Most parties involved in the shipping industry will by now have a clear picture of the requirements under the International Maritime Organisation (IMO) 2020 global sulphur cap on marine fuels. Therefore, attention has turned to the steps that must be taken to put those requirements into practice. Two clauses recently introduced by the Baltic and International Maritime Council (BIMCO) aim to address certain contractual aspects of the IMO 2020 requirements as they apply to time charterparties.
There has been a significant amount of focus and discussion on the technical and commercial aspects of compliance with the reduction in the global sulphur cap from 3.5% to 0.5%, which will come into force on 1 January 2020 pursuant to the Annex VI of the International Convention for the Prevention of Pollution from Ships (MARPOL). There has also been much debate with respect to scrubbers and the best technical solutions for compliance with IMO 2020. However, the contractual aspects of preparation for IMO 2020 have arguably received less attention. Nonetheless, the allocation of risk and costs relating to compliance must still be regulated in charterparties – in particular, in time charterparties, where owners remain responsible for operating vessels while the charterers are responsible for supplying fuel.
BIMCO has recently published two new standard clauses aimed at tackling some of these issues – namely, the 2020 Marine Fuel Sulphur Content Clause and the 2020 Fuel Transition Clause.
Marine Fuel Sulphur Content Clause
This clause deals with the allocation of responsibility and obligations between charterers and owners with respect to the provision of bunkers that comply with the new requirements. The clause replaces the BIMCO Fuel Sulphur Content Clause 2005 and forms part of BIMCO’s Suite of Standard Bunker Clauses for Time Charterparties.
In summary, the clause stipulates that charterers must supply fuel which at all times complies with applicable sulphur content requirements and that such fuel must comply with the specifications and grades set out elsewhere in the relevant charterparty. The charterers’ responsibilities under the provision also extend to warranting that bunker suppliers comply with the sulphur content requirements.
Although the provision places obligations mainly on charterers, owners will nonetheless have to warrant that the vessel can comply with sulphur content requirements.
The relevant ‘sulphur content requirements’ are defined as “MARPOL Annex VI (as amended from time to time) and/or by any other applicable lawful authority” and, therefore, cover the applicable regulations from time to time, including:
- the current 3.5% global cap;
- the new 0.5% global cap (once applicable);
- the 0.1% limit in emission control areas;
- particular regulations in port states; and
- any amendments to the foregoing.
Therefore, the clause can be incorporated into time charterparties today and will remain valid after the new IMO 2020 regime comes into force.
Fuel Transition Clause
The Fuel Transition Clause is not part of the Suite of Standard Bunker Clauses, but it aims to cover the one-off transitional period during the move from high to low sulphur fuels. Therefore, it is relevant only:
- to time charterparties entered into before 1 January 2020 that extend beyond that date; and
- where low-sulphur fuels have not been required from day one.
The clause not only aims to ensure that the vessel has compliant fuel onboard in time for 1 January 2020, but also deals with issues arising with respect to the prohibition on carriage of non-compliant IMO bunkers from 1 March 2020 – the so called ‘carriage ban’.
In brief, the clause provides:
- that before 1 January 2020 charterers must supply vessels with sufficient compliant fuel to reach the nearest bunkering port where compliant fuel is available; and
- owners and charterers must “use reasonable endeavours so that no later than 1 January 2020 there shall be no non-compliant fuel carried by the vessel”.
In short, the carriage ban stipulates that no later than 1 March 2020 there must be no non-compliant fuel onboard the vessel. The disposal of non-compliant fuel will be at the charterers’ time, risk and cost, while the obligation of ensuring that a vessel’s bunker tanks are ready to receive compliant fuel is at the owners’ time, risk and cost.
Third and missing BIMCO clause – scrubbers
BIMCO was also expected to issue a ‘scrubber clause’ in early 2019 to:
- address issues arising with respect to the cost, installation and use of scrubbers; and
- potentially regulate off-hire events resulting from the breakdown of scrubbers.
However, the clause has not yet been published.
The new BIMCO clauses attempt to address several of the key contractual issues relating to compliance with IMO 2020. However, as with all standard clauses, their inclusion in charterparties should be evaluated on a case-by-case basis and it should be considered:
- whether they are suitable to be included in their original unamended form; or
- whether amendments are required.
It is expected that bespoke and tailored versions of the clauses will be used.
From a drafting point of view, the consequences of breaching the new clauses are not dealt with in the clauses themselves and will have to be regulated elsewhere in the relevant charterparty. The inclusion of the new clauses may also require a re-wording of other provisions in charterparties (eg, bunker delivery and redelivery clauses should be carefully considered with respect to the types of fuels onboard and the prices to be paid) – in particular, for time charterparties spanning 1 January 2020 up to the carriage ban date of 1 March 2020.
The new clauses also require owners and charterers to cooperate to facilitate bunkering and debunkering operations. This is likely to result in disputes. Further, the requirement under the transition clause to use reasonable endeavours to ensure that there is no non-compliant fuel onboard by 1 January 2020 may prove difficult to enforce as the meaning of ‘reasonable endeavours’ is open to interpretation under English law.