MOne would hope that most owners either now have a strategy in place to comply with the amendments to annex VI of the International Convention for the Prevention of Pollution of Ships (MARPOL) that comes into effect on 1January 2020, or are at least moving swiftly to towards one. From then on ships will have to use fuel oil with a sulphur content of no more than 0.50% m/m against the current limit of 3.50%. However getting ready will not just mean having the right fuel in the bunker tanks or fitting a scrubber.
Recently Toby Miller, Chris Primikiris and Beatrice Cameli of major international law firm Hill Dickinson wrote a note on the implications for charter parties. The full articles, which covered both time and voyage , can be found on the firm’s website www.hilldickinson.com.
Time charters are likely to affected most. As the Hill Dickinson trio point out, under a time charterparty the responsibility for supplying fuel lies on the charterers. For example, the NYPE 1946 and Shelltime 4 forms state respectively:
Clause 2. ‘That the Charterers shall provide and pay for all the fuel except as otherwise agreed…’
‘7. Charterers to provide and pay for all fuel (except fuel used for domestic services)…’
‘29. Charterers shall supply marine diesel oil/fuel oil with a maximum viscosity of ___ Centistokes a 50 degrees Centigrade/ACGFO for main propulsion and diesel oil/ACGFO for the auxiliaries.’
So, unless scrubbers are fitted to the vessel, it will be charterers who will have to face the impact of the increased cost of compliant fuel, as is usually the case in time charters.
The Hill Dickinson note explains that the obligation on charterers is to provide fuel that is of reasonable general quality and suitable for the type of engines. However, it is common market practice to include a bunker specification clause in the riders or fixture/re-cap.
“Provision is also often made through the use of the standard form BIMCO clauses such as the bunker fuel sulphur content clause or bunker quality and liability clause. However, in their current form neither of these clauses will provide sufficient cover for owners. This is because the former only makes reference to ‘emission control zones’ (e.g. the Baltic Sea, North American ECA, etc.) and the latter only makes reference to ISO 8217 which, in its current format, does not provide an adequate cap.
“Owners should therefore ensure that there is express reference to compliance with MARPOL annex VI and the 0.5% limit in the relevant rider clauses and/or fixture re-cap. Further, any standard or bespoke clauses currently used should be amended accordingly.
The note warns that particular care should be taken when fixing vessels that span into 2020 and beyond.” A number of issues are likely to arise in such circumstances, including the requirement to comply with much stricter bunker specification standards. Decisions will also need to be made as to what is to happen to any unused non-compliant bunkers and who is to bear the cost of the same. For example, whether it would be possible to discharge the bunkers at the next port of call – an issue that will depend on how the port authorities will treat the non-compliant bunkers: if treated as ‘waste’ these could lead to the vessel being detained and issues regarding which party is to bear the associated costs and delay”
The lawyers also comment: “Another question is whether charterers will be able to sell any non-compliant fuel and if so, whether they would suffer a significant loss on the re-sale (as it not clear how the markets are to react).”
And, they say: “Similar considerations will apply on redelivery of the vessel. Bunker redelivery clauses usually specify that the owner is required to accept and pay for all bunkers retained on-board at current market prices. Again, consideration should be given as to what is to happen in circumstances where the vessel is redelivered with non-compliant fuel on-board or in circumstances where the vessel is to be redelivered before but very close to 1 January 2020. Whether acting as owner or charterer, it is important that the charterparty contains suitable clauses that protect the party in question, including indemnities covering losses that may arise from wrong supply, fines and delays.”
Hill Dickinson also considers the use of scrubbers and notes: “There are a number of significant issues that may arise in the context of a time charter. These include responsibility for the scrubbers’ installation and the associated dry-docking; whether owners can be obliged to install a scrubber under the existing terms of a charterparty; and, significantly, what is to happen in the event that the scrubber system is defective.”