Bunker Specification Disputes

Legal and Practical Issues in Claims

Handling

Philip Roche, Partner

Alex Gordon, Associate

21 May 2008
This Talk
• Philip Roche – background and effect of the
new air pollution regulations
– the charter party clauses and
practical claims handling
• Alex Gordon – recovery actions against
bunker suppliers
The Problems
• Bunker Fuel – Residual Fuel Oil
• Lesser-refined product contains impurities
– Metals
– Water
– Tar or asphaltines
– Sludge
– Sulphur – 3-7%
– Microbial infestation
Types of Bunker Fuel
• IFO180 - viscosity of the fuel is 180 cSt at 50°C

• IFO380 - viscosity of 380 cSt at 50°C

• MDO - Marine Diesel Oil - blend of gas oil and

heavy oil

• MGO - Marine gas oil - clear and not blended with

heavy fuel
ISO FUEL STANDARD 8217, 1ST REVISION 1996, FOR MARINE RESIDUAL FUELS
• CHARACTERISTIC UNITS LIMIT RMA
• DENSITY @ 15°C kg/m
• VISCOSITY @
• 100°C mm2/S
• APPROX VISC. @50°C * mm2/s
• FLASH POINT °C Min
• POUR POINT, WINTER °C MAX
• POUR POINT SUMMER °C Max
• MCR %m/m
• ASH %m/m
• WATER % V/V
• SULPHUR %m/m
• VANADIUM mg/kg Max
• ALUMINIUM & SILICON mg/kg Max
• TOTAL
• SEDIMENT POT %m/m
Air Pollution

• MARPOL Annex VI
– Revised Annex VI
(to be adopted in
October 2008)
• EU Directive 1999/32/EC
Air Pollution
• Sulphur Oxide – SOx
• Nitrogen Oxide – NOx
• Particulate matter
• Greenhouse Gases including CO2 - GHGs
MARPOL Annex VI
• Two Standards
– Worldwide – max 4.5% m/m
– SECAs – max 1.5% m/m

• EU
– EU Ports - max 1.5% (passenger ships only)
MARPOL Annex VI
• Regulation 14 – Controlling SOx emissions from
ships
– 4.5% worldwide
– 1.5% in the SECAs
– Gas cleaning systems 6g SOx / kWh
– Fuel changeover to be recorded
MARPOL Annex VI
• Regulation 18
– Fuel quality
– sampling
– delivery requirements

• ISO8217 – international marine fuel standard

– 5% Sulphur
Sulphur Emissions Control Areas

• SECA
• Baltic Sea – May 2006
• English Channel /
North Sea
– 22 November 2007

• Where next?
C/P Sulphur Content Clauses
• BIMCO Bunker Fuel Sulphur Content Clause
for Time Charter Parties 2005
• (a) Without prejudice to anything else contained in
this Charter Party, the Charterers shall supply
fuels of such specifications and grades to permit
the Vessel, at all times, to comply with the
maximum sulphur content requirements of any
emission control zone when the Vessel is ordered
to trade within that zone.
BIMCO Bunker Fuel Sulphur Content
Clause
• The Charterers also warrant that any bunker suppliers,
bunker craft operators and bunker surveyors used by the
Charterers to supply such fuels shall comply with
Regulations 14 and 18 of MARPOL Annex VI, including
the Guidelines in respect of sampling and the provision of
bunker delivery notes.
• The Charterers shall indemnify, defend and hold
harmless the Owners in respect of any loss, liability,
delay, fines, costs or expenses arising or resulting from
the Charterers' failure to comply with this Sub-clause (a).
BIMCO Bunker Fuel Sulphur Content
Clause
• (b) Provided always that the Charterers have fulfilled
their obligations in respect of the supply of fuels in
accordance with Sub-clause (a), the Owners warrant
that:
(i) the Vessel shall comply with Regulations 14 and 18
of MARPOL Annex VI and with the requirements of any
emission control zone; and
(ii) the Vessel shall be able to consume fuels of the
required sulphur content
when ordered by the Charterers to trade within any
such zone.
BIMCO Bunker Fuel Sulphur Content
Clause
(c) Subjectto having supplied the Vessel with fuels in
accordance with Sub-clause (a), the Charterers
shall not otherwise be liable for any loss, delay,
fines, costs or expenses arising or resulting from
the Vessel’s failure to comply with Regulations 14
and 18 of MARPOL Annex VI.
C/P Sulphur Content Clauses
Intertanko Clause

1. Owners warrant that the vessel shall comply with

the emission control and other requirements of
Regulations 14 and 18 of MARPOL Annex VI….
Intertanko Clause
2. Charterers warrant that they will supply bunkers:
(a) of sufficient quantity and quality to enable the
vessel to meet the emission control and other
requirements of Regulations 14 and 18 of
MARPOL Annex VI
(b) in accordance with the specifications in the
latest version of ISO 8217 as at the time of supply
and any other specifications contained elsewhere
in this charterparty.
Intertanko Clause
3. Charterers further warrant that all bunker suppliers
shall comply with the requirements of MARPOL
Annex VI and MEPC96(47) in respect of sampling
and the provision of a bunker delivery notes and,
where bunkers are supplied in a state where
MARPOL Annex VI is in force, that suppliers shall
be registered in accordance therewith.
Options
1. Use distillate/LSFO
− Revised MARPOL Annex VI
2. Bunker HS and LSFO – single
fuel and settling tanks
3. Bunker HS and LSFO – dual
lines and tanks
4. Exhaust scrubbers
5. Avoid SECAs
Air Pollution

• MEPC 57 – April 2008

• Revised Annex VI and NOx Technical Code
• Entry into force March 2010
Air Pollution
Summary of Revised Annex VI and NOx
Technical Code

Regulation 14 – Maximum limit of Sulphur content

– Up to 1 January 2012: 4.5%

– After 1 January 2012: 3.5%
– After 1 January 2020: 0.5%
(or 2025 after review in 2018)
Air Pollution
Summary of Revised Annex VI and NOx
Technical Code
Regulation 14 – Maximum sulphur content in fuels
in SECAs

– Up to 1 March 2010: 1.5%

– After 1 March 2010: 1.0%
– After 1 March 2015: 0.1%
Air Pollution
Summary of Revised Annex VI and NOx
Technical Code

• Regulation 4 – Abatement technologies

• Regulation 13 – NOx emissions
• Regulation 17 – Reception facilities
• Regulation 18 – Fuel availability
• Regulation 18 – Fuel Oil quality
Bunkering

• IMO Resolution MEPC 96 (47)

• Guidelines for sampling fuel oil for determination
of compliance with MARPOL Annex VI
Bunkering - Samples

• MEPC 96 (47)
– Ship’s inlet bunker manifold
Not the barge hose connection!
– Drawn continuously throughout delivery
– Method - approved sampler
- continuous drip sampler
- time or flow proportional automatic
sampler
- 400ml
Bunkering - Samples

• The “Fourth” Sample

– 1. for the laboratory
– 2. for the supplier
– 3. for the ship
retained onboard
– 4. the statutory
sample
The Statutory Sample
• Retained for 12 months onboard
• Not for use in commercial
disputes
• Can only be removed by Port
State Inspectors
• Sample log to be signed by
PSC
Bunker Delivery Notes (BDNs)
• Information to be included
– Ship
– Port
– Date
– Supplier and full details
– Product
– Density
– Sulphur Content (%m/m)
– Declaration of supplier
• Retained onboard for 3 years
Disputes

• Ship owner v time charterer (or demise or sub

charterers)

• Ship owner v bunker supplier

• Time / demise charterer v bunker supplier

Standard C/P wordings
• Baltime 1939 (as amended 2001)
Cl.4The Charterers shall provide and pay for
all fuel oil …..”

Cl.5The Charterers at the port of delivery….shall

take over and pay for all fuel oil…
Standard C/P wordings

• NYPE Form (1993), Clause 9(b) :

“The Charterers shall supply bunkers of a quality
suitable for burning in the ship’s engines and
auxiliaries and (our emphasis) which conform to
the specification(s) as set out in Appendix A.”
Standard C/P wordings
• Shelltime 4 :
“Charterers shall supply fuel oil with a maximum
viscosity of …..centistokes at 50 degrees centigrade
and/or marine diesel oil ……
Charterers warrant that all bunkers provided by
them in accordance herewith shall be of a quality
complying with ISO Standard 8217 …..”
Standard C/P wordings
• Boxtime 2004
“Box 14 Fuel Types”
“Cl.6 Charterers obligations
…Charterers shall provide and pay the
costs of the following…
(j) Bunker fuel (see Clause 12).”
Standard C/P wordings
• Clause 12(d) Specification
The Charterers shall supply fuel of the BSMA
100:1989 specification or any amendment thereto
as specified in Box 14.
Standard C/P wordings
• Clause 12(f) Bunkering
The Chief Engineer shall co-operate with the
Charterers’ bunkering agents and fuel suppliers and
comply with their requirements during bunkering,
including, but not limited to, checking, verifying and
acknowledging readings or soundings, meters etc
before, during and after delivery of fuel.
Standard C/P wordings
• Clause 12(f) (continued)
Three (3) samples of all fuel shall be taken during
delivery, sealed and signed by suppliers, Chief
Engineer and Charterers’ agent, each of whom
should retain one sample. If any claim should arise
in respect of the quality or specification of the fuel
supplied, the Owners and Charterers agree to have
samples of the fuel analysed by a mutually agreed
analyst.”
Legal / Practical Issues
• Property
• Quantity
– Seaworthiness
– Call for bunkers
• Quality
– Absolute duty on charterers
– Unusual requirements
Legal / Practical Issues

• Burden of proof as to damage rests on Owners

• Expert evidence (signs of pre – existing damage)
• Main Engine History (logs, spares requisition
requests, Class records etc)
• Disclosure
• Costs
Legal / Practical Issues
• Are the samples representative of the bunkers
delivered?
• Problems with seals, sample numbers, test reports.
• Have the samples been kept?
• Who should test the samples and how?
Claims Against Bunker Supplier
• Sale contract likely to be subject to supplier’s
standard terms and conditions.
• Check to see if back to back with charterparty
– Law and jurisdiction
– sampling
Claims Against Bunker Supplier
• Watch out for limitation of liability clause
– eg “In no event shall Seller's liability for any claim
or claims arising under this contract related to a
particular nomination exceed in the aggregate
the sum of $300,000.00”.
– “Seller is not liable for supplying defective or
improper marine fuel, or marine fuel other than
as ordered by Buyer, unless the same is directly
and solely caused by the negligence of Seller's
own employees, which negligence must be
affirmatively proved” (our emphasis).
Claims Against Bunker Supplier
• Watch out for limitation of liability clause
– “Seller shall not be responsible, whether in
contract or warranty tort or on any other basis, to
buyer, for any special, incidental, consequential,
indirect or exemplary damages, and in no event
shall seller’s total liability on any or all claims
from buyer exceed the price of the goods” (our
emphasis).
Claims Against Bunker Supplier – 1/3
• Any claim by Buyer as to shortage in quantity must
be noted on the marine fuel delivery receipt signed
by Master or Chief Engineer at time of delivery.
• Any claim by Buyer with respect to deficiency in
quality of marine fuels delivered by Seller, or claim
by Buyer that Seller delivered improper or the wrong
kind of marine fuels, must be made as soon as
possible, and in no event more than 30 days from
date of delivery to the Buyer's vessel. (our emphasis
added)
Claims Against Bunker Supplier – 2/3
• On making claim, Buyer shall furnish to Seller:
– a sample of the marine fuel delivered by Seller
– all analysis made by Buyer of the product
• Buyer shall immediately give Seller all reasonable
opportunity to inspect:
– the vessel, including, without limitation, its
engines, fuel tanks, equipment, logs, records;
and
– communications between vessel and Buyer
(and/or owner or operator) and to and from fuel
testing organizations consulted by Buyer or
vessel interests
Claims Against Bunker Supplier – 3/3
• If these conditions are not met within said 30 day
period, Buyer shall be time-barred from making
claim…
• Seller shall not be responsible for any claim arising
from the commingling of marine fuel (our emphasis
added) delivered by Seller with other fuel or
substances aboard Buyer's vessel or aboard the fuel
barge. Claim of any nature does not relieve Buyer of
responsibility to make full and timely payment of all
amounts billed by Seller...
Claims Against Bunker Supplier
• Examples of off-spec bunker disputes
– Co-mingling
– Catalytic fines
Standard C/P wordings
• Shelltime 4 :
“Charterers shall supply fuel oil with a maximum
viscosity of …..centistokes at 50 degrees centigrade
and/or marine diesel oil ……
Charterers warrant that all bunkers provided by them
in accordance herewith shall be of a quality
complying with ISO Standard 8217 …..”
Standard C/P wordings
• NYPE Form (1993), Clause 9(b) :
“The Charterers shall supply bunkers of a quality
suitable for burning in the ship’s engines and
auxiliaries and (our emphasis) which conform to
the specification(s) as set out in Appendix A.”
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