managers have provided management services to the required standards and/or to budgeting and expenditure issues. SHIPMAN is a ship management contract that may include crew, technical and commercial management and insurance contracts relating to a ship. The last edition of this contract is SHIPMAN 2009.4. Conflicts of interest As part of SHIPMAN 2009, the Manager undertakes to make its “best efforts” to provide services in accordance with “Good Ship Management Practices”. 15 Such a duty of care is an obligation which `is generally understood in the shipping industry`16 and which is intended to interpret and apply the manner in which New York maritime arbitrators are well equipped. However, given that large vessel managers often manage fleets of more than one owner, SHIPMAN 2009 explicitly allows the manager to “allocate available supplies, labour and services in the manner and in the current circumstances” that the manager deems “fair and appropriate”. 17 The potential conflict between a manager`s obligations to an owner and his obligations and loyalty to others is often not obvious. Although the AIFM needs flexibility in this regard, the investor`s owner needs some comfort to ensure that its vessels are managed uniformly compared to other fleets that are part of the MANAGER`s portfolio, in particular fleets that belong to the AIFM`s subsidiaries. Some form of “most-favoured-nation clause” should be seen as a practical way to manage potential conflicts.

Section 17(b)(ii) provides that managers are not liable for the acts or omissions of the crew, even if such acts or omissions are negligent, grossly negligent or intentional. However, this exception does not apply if it is demonstrated that such acts or omissions are due to the failure of managers to provide the necessary crew management services in accordance with Article 5(a) (if any). When managers provide crew management services, they are required to provide qualified personnel who meet the requirements of STCW 95. This includes, but is not limited to, the selection, integration and provision of crew management and training services. From the manager`s point of view, the result in Lin Shipping was clearly not what it had negotiated given the wording of the contract. From the owners` point of view, the result was what they had hoped for during the negotiation process, regardless of the language of the contract. For proprietary investors, Lin Shipping`s teaching regarding negotiating liability provisions comes directly from the Rolling Stones` songbook: managers are not liable to owners unless the managers (or their employees, agents, and/or subcontractors) have negligently, gravely, or intentionally failed to provide the management services. 2. Duration and termination SHIPMAN 2009 provides for a minimum duration of the contract during which the contract cannot be terminated by either party, with the exception of late events and extraordinary events (such as loss or seizure of the ship).10 At the end of the minimum term, the contract will continue on a permanent basis until it is terminated by either party for any reason This is or without giving a reason at the time of termination.11 In Since a ship management contract is a personal service contract, there is nothing in SHIPMAN 2009 that effectively allows the owner to terminate the contract for the initial term if the ship is constantly operating below the market average or according to a detectable financial formula. Such early exit provisions, which are often found in container management agreements, should be considered in cases where commercial management services are provided, in particular in the context of longer-term commitments. In accordance with Article 17(b)(i), the liability of managers is limited to ten (10) times the annual administration fee.

However, this limitation may be broken if it is proven that the loss was caused by an intentional or reckless personal act or omission of managers. It is also not uncommon for managers to get caught in the middle of disputes between shipowners and third-party contractors/suppliers (including shipyards), and managers may also get involved in disputes over ship ownership or charter agreements. As part of the technical management of the vessel, managers are also required to ensure compliance with the ISM Code, and therefore any violation of it could also expose managers to potential liability. The third-party vessel management services available in today`s market are diverse, but the three most common forms are technical management, crew management, and commercial management. Technical management generally includes the provision of services related to the maintenance, repair and operation of the ship, including compliance with flag State requirements and international operating standards. Crew management includes crew selection, training, administration and transportation. Commercial management is mainly about finding and negotiating employment for the ship. Until recently, contracts for ship management services varied considerably in form. In 1988, as a result of the growth of the ship management industry, the Documentation Committee of the Baltic and International Maritime Council (BIMCO)4 began publishing a series of standardized ship management forms known as SHIPMAN, the most recent version being SHIPMAN 2009.5 The current form, which replaced all previous forms6, is often used as a starting point for individual negotiations between the manager and the owners.

Article 13 of SHIPMAN deals with the budgeting and management of funds. This is frequently changed and additional provisions are often included. We advise owners/managers to carefully review all these conditions. First, by agreement or by exercising the right of termination without fault on his part. The SHIPMAN is a contract of indefinite duration that runs until its termination by agreement or termination by a party. If the minimum duration of the contract has expired (as agreed between the parties and indicated in box 18), either party may terminate the contract with two months` notice. SHIPMAN is the industry standard contract for ship management. Managers are appointed by the owners as agents to perform vessel management services as defined in the contract.

This usually includes technical management and may also include crew management and commercial management. Third-party vessel management has grown significantly since the 1980s. Today, with about a third of the world`s deep-sea fleet under some sort of third-party management1, ship managers appear in many maritime transactions for a variety of reasons. For example: Managers have broad authority under the terms of the rating, as agents for and on behalf of the owners, to take such actions as they deem necessary in their “absolute discretion” to provide management services. 1 See www.bimco.org/en/Education/Seascapes/Sea_View/The_modern_ship_manager.aspx (last accessed June 20, 2012).2 Id. 3 R, Giorgi, Challenges in Ship Management, presentation to the Capital Link Forum, 2d Annual Invest in International Shipping Conference (March 20, 2008). 4 Based in Denmark, BIMCO is the largest of the international organizations representing shipowners that control about 65% of the world`s tonnage and have members in more than 120 countries. Members are marine transportation industry stakeholders with a variety of interests, including marine brokerage, management, accounting and law. BIMCO is also an accredited NGO.

5 A copy of SHIPMAN 2009 is available on BIMCO`s website: www.bimco.org/Chartering/Documents/Ship_Management/SHIPMAN2009.aspx (last accessed June 20, 2012).6 The immediate predecessor of SHIPMAN 2009 was Form SHIPMAN 98. 7 46 U.S.C§ 31341(a)(3). 8 46 U.S.C § 31342. 9 See z.B. Community Bank of LaFourche v.M/V MARY ANN VIZIER, 2012 U.S. Dist. LEXIS 66842 (E.D. La.

14 May 2012). 10 SHIPMAN 2009, Part I, Box 18, Part II, Paragraph 21(a). 11 Id.12 SHIPMAN 2009, Part I, Box, 21, and Part II, Section 5, Section 23. 13 SHIPMAN 2009, Part II, Section 5, Clause 23(e).14 See § 5 below.15 SHIPMAN 2009, Part II, Section 3, Clause 8(a).16 Associated Transport Line, LLC v Colonial Marine Industries, Inc., SMA No. 3870 (December 17, 2004) (N.Y. Arb., J. Berg, D. Martowski and D.J. Szostak, Arbitrators).17 SHIPMAN 2009, Part II, Section 3, Clause 8(a).18 See www.bimco.org/Chartering/Documents/Ship_Management/Withdrawn_Forms/SHIPMAN98/ Explanatory_ Notes_SHIPMAN98.aspx (last accessed June 20, 2012).

. . . .