From 2020 we have entered into a new decade of shipping which is regulated by new IMO 2020 Sulphur emission regulations. Although, the pandemic has masked the effect of it, still we need to prepare for the way ahead. Keeping that in mind, the Standard Club release bunker handling guidelines for charterparties earlier this year in April. Today we are going to delve deeper into that.
Time Charterparties Bunker Handling
Primary responsibility for compliance with IMO 2020 rests with ship owners. This is normally reflected in charterparty provisions either as express ship owners’ warranties or as part of the vessel’s legal fitness obligations, although the risk and cost of compliance with IMO 2020 can be allocated under the charterparty terms.
This applies in particular to time charterparties.
The majority of time charterparties pre-dating 2020, however, have not been drafted with the new and evolving compliance regime in mind. If unamended, it is likely that the charterparty will not adequately provide for compliance with the Sulphur Cap, Carriage Ban and the transition from
HSHFO to VLSFO (if no Scrubber has been installed).
This creates commercial uncertainty and could lead to disputes.
In particular, options for disposing of HSHFO in light of the Carriage Ban could be limited, and both parties are likely to be reluctant to assume this responsibility where it is not expressly set out in the charterparty
In order to comply with the carriage ban, members with ships without scrubbers will, therefore, need to ensure that any supplied fuel is in compliance with the sulphur limits set out in MARPOL Annex VI, and that any residual high sulphur fuel in the tanks does not push the limit above 0.50%.
With a view to achieving compliance with IMO 2020, Industry bodies such as BIMCO and INTERTANKO have introduced standard industry clauses for time charterparties – see here and here
Areas of Dispute
Primary responsibility for compliance with MARPOL Annex VI rests with shipowners. This is normally reflected in (time and voyage) charterparty provisions. For example, it is fairly common to find that shipowners have warranted that a vessel will comply with International (and National) rules and regulations. In addition, to comply with any fitness obligations under a charterparty, this includes ‘legal fitness’ for the chartered service, and such fitness is likely to include compliance with International (and National) maritime rules and regulations, such as MARPOL Annex VI.
It is anticipated, therefore, that in most cases, the consequences of non-compliance will rest with shipowners in the first instance. Nevertheless, it is possible for the cost and risk of compliance to be allocated by way of contractual arrangement between the parties, although it will also will depend on the nature and specific circumstances of the event of non-compliance itself post 1 January 2020 and the approach to enforcement by any contracting state.
In a time charterparty context, charterers are obliged to pay for and supply fuel to a vessel whilst she is on hire. Clear wording will be required to allocate responsibility and/or liability for non-compliance onto charterers (eg an express obligation to provide compliant fuel and an accompanying indemnity in favour of owners) failing which shipowners will be left to rely on implied terms depending on the nature of the non-compliant event and the charterparty provisions in question. However, in circumstances where the ship is not fit or capable of consuming compliant fuel, liability will, generally, rest with shipowners.
The BIMCO clauses seek to make clear which party bears the responsibility for non-compliance in prescribed circumstances in a time charterparty context
Fines & Penalties
Regulation 11 expressly provides that enforcement and policing of MARPOL Annex VI compliance is to be left to each contracting state. This means that it can be enforced either by a contracting flag state (Administration) or (more likely) a port state authority of a contracting state (eg port state control).
Importantly, however, there is no uniform application of MARPOL Annex VI, and no guidance on the level of potential fines to be levied and/or the form of enforcement (civil or penal action) in the event of non-compliance. An early indication of the likely consequences has recently been provided by Singapore, although such guidance is few and far between, but it is hoped that only wilful non-compliance will carry with it the harshest consequences. For the same reason, it is recommended that vessels complete The Ship Implementation Plan for the Consistent Implementation of 0.50% Sulphur Limit under MARPOL Annex VI [2] and that members take all possible action necessary to ensure compliance.
Whilst primary responsibility is likely to rest with shipowners, it is not inconceivable that there may exist circumstances in which action could be taken against those parties supplying the fuel (eg charterers or bunker suppliers) in a given contracting state either by virtue of the way in which such a state has incorporated MARPOL Annex VI into its domestic law or by operation of local law itself.
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Source: Standard Club
