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Published 23 May 2023
As maritime technology gains greater adoption, purchasers of maritime software will need to become familiar with the special contractual provisions that appear in software agreements. This article provides an introduction to the key issues which should be checked and considered when negotiating a maritime software agreement.
Maritime technology is developing at a faster pace than ever before. Digitalisation of the industry has firmly taken hold and while the traditional paper and manual processes remain, increasingly these processes are being replaced or complemented by digital ones. Those processes go beyond the familiar use of IT for onboard or onshore administrative tasks and offer new ways of operating, such as remote monitoring of cargo and equipment and new platforms for connecting with customers.
The breadth and scope of available maritime technology software for both Information Technology (IT) and Operational Technology (OT) applications is beyond the scope of this briefing, but the below diagram gives some idea of the variety of the newer software solutions available:
(Modular) Platforms for whole of supply chain monitoring
Software and dashboards for emissions monitoring and EEXI and CII reporting
Sensors and systems for remote monitoring of cargo
Planned Maintenance Systems software, integrated with OT for remote monitoring of equipment and remote diagnostics
Sensors and systems for remote monitoring of vessel equipment and machinery
Whereas several of the very largest shipping companies have invested in their own in-house technology platforms, many smaller entities simply do not have the funds or in-house IT expertise necessary to develop their own bespoke products and must therefore rely on external suppliers. In this briefing, we look at the key risks and liabilities that arise in the context of contracts for the supply of software particular to the shipping industry, and the key issues to be addressed when entering into such contracts. Naturally, there are more general issues to consider in all software contracts which we have considered in other articles such as this one, here.
The special maritime context
There are certain key structural elements of the maritime industry which we consider provide important context to the discussion that follows. These include:
The different methods of procuring software
Traditionally, software was sold under a licensing agreement, granting the buyer the right to install the software on its own systems and to use the software within the terms of the license. This is often known as “on prem” implementation. More recently, we have seen the development of ‘software as a service’ or ‘SaaS’ in which the supplier grants the buyer access to the software, via an app or web-based platform, with the software itself remaining installed on the supplier's servers and systems. The latter is often done on a subscription model basis, thereby providing more flexibility for the buyer. Additionally, it is possible to buy software and the related intellectual property rights outright, or to purchase software design services for the development of wholly new, bespoke software. Broader issues around SaaS deals are noted here.
Determining the method of procurement is an important first step as it will impact the degree to which the terms and conditions for the supply of the software are open to negotiation. For the purchase of access to existing software, either via a licensing agreement or a SaaS agreement, it is likely that you will be a rule-taker, in the sense that there will be very little scope to negotiate changes to the software supplier's standard terms and conditions, much like buying access to an app on your phone or buying access to Microsoft Office for working from home. Nevertheless, it is still important to consider the terms and conditions carefully and to evaluate what risks and liabilities may arise which may need to be countered via a change in internal policies and / or insurance cover. In addition, nothing is “non-negotiable” when it comes to the most significant points, from experience, but obviously commercial leverage is key.
For the purchase of bespoke software design services, there will likely be much more scope for negotiating the terms with the supplier and it is also highly likely that the selection of the supplier will have taken place following some kind of tender process, such that they should already be aware of your key contractual requirements. We are also starting to see a hybrid of standard software being offered with bespoke add-on modules, which may also give you more room to negotiate.
A fundamental issue which must be considered at the procurement stage and throughout the life cycle of any system contract is cyber-security. The management of cyber risk within a shipping company is now an integral part of the company's Safety Management System following the introduction of IMO Resolution MSC.428(98). It is therefore essential that due diligence is carried out in relation to the supplier's own cyber-risk management processes as part of the procurement process, and that this is reviewed as new products or versions of products are supplied. Owners should develop their own minimum cyber security standard for suppliers and assess compliance against this.
Key risks and liabilities
The key risks and liabilities to look out for when entering into an agreement for the supply of software will differ dependent on the procurement method chosen. We summarise the key issues arising under each method below:
Licensing agreement (software hosted on Owners' servers)
SaaS (subscription model with software hosted on supplier's servers)
Bespoke software design services
How are new versions or patches of the software going to be dealt with – are these included in the licensing fee, or will you have to pay an additional cost for these?
What is the duration of subscription and what are your rights to cancel?
What is the timeline for delivery? As with shipbuilding contracts, what is the procedure (if any) for change orders and subsequent delays?
Ongoing support / maintenance / upgrades – do you want the right to do maintenance yourself (if you have access to the required expertise) or do you want the supplier to take sole responsibility?
If the latter, are the supplier's service levels sufficiently clear, including as to whether any additional fees are payable, how such service is to be provided (remotely or in person) and where in the world such service is going to be available?
The number of permitted users and any geographical access restrictions.
Ongoing support / maintenance / upgrades – do you want the right to do maintenance yourself (if you have access to the required expertise) or do you want supplier to take sole responsibility?
If the latter, are the supplier's obligations regarding maintenance service levels sufficiently clear, including as to whether any additional fees are payable, how such service is to be provided (remotely or in person) and where in the world such service is going to be available?
How are upgrades / patches going to be delivered - on site or remotely ‘over the air’?
Availability of continuous, uninterrupted access to the service, and the supplier's obligations to give advance notice of downtime. Having properly negotiated, clear, service level provisions in this respect is crucial.
How are upgrades / patches going to be delivered? On site or remotely ‘over the air’?
Security of data stored by the supplier.
How will the software be tested on your systems prior to installation? A clear process and timeline should be agreed, with objective measurable criteria for tests to be passed.
Supplier's financial stability – perhaps a particular concern if you are engaging with a new start-up
Clear understanding of what support is available from the supplier, when this available and how this is accessed (for example, can the Master directly seek assistance or does he have to go through a shore-based designated user?)
Are the criteria for acceptance of the software sufficiently clear?
Do you wish to agree that a certain proportion of the fee be retained until the software has been tested and accepted?
For all types of software agreement, particular attention should be paid to the following key issues:
Special considerations for operational technology
For software which is intended to be used with or integrated into OT, the following further issues must also be considered, in addition to any Class, insurance or Flag mandated requirements:
Alongside consideration of the contractual clauses, where new software is adopted a review of operational processes is highly recommended. Key questions to be asked include:
The law surrounding digital products and digitalisation in England & Wales generally remains largely undeveloped, as the legislative process is far slower than the speed of technological developments. However, there are several draft bills in the pipeline alongside ongoing consultations on matters such as electronic trading documents, smart contracts, and digital assets, which suggest that it will be necessary to keep a close eye on statutory and regulatory developments in the near future.
DACB are well-versed in all matters relating to maritime regulations, contractual risk management and the risks and opportunities that accompany the adoption of new technologies, from software to autonomous ships, to cyber-risk, to data governance, to intellectual property and digital asset management. If you are embarking on a digitalisation journey and wish to discuss how you can best protect your business while continuing to pursue innovation, please do not hesitate to contact the authors or your usual DACB contact.
 See the Bimco Guidelines on Cyber Security Onboard Ships for general guidance on cyber-security issues when selecting vendors
 IACS Unified Requirement E26, April 2022, on "Cyber Resilience of Ships"
 IACS Unified Requirement E22, Rev. 2 June 2016, on "On Board Use and Application of Computer Based Systems"
 For example, IACS UR e 26 provides in relation to remote maintenance: "When remote access is used for maintenance, the following requirements shall be complied with in addition to those in 184.108.40.206.1:
- Documentation shall be provided to show how they connect and integrate with the shore side.
- Patches and updates shall be tested and evaluated before they are installed to ensure they are effective and do not result in side effects or cyber events that cannot be tolerated. A confirmation report from the software supplier towards above shall be obtained, prior to undertaking remote update…"
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