This article was published in The Marine Insurer issue 20, January 2025.
In June of this year, BIMCO introduced WRECKSTAGE 2024. The release culminates years of hard work undertaken by industry representatives from the ISU and IG, and leading legal professionals together with BIMCO, writes Andreas Øgrey, Senior Vice President, Global Head of Casualty and Major Claims at Skuld and part of the BIMCO sub-committee responsible for the latest revision. The updated version of the first of the three standard wreck removal contracts, BIMCO’s WRECKSTAGE 2024, makes a generational leap forward in contracting for wreck removal.
A lot happens in 14 years. It is easy to forget that back in 2010, when the previous version of the WRECKSTAGE was released, the incidents with the Costa Concordia, Rena, Golden Rey, Kea Trader, X-Press Pearl, Sewol and Wakashio, just to name a few, had not yet happened. Since the release of the 2010 version, we have seen developments in new technology and innovative techniques in removing wrecks. The Nairobi International Convention on the Removal of Wrecks has since been widely adopted and there has been an increase in global consciousness on Environmental, Social and Governance. These factors have influenced how wreck removal contracts have been drafted and operations executed, independently and in conjunction with each other, necessitating a revision of the wreck removal suite of contracts.
Initial talk around revisions began some time ago. The International Salvage Union and The International Group of P&I Clubs were considering revising their Code of Practice for tendering for wreck removals. In the period before this, we had also seen a tendency on some projects to utilise Quantitative Risk Assessment (QRA) as part of the wreck removal tendering and contracting. This introduced a novel way of assessing, discussing and allocating risk in wreck removal contracts. The majority of large wreck removal contracts still utilised traditional risk scoring and risk allocation, or variations of this, but it became more and more evident that parties were choosing bespoke and more sophisticated risk allocation procedures than catered for in the default provisions of the BIMCO 2010 suite of contracts, where the standard clauses were often redacted. Particularly affected was the WRECKSTAGE contract as the go to “qualified lump sum” contract neatly placed between the “true lump sum” (WRECKFIXED) and the “time and materials” contract (WRECKHIRE). A natural starting point for the revision process was WRECKSTAGE, which was often favoured for medium to large projects.
After years of exploration around the topic, BIMCO started revising WRECKSTAGE in early January 2020. A sub-committee was formed consisting of industry representatives from the IG, ISU and leading legal professionals well versed in wreck removal contracting.
A starting point in the discussions was retaining the balance of the contract, but at the same time adjusting to industry demands for a more flexible risk apportionment aligned with clause 4, which governed material changes in position and condition of the wreck. This clause was often deleted wholly or partly during negotiations and replaced with bespoke risk allocation clauses.
Consequently, the 2024 version introduces a new clause 4 specifically dealing with risk allocation. This clause works with both QRA and traditional risk assessment tools. It is an opt- in procedure where the contractor or company can agree to take on risk as defined in a risk allocation matrix which is provided in a new Annex V. As this clause is optional, the parties will need to incorporate it by election in Part I of the form which contains the traditional BIMCO box layout enabling the parties to insert key information relating to the agreement. Annex V allows the parties to name the risks and then allocate those risks based on the specifics of the project. Depending on whether it is a contractor or company risk, the consequences of those risks materialising are set out in clause 4. For company risks, it provides the contractor with direct access to additional remuneration on a time and materials basis. For contractor risks, these fall within the lump sum and there is no additional recourse if the risk materialises.
Clause 4 ties in together with a new clause 5, which replaces the 2010 version of clause 4. These two clauses are intended to work seamlessly together, but where clause 5 applies to change in position and condition of the wreck, it also works where the parties have not incorporated clause 4 by election. Wholesale amendments have been made to clause 5, including new notice provisions, and clearer mechanisms for changes to the lump sum in case of a material change, and consequences if the parties do not agree to a change.
Other key changes are amendments to the Part I boxes that provide a better linkage to Part II as well as additional annexes to better reflect the nature of these projects with possibilities to add additional information. Clause 8, covering delays, provides a more exhaustive code, including more detailed provisions on sub-contracted assets.
The liability clause has seen considerable revision transforming it into a comprehensive “knock for knock” arrangement. This reflects the specialist nature of wreck removal and the amendments that have become common in industry practice. The clauses covering security and payment have been streamlined and the pollution clause now reflects potential impacts to the marine environment.
A common industry amendment was the removal of the expert evaluation clause. A revised expert evaluation clause is hoped to encourage the parties to use this mechanism should disputes arise during the project. It now includes consequences if the parties do not follow the expert’s recommendation.
It is expected that the new WRECKSTAGE 2024 will be welcomed by the industry, requiring fewer additional clauses and amendments. As with any wreck removal project, some changes will still be necessary and remain project specific.
BIMCO and the wreck revision sub-committee have already started work on revising WRECKHIRE and WRECKFIXED with the aim to also bring these contracts into the next generation and complement the suite of wreck removal forms. Both revised versions are planned for publication in 2025.