BIMCO has published two standard Quiet Enjoyment Letters (QELs), the first standard form QELs available to the industry, to offer a tool that can ensure the charterers’ uninterrupted use of a ship if the owner defaults under the financing facility, says an article published on their website.
Summary
- BIMCO introduces two standard Quiet Enjoyment Letters (QELs), marking a significant development for the industry.
- The purpose is to ensure uninterrupted ship usage for charterers in case of an owner’s default under a financing facility.
- Key features include enabling lenders to assure charterers’ access to the ship and empowering lenders to appoint a replacement owner in case of default.
- Collaborative development involved stakeholders like owners, charterers, lenders, leasing institutions, and legal experts.
- The balanced standard reflects market practices and upholds rights and obligations of all parties involved.
Purpose And Significance
BIMCO has introduced two standard Quiet Enjoyment Letters (QELs), representing a significant development for the industry. These forms aim to ensure uninterrupted use of ships for charterers in the event of an owner’s default under a financing facility. By providing this tool, BIMCO addresses a critical need in the market, enhancing stability and continuity in maritime operations.
Key Features And Obligations
The QELs enable lenders to provide assurance to charterers, who lack a direct contractual relationship with the lender, ensuring their continued access to the ship. Charterers undertake certain commitments, including maintaining the charter party and fulfilling payment obligations. Additionally, lenders are empowered to safeguard their interests by appointing a replacement owner in the event of default.
Collaborative Development Process
The development of these forms involved collaboration among various stakeholders, including owners, charterers, lenders, leasing institutions, and legal experts. Representatives from prominent entities such as Wah Kwong, BHP, Danish Ship Finance, and Linklaters LLP contributed to the comprehensive drafting process.
Balanced Standard Reflecting Market Practice
Ensuring fairness and balance was a primary objective during the drafting process. The resulting QELs represent a culmination of efforts to create a standard that aligns with market practices and upholds the rights and obligations of all parties involved.
Two Versions Available
BIMCO has crafted two versions of the QELs to cater to different needs. The standard QEL requires signatures from the lender, owner, and charterer, while the “short form” version is solely signed by the lender. This flexibility accommodates varying preferences and requirements within the industry.
Applicability And Complementary Resources
The QELs are designed for use across different charter party and ship leasing structures, including bareboat and time charter parties. They complement BIMCO’s existing suite of term sheets for ship financing and sale and leaseback transactions, enhancing the organization’s offerings in supporting maritime transactions.
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Source: bimco
