1. WHAT ARE THE RISKS OF NON-COMPLIANCE?
a) Contractual liability At a commercial level, non-compliance with Regulation 14.1.3 is likely to give rise to a variety of charterparty claims between owners and charterers. These will likely include claims for unseaworthiness; claims that the vessel has not been properly fitted for service; claims for the costs of deviation required to take on compliant fuel; off-spec bunker claims; disputes over responsibility for managing and segregating different fuels on board; contamination claims; claims for delay occasioned by engine failure, detention or arrest; and disputes over payment of financial penalties incurred. Owners and charterers are therefore advised to assess, and if necessary renegotiate their charterparty terms, focusing in particular on the costs and risk allocation clauses, to ensure that they are not unduly exposed to liability arising from non-compliance. Two considerable areas for potential dispute are addressed below:
i) Bunkering of compliant fuel Under common time charterparty forms, including the NYPE 1946 form and the Shelltime 4 form, it is charterers’ responsibility to supply fuel for the vessel. Time charterparties will normally also include a bunker specification rider clause, and, potentially, additional standard form BIMCO or other clauses, dealing with sulphur content or bunker quality. Owners and charterers should review all clauses concerning fuel and bunkering, to ensure that those clauses are Regulation 14.1.3-compliant. In particular, this will reduce the risk of disputes in circumstances where vessels are visiting port states which have not ratified Annex VI, or smaller ports where non-compliant fuel may not be available. The inclusion of express sampling procedures, to ensure that bunkering operations are Annex VI-compliant (including that bunker delivery notes state the sulphur content of the fuel supplied) are also likely to reduce the occurrence of disputes.
Parties should further consider the adoption of a clause overriding Regulation 18.2 of Annex VI (which establishes that a vessel should not be required to deviate from the intended voyage or unduly delay the voyage, in order to obtain compliant fuel). As well as minimising the scope for disputes (assuming that the vessel is not fitted with a scrubber or other alternative means of compliance), this is relevant from a commercial point of view; increasing numbers of blue-chip companies have now adopted a zero-tolerance policy concerning doing business with shipping companies that are non-compliant with the new Regulation. Cargo owners may also demand a compliance clause before placing cargo with vessels.
BIMCO have recently announced that they will be introducing a series of standard clauses to attempt to address some of the above issues. The first, named the “BIMCO 2020 Global Marine Fuel Sulphur Content Clause for Time Charter Parties” is expected to be published at the end of October 2018. It sets out time charterers’ obligations and liabilities in providing fuel of the required content. Fuel management is to remain the responsibility of owners. A second “bridging” clause, addressing the transitional period around 1 January 2020, is expected to be published between January and February 2019. This clause will likely address the final bunkering of the ship by time charterers prior to redelivery, requirements for sufficient compliant fuel on board at redelivery, tank cleaning costs and disposal of residual fuel, during the period immediately before and after 1 January 2020. Parties should also ensure that the price of fuel on delivery and redelivery is specified, in particular when negotiating longer-term fixtures that will span the transitional period, to avoid disputes.
33 | ADMISI - The Ghost In The Machine | November/December 2018
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