BIMCO's Low Sulphur Time Charter Party Clauses
Are these Comprehensive?
Contributed by Nicholas Woo of Birketts LLP.
My vessel will be fixed for delivery into a long term time charter in Q4 2019. If I incorporate the BIMCO 2020 Fuel Transition Clause for Time Charter Parties and the BIMCO 2020 Marine Fuel Sulphur Content Clause for Time Charter Parties into my charter party, will this be enough to address all contractual issues arising from the MARPOL Regulations?
NO! The BIMCO clauses do not deal, for example, with:
i) The value/price of compliant bunkers on delivery and redelivery. Owners will therefore need to insert provisions to provide for this, either by way of agreed fixed prices or by way of a bunker adjustment factor.
ii) Where a scrubber installed on the vessel. Note that, for the purposes of a charter party, any scrubber installed will usually form part of the ship’s machinery/equipment, maintenance of which will be owners’ responsibility in the usual way. (And see below regarding disposal of scrubber waste). You should speak to your legal advisers about including a specific "scrubber clause". See also INTERTANKO’s Bunker Compliance Clause for Time Charterparties and the Joint Guidance issues by BIMCO and INTERTANKO that was published on 23 May 2019.
iii) Performance of the vessel. Due to lower density (lower energy content per volume) of compliant fuel, ships’ engines are likely to burn additional bunkers to achieve the speed currently achieved with IFO/HFO. If compliant fuel has lower ignition / combustion properties than current HFO/IFO, this will cause reduced engine power. Alternatively, if a vessel has scrubber/s on board, the scrubber/s are expected to increase the vessel’s fuel consumption because the scrubber/s will require additional electrical power. It is recommended that owners review their vessels’ performance with compliant fuel and adjust the speed and performance warranty in their charter parties, accordingly.
iv) It is recommended that owners insert provisions that require charterers to provide sufficient information and in sufficient time in order for owners to prepare an implementation plan and if required, a Fuel Oil Non-Availability Report ("FONAR").
v) Clause (c) of the Transition Clause suggests that charterers are to clean bunker tanks of pumpable non-compliant fuel only. This may mean that owners may be obliged to clean bunker tanks of unpumpable non-compliant fuel. If owners do not clean the bunker tanks of unpumpables, any contamination of the compliant fuel may be to owners' account. This will include debunkering and disposal costs if this occurs after the Carriage Ban date. Accordingly, it is recommended that the charter party clarifies whose responsibility it will be to clean bunker tanks of unpumpable non-compliant fuel.
vi) Clause (a) of both the Content and Transition clauses provide that the meaning of "Sulphur Content Requirement" may also be dependent on the "applicable lawful authority" (for eg local PSC). Members are recommended to ensure that the power of "lawful authority" under this clause is limited to the MARPOL Annex VI requirements only, either by deleting “and/or by any other applicable lawful authority” or by inserting wording similar to the BIMCO notes, namely to make clear that reference to the "lawful authority" is limited to the MARPOL Regulations only.
vii) The provision in clause (b) of the Contents clause may need amendment to make it clear that the indemnity and provision that the vessel "shall remain on hire throughout" applies in all cases where charterers are in breach of their responsibilities outlined in (b), including where loss of time is suffered after the vessel is redelivered by Charterers.
viii) You should also review the charter party terms as a whole (both proforma and riders) to ensure that there are no provisions that are contradictory to the BIMCO clauses. For example, the description of the bunkers in the BOD and BOR clauses should make reference to MARPOL 0.50% compliant bunkers rather than simply referring to "180 CST" or "ISO 8217" fuel.
If I incorporate the BIMCO Fuel Transition Clause for Time Charter Parties into my charter party, are there any amendments or additional clauses that you would recommend?
i) The BIMCO Fuel Transition Clause for Time Charter Parties provides that: “(c) (i) In order to meet the Requirements, the Charterers shall at their risk, time and cost ensure that any Non-Compliant Fuel remaining on board after the Effective Date shall be discharged from the Vessel’s bunker tanks until such tanks are free of liquid and pumpable fuel latest by the Carriage Ban Date or the redelivery date of the Vessel, whichever occurs first;…” However, this appears a harsh requirement for charterers to fulfil where the non compliant fuel was stemmed by the vessel’s previous charterers or her owners. Charterers may therefore wish to exclude this requirement in such circumstances. Also, your charter party may want to state what is to happen where there is unpumpable fuel on board - see Q1(v) above.
ii) The BIMCO Fuel Transition Clause for Time Charter Parties provides that: “Owners and Charterers shall co-operate and use reasonable endeavours so that no later than the Effective Date there shall be no Non-Compliant Fuel carried for use by the Vessel.” Clearly, an obligation to “co-operate and use reasonable endeavours” is what owners and charterers should be aiming for. However, this is not something that is capable of effective enforcement by legal proceedings if one party refuses to co-operate. Whilst this is not a complete answer, it is suggested that, prior to the commencement of the charter party, owners prepare the ship’s implementation plan (Resolution MEPC.320(74) published in May 2019) and insert clauses in the charter to ensure that charterers are obliged to provide sufficient information in good time to enable the vessel to comply with this implementation plan - see Q1(iv) above
iii) The BIMCO Fuel Transition Clause for Time Charter Parties provides that: ”(e) Segregation - Unless otherwise agreed between Owners and Charterers, each supply of Compliant Fuel shall be bunkered into empty tanks within the Vessel’s natural segregation.” This requires there to be sufficient empty bunker tanks in which to stem compliant fuel. This, in turn, requires a) charterers know how many empty bunker tanks are available on delivery of the vessel and during the charter and b) that owners know when and in what quantity charterers intend to stem bunkers. It is suggested that the charter party details a protocol for how bunkers are managed on board and that, before delivery of the vessel, owners disclose the number and available capacity of the vessel’s bunker tanks and that, during the charter party, a bunker management plan is drawn up by the ship’s chief engineer and agreed between owners and charterers.
For an in depth review of the sulphur fuel BIMCO clauses view the presentation below.
*In this article, bunkers that comply with MARPOL Annex VI, as amended from time to time, and/or by any other applicable lawful authority are described as “compliant bunkers".
HFW's 2020 Sulphur Cap Presentation PDF (2.4 MB)
Off-hire in a nutshell PDF (241.3 KB)
IMO's Low Sulphur Fuel Limit - 1st January 2020 PDF (177.2 KB)
INTERTANKO Bunkers Compliance clauses & FAQ PDF (452 KB)