BIMCO Introduces Standard Quiet Enjoyment Letters To Ensure Uninterrupted Use Of Ships

BIMCO has recently published two standard Quiet Enjoyment Letters (abbreviated as QELs), the first-ever standard form QELs that is available to the larger industry, to offer a tool that can maintain the charterers’ undisturbed use of a vessel in case the owner defaults per the financing facility

The QELs will be offered by the lender to the charterer to ensure that the charterer, who doesn’t have a contractual bond with the lender but just with the owner, can quietly keep enjoying the ship only if the owner defaults. In return, the charterer also gives a particular number of undertakings, encompassing those not to cancel the charter party altogether and to keep paying the amounts pending under the charter party. The QELs offer lenders the opportunity to secure rights, like appointing a replacement owner if there is a default.

The two forms bridge a gap in the market wherein no standard form is available at the moment. They are distinct since they are advantageous to the charterers, owners, and lenders, says Nicholas Fell, Chair of BIMCO’s Documentary Committee. The QELs have been developed in a collaborative procedure involving the representatives of the owners (Oldendorff Carriers and Wah Kwong), the charterers (Noble Resources International and BHP), lenders (Danish Ship Finance), leasing bodies (CMB Financial Leasing) and legal specialists (Linklaters and Holland & Knight).

The project’s subcommittee in charge aimed to bring about a balanced standard, which reflects the market practices and represents the rights and obligations of parties, explained Catherine Smith, Chair of the BIMCO QEL subcommittee. Two versions of the QEL have been prepared: a standard and quiet enjoyment letter signed by the lender and agreed upon by the charterer and owner and a “short form” version duly signed by the lender only.

The QELs were drafted for use with bareboat and time charter parties, as well as vessel leasing structures, and also complement the BIMCO’s portfolio of term sheets for vessel financing and vessel sale as well as leaseback transactions that include the SHIPTERM, SHIPLEASE, and SHIPTERM S term sheets.