Readiness for the global sulphur cap - BIMCO's new IMO 2020 clauses
Most of those involved in the shipping industry will by now have a clear picture of the requirements under the IMO 2020 global sulphur cap on marine fuels. Attention has therefore turned to the steps that need to be taken to put those requirements into practice. Two clauses recently introduced by BIMCO are aimed at addressing 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 IMO's MARPOL Annex VI ("IMO 2020"). There has also been much debate with respect to scrubbers and what the best technical solutions may be for compliance with IMO 2020. The contractual aspects of preparation for IMO 2020 have
however arguably received less attention. Nonetheless, the allocation of risk and costs relating to compliance will still need to be regulated in charterparties, in particular in time charterparties, where the owners remain responsible for operating the vessel whilst the charter-
ers 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.
The Marine Fuel Sulphur Content Clause
This clause deals with the allocation of responsibilities and obligations between charterers and owners with respect to the provision of bunkers that comply with the new IMO 2020 requirements. The clause replaces the BIMCO Fuel Sulphur Content Clause 2005, and forms part of BIMCO's Suite of Standard Bunker Clauses for Time Charter Parties.
In summary, the clause stipulates that charterers will be under an obligation to supply fuel which at all times complies with any 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 clause also extends to warranting that bunker suppliers comply with the sulphur content requirements.
Although the clause mainly places obligations on the charterers, the
owners will nonetheless have to warrant that the vessel can comply with the 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 global cap of 3.5 %, the new global cap of 0.5 % (once applicable), the 0.1 % limit in emission control areas (ECAs), particular regulations in port states and any amendments to the foregoing. The clause can therefore be incorporated into time charterparties today and will remain valid after the new IMO 2020 regime comes into force.
The Fuel Transition Clause
The fuel transition clause is not part of the Suite of Standard Bunker Clauses, but is intended to cover the one-off transitional period during the move from high to low sulphur fuels. It is therefore only relevant to time charterparties entered into prior to 1 January 2020 that extend beyond that date and where low sulphur fuels have not been required from day one.
The clause is not only intended 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 of carriage of non-compliant IMO bunkers from 1 March 2020 – the so called "carriage ban".
In brief, the clause provides that charterers prior to 1 January 2020 are under an obligation to supply the vessel with sufficient compliant fuel to reach the nearest bunkering port where compliant fuel is available and requires owners and charterers to "use reasonable endeavours so that no later than 1 January 2020 there shall be no non-compliant fuel carried by the vessel". With regard to the carriage ban, it stipulates that no later than 1 March 2020, there shall be no non-compliant fuel onboard the vessel. The disposal of non-compliant fuel shall be at the charterers' time, risk and cost, whilst the obligation of ensuring that the vessel's bunker tanks are ready to receive compliant fuel is at the owners' time, risk and cost.
The third and missing BIMCO clause – scrubbers
BIMCO was also expected to issue a "scrubber clause" in early 2019 which was expected 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. The clause has, however, 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 always be considered if they are suitable to be included in their original unamended form or if amendments are required. We expect to see bespoke and tailored versions of the clauses being 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 re-wording of other provisions in charterparties, for example bunker delivery/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/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.
- BIMCO's Suite of Standard Bunker Clauses for Time Charter Parties deals with general issues relating to the specifications, grades and quality/suitability of the fuel provided by time charterer.
- 2020 Marine Fuel Sulphur Content Clause deals with the basic obligation to comply with the sulphur content requirements of MARPOL Annex VI and other applicable regulations.
- 2020 Fuel Transition Clause deals with the one-off event of switching between fuel with a maximum sulphur content of 3.50% and fuel with a maximum sulphur content of 0.50%.