As wind farm vessel orders pick up, lawyers at Watson Farley & Williams (WFW) have warned owners to beware of several contractual factors that could pose particular problems with this new vessel type.

Last year, offshore renewable projects achieved an estimated record project sanctioning of $56bn, which for the first time represents a higher amount than offshore oil and gas, totalling an estimated $43bn.

WFW London maritime partner Richard Smith and senior associate Gabriela Roque said: "Similar to the oil and gas sector, the principal commercial issue for a shipowner operating in the offshore wind sector (particularly for those with vessels used during the construction phase) is the relative lack of long-term employment."

They argue this means a significant element of speculation is involved when ordering vessels because future rates are not known.

WFW expects investment in the larger projects will be based on medium-term charter commitments and they emphasise a number of points to which owners will want to pay particular attention.

As the demand for specialised vessels increases, it is likely that for an owner to seal a slot at a yard, talks will have to take place before a charter is in place.

Cover all the bases

That makes agreements for delays or cancellations of vital importance, not just with a shipyard but also with a charterer, the lawyers believe.

WFW said a shipbuilding contract may typically include guarantees in relation to speed, fuel and power consumption, as well as lifting capacity.

The lawyers argue that an owner's rights under a yard deal should be mirrored in the charter.

If a deal is torn up at the shipyard, the owner could still be liable under the charter unless both are aligned.

"It would be unusual to see the builder being liable for consequential damages beyond the contractual liquidated damages and this will be important to address in order to mitigate exposure for the owner," Smith and Roque said.

Beware charterer delays

Similarly, a charterer may insist on having the right to delay taking delivery of a new ship due to the uncertainty of timings in offshore wind farm construction, WFW argues.

The lawyers advised shipowners to replicate similar rights in agreements with yards.

"However, said right may be hard to negotiate with the builder as most shipyards will have critical path issues, such that an unexpected delay on one project can potentially have severe implications on follow on projects," the duo said.

"The owner ought to take this into consideration before agreeing to such right by the charterer under the charter," they added.

WFW also warned against agreeing to early delivery from the shipyard as there may be a longer gap before hire becomes payable.

Owners should also match the delay and delivery provisions under the charter as closely as possible to those under the shipbuilding contract.

"The owner will also want to avoid a situation whereby they incur liquidated damages under the charter with no corresponding right for compensation under the shipbuilding contract," Smith and Roque said.