Mudit Singh: Increasing Bunker Disputes

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The Club has recently experienced an increase in the number of bunker quality dispute claims arising from the delivery of allegedly off-specification or contaminated bunkers.  These claims have ranged from variation in the parameters of the bunker supplied to presence of contaminants, such as ash and microbes.  These claims can result in expensive claims not only because of the bunkers themselves but also related costs such as machinery damage, time lost, tank cleaning costs.

Bunker disputes are fraught with problems, both on an evidentiary and legal basis.  This is perhaps not surprising given that both the bunker supplier and receiver are working to strict schedules often resulting in important aspects of the bunker delivery operations being overlooked.  This article focuses on bunker quality and contamination issues, with the aim of providing Members with helpful tips for collating evidence and advice on contractual terms.

Contract terms

Depending on the charter arrangements, either the owner or the charterer will be responsible for ordering and arranging bunkers to be supplied to the vessel.  Bunker receivers may find supplier’s terms onerous.  In particular, the liability exclusion clauses and short time periods (commonly 15 days for quantity and 30 days for quality) within which a claim has to be presented in a jurisdiction of the supplier’s choice.  BIMCO has issued a more balanced Standard Bunker Contract which Members may find helpful and we encourage them to use it as a starting point when negotiating a supply contract.

It is also important that the correct grade of bunkers, based on the engine type and applicable regulations, is ordered and specified in sale and purchase agreement.  To avoid any confusion, it is best to specify the grade of bunkers by making a reference to their ISO 8217 grade.  Blending of bunkers in the receiving ship’s tanks or in the hoses should be avoided to ensure homogenous bunkers are delivered.

Practical tips for Members

At the time of delivery, the ship’s crew should be presented with a bunker delivery receipt detailing the specifications of bunkers being supplied.  Prior to taking delivery, the ship’s crew should ensure that these details correspond with the stemmed specification.  Unfortunately, we have been notified of claims where the crew failed to perform these checks and when the discrepancy was realised, it was too late to rectify the mistake.

Sampling is the most crucial evidence to preserve, as it will be relied upon if a dispute later arises regarding the quality of bunkers supplied.  Samples of bunkers already in the receiving ship’s tanks should be collected prior to commencement of bunkering operations and the mixing of new and old bunkers should be avoided as much as possible.

It is usual practice that the ship’s crew are presented with samples collected on board the bunker barge.  In most cases, this is the agreed sampling procedure under the supply contract and these samples are considered as representative.  If this is indeed the case, the ship’s crew should attend the sampling on the barge to ensure that correct sampling procedures are followed and sufficient quantity of these samples is retained for future analysis (MARPOL provides guidelines in Resolution MEPC 182(59) which can be followed). Sampling equipment should be clean and tamper proof and samples collected must be sealed and retained.  The ship’s crew should ensure that the samples retained for analysis are in addition to the mandatory MARPOL samples.

Upon completion of bunkering, the supplier should present a Bunker Delivery Note (complying with MARPOL Annex VI Reg. 18.5) to the ship’s crew and a copy should be retained by the ship’s staff.

Newly supplied bunkers should only be used once their samples have been analysed and they are found to be on-specification and free of contaminants.  Not doing so exposes the ship’s machinery to damage from off-spec and/or contaminated bunkers and the owners of the vessel to a breach of MARPOL or other local regulations governing the specification of bunkers to be consumed by the vessel.  ISM and MARPOL checklists and records must also be preserved to demonstrate that proper procedures were followed.

If the bunkers are found to be off-specification or contaminated they should not be used and a surveyor should immediately be appointed to collect the samples – preferably jointly with the bunker supplier’s appointed surveyor.  Depending on the degree to which the bunkers are found to be off-specification or contaminated, an analysis (preferably jointly and at a mutually agreed laboratory) of these samples will need to be carried out.  Bunker quality experts may also need to be appointed to advise on mitigation of damage to the ship and to suggest further appropriate analysis which bolsters the claim/defence.

Members are advised to also explore indemnity provisions in other relevant contracts, such as charterparties, when faced with bunker quality issues.  Timely action and notification is the key to avoid expensive claims and successful indemnity action against third parties involved in the bunker quality dispute.

How can the Club help?

The Legal Assistance & Defence Cover (LADC) provided by the Club includes support for legal costs in respect of the supply of inferior, unsatisfactory or unsuitable fuel (see Rule 6, Section 3A(v)).  Therefore, if Members are faced with a scenario where they believe a claim of this nature may arise or has arisen, we encourage Members to contact the LADC team for assistance.

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Source: The Shipowners’ Club

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