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.