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IMO 2020 - new BIMCO sulphur clauses

Details

On 10 December 2018 BIMCO released two awaited clauses addressing fuel sulphur content obligations under time charter parties. The clauses have been developed ahead of the fast approaching implementation date for the MARPOL Annex VI global sulphur cap: 1 January 2020. The global cap will limit the permissible sulphur content of fuel emissions to 0.5% m/m outside of designated emission control areas, a significant reduction from the current Annex VI limit of 3.5%. The existing 0.1% m/m limit for emission control areas will remain unaffected. 

New clause 1: BIMCO 2020 Marine Fuel Sulphur Content Clause for Time Charter Parties

This clause deals solely with compliance with sulphur content requirements, and does not cover fuel specifications, grades, quality and suitability. According to the accompanying BIMCO explanatory notes the proposed clause has been intentionally kept ‘short and simple’ and is to complement the existing clauses in time charterparties dealing with bunker issues. This clause is to replace the BIMCO Fuel Sulphur Content Clause 2005.

Comment:

  • The clause contains a charterers’ warranty to supply fuel permitting the vessel at all times to comply with stipulated sulphur limits and an owners’ warranty that the vessel shall comply with sulphur requirements. It is common for charterparties to contain a compliance clause requiring owners to comply with all relevant rules, regulations etc. and that would include MARPOL Annex VI. We recommend that parties amend the wording of the new clause before using it in charterparties so that it defines the parties’ respective responsibilities explicitly.  
  • The clause states that it applies to sulphur content requirements and that this means any sulphur content ‘and related requirements’ stipulated in Annex VI. The words used are wide enough to cover any and all requirements in Annex VI, but the explanatory notes say that the phrase ‘and related requirements’ is a reference to documentary requirements such as bunker delivery notes. It is also interesting to note that under this clause charterers warrant that any bunker suppliers, surveyors etc. shall comply with the sulphur content requirements.

New clause 2: BIMCO 2020 Fuel Transition Clause for Time Charter Parties

This clause has been developed for charterparties with a delivery date before 1 January 2020 and which will extend beyond that date. It is a ‘one off’ clause to facilitate the transition. It sets out steps to ensure compliance when the global cap comes into force on 1 January 2020 and to deal with removal of fuel containing more than 0.5% by the 1 March 2020 carriage ban. 

(In October 2018 the Marine Environment Protection Committee (MEPC 73) confirmed that from 1 March 2020 onwards ships will be banned from carrying non-compliant bunkers (more than 0.5% m/m) on board, unless they are fitted with scrubbers.)

Comment:

  • The clause obliges charterers to supply compliant fuel by 1 January 2020 (so that by then they have sufficient fuel to reach the nearest bunkering port with compliant fuel availability) and to offload non-compliant fuel by 1 March 2020 at the latest.
  • It also obliges owners to ensure that  fuel tanks are fit to receive compliant fuel.
  • In the ordinary course it would follow that a breach by one party of the above responsibilities would entitle the other to claim damages. No term providing for a breach by owners to constitute an off-hire event is included in the clause, so this issue is left to be determined by reference to any off-hire provisions elsewhere in the charterparty.
  • The clause contains a term requiring owners and charterers to cooperate and use reasonable endeavours to rid vessels of fuel with sulphur content in excess of 0.5% by 1 January 2020. What this would entail is open to interpretation, so this provision will not be straightforward to enforce. Its clear purpose, however, is to encourage owners and charterers to burn non-compliant fuel prior to 1 January 2020 to avoid the need to debunker in the period leading up to the carriage ban on 1 March 2020. 
  • The clause does not contain any provision regarding redelivery bunkers. Many parties to charters spanning the transition period will need to discuss what will happen to unused bunkers. Does an obligation that owners pay for redelivery bunkers include bunkers with sulphur content in excess of 0.5%? If so, what will be the value of those bunkers? Additional points to keep in mind include bunker specification, fuel segregation, monitoring, blending, speed and performance. Review and discussions should take place without delay to ensure a smooth transition and avoid disputes without delay to ensure a smooth transition and to avoid disputes.

Conclusion

The new BIMCO clauses are helpful and welcomed. It is to be noted though that these are proposed template clauses that can be amended by the parties as applicable (and subject to their negotiating powers), so it is likely that bespoke tailored versions will be used in most cases. In addition to the issues identified above, owners and charterers should consider agreeing terms dealing with:

  • Ensuring that sufficient suitable fuel can be sourced and made available on board vessels by 1 January 2020
  • Deviation which may be required to take on suitable bunkers (even though MARPOL Annex VI provides that there is no obligation to deviate in order to obtain compliant fuel)
  • Allocation of risk and responsibility in the event of engine damage caused by new lower-sulphur bunker blends

These are a few of the issues arising from the impending global cap.

A third clause dealing with scrubbers is expected to be published by BIMCO in early 2019. 

For more information about the 2020 global sulphur cap see our previous articles

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