In such circumstances, it is suggested that the consequences of carrying and burning non- compliant fuel would be recoverable from charterers. This is either on the basis that charterers are liable to supply fuels (and have accordingly breached an obligation to supply compliant fuels), and also on the basis of an indemnity for following their orders to stem non-compliant fuel. The fact that non-compliant fuel was not available would not protect charterers from such claims under the charterparty.
A further issue which arises is that a vessel subject to a long term charter may have non-compliant fuel on board post 01 January 2020 (such fuel having been compliant prior to 01 January). Such fuel ought to be removed prior to 1 March 2020. So, who pays for its removal?
If charterers have, prior to 2020, supplied fuel to a vessel which will not comply with the new rules, then if that fuel remains on board, it is suggested that charterers would need to give an order that it be removed prior to 1 March 2020, failing which the vessel will be in breach of the new rules, and Regulation 18(2)(c) would be applied by the relevant state party to MARPOL)
The fuel on board a time chartered vessel belongs to time charterers. Therefore, it is for them to remove it, and it is also theirs to re-sell or re-process as they see fit.
If charterers refuse to give the vessel orders to remove the non-compliant fuel, or do not do so within the relevant time, it is also suggested that the costs of removal would be recoverable from charterers. The legal basis for this would either be breach of an implied term that they are responsible to remove such fuel from the vessel or by way of an indemnity. Any fines levied against the vessel for non-
30 | The Report • March 2019 • Issue 87
compliance post 1 March 2020 would also be recoverable from charterers.
If non-compliant fuel is supplied after 1 March 2020 on account of compliant fuels being unavailable, vessels will likely be required to remove it at the earliest opportunity (but without having to deviate or unduly delay the voyage), and replace it with compliant fuel. This will again be done at charterers’ time and expense.
ii) Scrubbers Installed Ships with scrubbers will not be required to remove non- compliant fuel, and will be able to continue being supplied with it, and burning it on or after 1 March 2020. This gives such vessels a further commercial advantage.
4) BUNKERS ON REDELIVERY / DEFINITION OF BUNKERS
In our example, the cost of the bunkers at both ends would only apply to HSMGO and LSMGO. Actual cost would apply to all other fuels. However, in relation to delivery and redelivery quantities, bunkers have only been defined as “high sulphur fuel” and “low sulphur fuel”, in line with the two categories of bunkers available today.
It may of course be the case that the charterparty fuel prices (agreed pre 2020) do not reflect the cost of buying fuel post 2020. However, the parties will be stuck with the bargain that they have reached, with the result that charterers in our example could end up ‘selling’ bunkers on redelivery to the owners at a significant discount. From 2020 however there will be three categories: fuel with sulphur content of (a) < 0.1% m/m, (b) < 0.5% m/m, and (c) < 3.5% m/m.
It is suggested that post 2020, in all cases, “low sulphur fuel” should sensibly be interpreted to mean fuel with a fuel sulphur content of < 0.1% m/m. So the charter prices would apply accordingly.
i) No Scrubbers Vessels with no scrubbers installed will not be permitted to be supplied with or burn todays so-called “high sulphur fuel”.
In such circumstances it is suggested that “high sulphur fuel” on redelivery should sensibly mean fuel with a sulphur content of < 0.5% m/m, i.e. category (b) above.
ii) Scrubbers installed Vessels with scrubbers installed will be permitted to carry fuel with a sulphur content of < 3.5% m/m.
In such circumstances it is suggested that “high sulphur fuel” on redelivery would mean fuel with a sulphur content of < 3.5% m/m, i.e. fuel which meets the current global limit (category (c) above).
A sensible solution would be for parties to discuss addendums to their existing charterparties to deal with any uncertainty over the quantity and cost of specific fuels.
5) SWITCHING FUELS
Different limits on sulphur emissions exist inside and outside of ECAs, and this will continue beyond 2020. Switching fuels has become commonplace, and will also continue.
Crew competency issues sometimes arise when vessels switch to different fuels and cases have arisen where breakdowns and delays have occurred due to switching over fuels. If issues arise from switching fuels, then the vessel will be off-hire, and owners would not be entitled to an indemnity from Charterers. Such matters are for owners as they relate to the use and management of the vessel.
6) PERFORMANCE WARRANTIES
Charterparties usually contain performance warranties giving specific speed and consumption
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