ii) Installation, maintenance and repair of scrubbers In the context of vessels retrofitted with scrubbers to comply with Regulation 14.1.3, owners and charterers should ensure that any charterparty entered into, adequately allocates responsibility for installation, maintenance and repair. BIMCO have announced that a standard Scrubber clause is due to be published around March – April 2019. The clause is likely to address possible installation cost sharing between owners and charterers, with formulas potentially reflecting the life of the scrubber or the remaining duration of the charterparty. The clause might also deal with scrubber breakdown, and impose requirements for the carriage of a reserve of LSFO to avoid off-hire.
Owners and charterers should additionally review dry-docking and off-hire clauses (in the context of time charterparties), and laytime and demurrage clauses (in the context of voyage charterparties) to ensure that those clauses clearly allocate responsibility for time and costs spent on installation, maintenance and/or repair.
A further consideration for owners, in the context of vessels both able to burn LSFO and also retrofitted with a scrubber, is the extent to which charterers may use scrubbers, instead of sourcing compliant fuel under the contract, and to what extent charterers should bear the additional energy consumption costs incurred as a result.
b) Sanctions and fines Though enforcement will vary from jurisdiction to jurisdiction, non-compliant vessels should expect financial penalties from Port States that have ratified Annex VI. Article 4(4) MARPOL Convention requires that these should be “adequate in severity to discourage violations ... irrespective of where the violations occur.” The EU Sulphur Directive similarly requires Member States to impose penalties that are “effective, proportionate and dissuasive and may include fines ... [that] at least deprive those responsible of the economic benefits derived from their infringement and that those fines gradually increase for repeated infringements.”
Further, certain Port States may pursue and arrest vessels under local rules and regulations. The United States Coast Guard, for example, are empowered to seize vessels in breach of Sulphur Regulations. Concurrently, the US Environmental Pollution Agency (“EPA”) may impose civil fines on non-MARPOL compliant vessels of USD 25,000 per day of non-compliance.
Again, owners and charterers should ensure clear allocation of risk and cost liability in their charterparties.
c) Insurance Owners should also be aware of the potential consequences for their Hull and P&I insurance coverage. Flag States that have ratified Annex VI should in theory revoke or, at least, suspend vessels’ MARPOL certificates, if they do not comply with the Regulation. If this occurs, or if a vessel is otherwise deemed to be unseaworthy, or no longer in class, as a result of non- compliance, owners may be considered to have breached seaworthiness, class and / or other warranties under their Hull and Machinery and / or Protection and Indemnity policies. If these breaches are determined to define the risk as a whole, UK insurers, at least, will be entitled to avoid liability for losses that would otherwise be covered under a policy.
2. CONCLUDING THOUGHTS FOR PART 1 Regulation 14.1.3 is likely to have a dramatic effect on the shipping industry, the extent of which is still largely unknown. As explored above, from a contractual point of view, owners and charterers can best protect themselves by reviewing the terms of their contracts of carriage, and of their insurance policies, to ensure that their contractual positions are adequately protected, and that they are aware of the extent to which any non-compliance may affect policy coverage.
Written by Beth Bradley, Benjamin Bryant and Ioanna Tsekoura.
Beth Bradley E:
bethan.bradley@
clydeco.com
34 | ADMISI - The Ghost In The Machine | November/December 2018
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