There has been much recent press expressing concerns about poor quality and off-spec bunkers as well as the impending cut of sulphur emission limits from 1 January 2015. These concerns have been echoed by Jens Maul Jørgensen, the new chairman of the International Bunker Industry Association, who recently described off-spec bunkers as a serious problem.
In the offshore industry, bunkers are currently often a greater expense than daily hire rates, meaning the supply of bunkers is a major financial commitment for charterers.
The standard liability position under the Supplytime forms is the “knock-for-knock” provision, whereby each party bears the risk and responsibility for injuries and losses affecting its own employees and equipment, i.e. “your people, your property, your problem”.
Under Supplytime 89, any damage cause to a vessel’s engine or machinery, and any time lost due to breakdowns, as a result of off-spec bunkers supplied by charterers would still be for owners’ account. In the Supplytime 2005 form, in response to increasing claims due to off-spec bunkers, damage due to the supply of “unsuitable” bunkers is carved out of the knock-for-knock regime under clause 10(d). This places liability on the charterers for any “unsuitable” fuel used and supplied by charterers which causes damage to the vessel. “Unsuitable” is not a term of art or a defined term in the contract. However, in its explanatory notes, BIMCO has confirmed that charterers will be liable if they provide fuel that is contractually ‘on-spec’ but nevertheless causes damage to the vessel’s engine (for example due to additives by the bunker suppliers).
In any event, both Supplytime forms include a “hazardous and noxious substances” clause making charterers always responsible for any losses, damages or liabilities suffered by owners caused by“hazardous and noxious substances”. It is arguable that bunkers, even if used as fuel rather than carried as cargo, fall within the IMO Convention on the Carriage of Hazardous and Noxious Substances by Sea 1996. In that case, any losses caused by defective bunkers would fall outside the knock-for-knock regime in both Supplytime forms.
Some commentators have suggested that the carve-out in the 2005 form and the possibility that bunkers could be “hazardous and noxious substances” cannot be right. It remains to be seen if this will be addressed in the next edition of Supplytime which BIMCO has recently announced is being undertaken. In the meantime, charterers need to be aware of their potential exposure.