Stephenson Harwood LLP partner John Simpson explores some of the legal issues which may arise following the shift to scrubbers and low-sulphur fuel oil after 1 January 2020
Responsibility for fuel remaining on board
Ships which do not have an exhaust gas cleaning system capable of limiting pollutants to the required level will have to burn only low-sulphur fuel oil from 1 January 2020. Such ships will be allowed to have non-compliant fuel on board (but in segregated tanks and not to be used) during a grace period up to 1 March 2020. However, prudent owners will want such fuel to be used or removed before 1 January, as it will be an offence to have non-compliant fuel on board such ships after 1 March.
Responsibilities between owners and charterers for removing non-compliant fuel will depend on the charterparty terms and many owners are inserting terms into their new charters requiring the charterer to use or remove non-compliant fuel before 1 January.
The principal responsibility of the charterer is to supply fuel which is suitable for use on the vessel. That is likely to include an obligation to supply low-sulphur fuel after 1 January 2020 and to use (before 1 January) or remove (before 1 March) non-compliant fuel from the vessel, as it will no longer be suitable for use by the vessel after those dates. However, this remains undecided and there may well be disputes between owners and charterers in relation to the costs and time involved in removing non-compliant fuel oil before the relevant deadlines.
Responsibility for sludge
Under most time charters, it will be the responsibility of the owner to de-sludge the tanks. So long as the charterer continues to supply suitable (ie low sulphur) fuel, the charterer is likely to have complied with its obligations, even if sludge or residues of earlier bunker stems cause the fuel to be non-compliant when a sample drawn from the fuel sampling point is later tested. This remains undecided and may give rise to disputes in relation to lost time and costs, particularly where the vessel has been on time charter to the same charterer since its maiden voyage (and that charterer has therefore been responsible for stemming all of the fuel on board).
Other possible areas for disputes
Unavailability of low-sulphur fuel oil may also cause difficulties for owners, who could be fined for burning non-compliant fuel (or having such fuel on board) if they cannot obtain supplies at the vessel’s ports of call. The Convention recognises that there may be availability problems and provides that owners should fully document any such problems which they experience. This will not guarantee that the owner will not be prosecuted but may result in less harsh enforcement.
Low-sulphur fuel oil prices will be higher than those for non-compliant fuel, so there may be more temptation for unscrupulous bunker suppliers or employees to short stem bunkers. The introduction of mass flow meters will help in relation to accurate fuel quantity measurement. Although there have been some reports of tampering with mass flow meters, authorities (particularly in Singapore) have come down hard on any supplier which has been found to be involved.
With proper preparation, there is every reason that shipowners and charterers will experience a smooth transition to the use of low-sulphur fuel oil into 2020. However, there do remain a number of possible areas where the unwary or the unlucky may find themselves involved in disputes and the better these can be anticipated, the less likely they are to arise.