keeps you connected across the coal world

Submit Your Articles
We welcome article submissions from experts in the areas of coal, mining, shipping, etc.

To Submit your article please click here.

International Energy Events

WTI Crude Oil

BRENT Crude Oil

Search News
Latest CoalNews Headlines
Tuesday, 16 October 18

With less than eighteen months before Regulation 14.1.3 of Annex VI of the MARPOL Convention comes into effect, there are still numerous challenges surrounding compliance and enforcement, which have cast uncertainty over the effect that the Regulation will have on the international maritime industry, and on individual shipping companies.
This three-part series aims to draw owners’ and charterers’ attentions to the practical issues that they should be aware of, ahead of the implementation of Regulation 14.1.3, and to highlight the various measures that they should now be considering, in order to safely absorb the significant costs and other commercial risks that are forecast to accompany the entry into force of the Regulation.
Part 1 provides a brief summary of the scope of Regulation 14.1.3, and an analysis of the different types of risks to which owners and charterers are likely to be exposed, if they do not take the necessary steps to comply with Regulation 14.1.3, by 1 January 2020.
Scope of the Regulation
Regulation 14.1.3 of Annex VI of the MARPOL Convention (“Regulation 14.1.3”) was adopted by the IMO in 2016, in response to environmental concerns. The Regulation now provides that “the sulphur content of any fuel oil used on board ships shall not exceed … 0.50% m/m on and after 1 January 2020.” The new limit will see a steep reduction in the permissible global sulphur limit, down from the 3.5% mass/mass (“m/m”) limit, currently in effect under Regulation 14.1.2. The limit will apply to all vessels registered with Flag States that have ratified Annex VI, and in all waters belonging to Port or Coastal States that have ratified Annex VI, at which, or through which, a vessel calls or passes.
The IMO has reconfirmed that Regulation 14.1.3 will take effect with immediacy, despite recent calls by leading Flag States and shipping associations for a period of “experience building” and “pragmatic enforcement”. The new limit will also not affect the ongoing obligation under Regulation 14.4.3 that vessels operating within Emission Control Areas (“ECAs”) use fuel with a sulphur content of only 0.1 m/m.
1. What are the risks of non-compliance?
a) Contractual liability
At a commercial level, non-compliance with Regulation 14.1.3 is likely to give rise to a variety of charterparty claims between owners and charterers. These will likely include claims for unseaworthiness; claims that the vessel has not been properly fitted for service; claims for the costs of deviation required to take on compliant fuel; off-spec bunker claims; disputes over responsibility for managing and segregating different fuels on board; contamination claims; claims for delay occasioned by engine failure, detention or arrest; and disputes over payment of financial penalties incurred. Owners and charterers are therefore advised to assess, and if necessary renegotiate their charterparty terms, focusing in particular on the costs and risk allocation clauses, to ensure that they are not unduly exposed to liability arising from non-compliance. Two considerable areas for potential dispute are addressed below:
i) Bunkering of compliant fuel
Under common time charterparty forms, including the NYPE 1946 form and the Shelltime 4 form, it is charterers’ responsibility to supply fuel for the vessel. Time charterparties will normally also include a bunker specification rider clause, and, potentially, additional standard form BIMCO or other clauses, dealing with sulphur content or bunker quality. Owners and charterers should review all clauses concerning fuel and bunkering, to ensure that those clauses are Regulation 14.1.3-compliant. In particular, this will reduce the risk of disputes in circumstances where vessels are visiting port states which have not ratified Annex VI, or smaller ports where non-compliant fuel may not be available. The inclusion of express sampling procedures, to ensure that bunkering operations are Annex VI-compliant (including that bunker delivery notes state the sulphur content of the fuel supplied) are also likely to reduce the occurrence of disputes.
Parties should further consider the adoption of a clause overriding Regulation 18.2 of Annex VI (which establishes that a vessel should not be required to deviate from the intended voyage or unduly delay the voyage, in order to obtain compliant fuel). As well as minimising the scope for disputes (assuming that the vessel is not fitted with a scrubber or other alternative means of compliance), this is relevant from a commercial point of view; increasing numbers of blue-chip companies have now adopted a zero-tolerance policy concerning doing business with shipping companies that are non-compliant with the new Regulation. Cargo owners may also demand a compliance clause before placing cargo with vessels.
BIMCO have recently announced that they will be introducing a series of standard clauses to attempt to address some of the above issues. The first, named the “BIMCO 2020 Global Marine Fuel Sulphur Content Clause for Time Charter Parties” is expected to be published at the end of October 2018. It sets out time charterers’ obligations and liabilities in providing fuel of the required content. Fuel management is to remain the responsibility of owners. A second “bridging” clause, addressing the transitional period around 1 January 2020, is expected to be published between January and February 2019. This clause will likely address the final bunkering of the ship by time charterers prior to redelivery, requirements for sufficient compliant fuel on board at redelivery, tank cleaning costs and disposal of residual fuel, during the period immediately before and after 1 January 2020. Parties should also ensure that the price of fuel on delivery and redelivery is specified, in particular when negotiating longer-term fixtures that will span the transitional period, to avoid disputes.
ii) Installation, maintenance and repair of scrubbers
In the context of vessels retrofitted with scrubbers to comply with Regulation 14.1.3, owners and charterers should ensure that any charterparty entered into, adequately allocates responsibility for installation, maintenance and repair. BIMCO have announced that a standard Scrubber clause is due to be published around March – April 2019. The clause is likely to address possible installation cost sharing between owners and charterers, with formulas potentially reflecting the life of the scrubber or the remaining duration of the charterparty. The clause might also deal with scrubber breakdown, and impose requirements for the carriage of a reserve of LSFO to avoid off-hire.
Owners and charterers should additionally review dry-docking and off-hire clauses (in the context of time charterparties), and laytime and demurrage clauses (in the context of voyage charterparties) to ensure that those clauses clearly allocate responsibility for time and costs spent on installation, maintenance and/or repair.
A further consideration for owners, in the context of vessels both able to burn LSFO and also retrofitted with a scrubber, is the extent to which charterers may use scrubbers, instead of sourcing compliant fuel under the contract, and to what extent charterers should bear the additional energy consumption costs incurred as a result.
b) Sanctions and fines
Though enforcement will vary from jurisdiction to jurisdiction, non-compliant vessels should expect financial penalties from Port States that have ratified Annex VI. Article 4(4) MARPOL Convention requires that these should be “adequate in severity to discourage violations … irrespective of where the violations occur.” The EU Sulphur Directive similarly requires Member States to impose penalties that are “effective, proportionate and dissuasive and may include fines … [that] at least deprive those responsible of the economic benefits derived from their infringement and that those fines gradually increase for repeated infringements.”
Further, certain Port States may pursue and arrest vessels under local rules and regulations. The United States Coast Guard, for example, are empowered to seize vessels in breach of Sulphur Regulations. Concurrently, the US Environmental Pollution Agency (“EPA”) may impose civil fines on non-MARPOL compliant vessels of USD 25,000 per day of non-compliance.
Again, owners and charterers should ensure clear allocation of risk and cost liability in their charterparties.
c) Insurance
Owners should also be aware of the potential consequences for their Hull and P&I insurance coverage. Flag States that have ratified Annex VI should in theory revoke or, at least, suspend vessels’ MARPOL certificates, if they do not comply with the Regulation. If this occurs, or if a vessel is otherwise deemed to be unseaworthy, or no longer in class, as a result of non-compliance, owners may be considered to have breached seaworthiness, class and / or other warranties under their Hull and Machinery and / or Protection and Indemnity policies. If these breaches are determined to define the risk as a whole, UK insurers, at least, will be entitled to avoid liability for losses that would otherwise be covered under a policy.
2. Concluding thoughts for Part 1
Regulation 14.1.3 is likely to have a dramatic effect on the shipping industry, the extent of which is still largely unknown. As explored above, from a contractual point of view, owners and charterers can best protect themselves by reviewing the terms of their contracts of carriage, and of their insurance policies, to ensure that their contractual positions are adequately protected, and that they are aware of the extent to which any non-compliance may affect policy coverage.
At Clyde & Co, we have experience in assisting owners, charterers and fuel suppliers with drafting well-structured, clear and balanced clauses, and in providing concise coverage advice.
In Part 2, we will explore challenges to compliance facing owners and charterers, in addition to the perceived challenges to enforcement, still facing the IMO.
Source: Beth Bradley, Benjamin Bryant, Ioanna Tsekoura, Clyde&Co

If you believe an article violates your rights or the rights of others, please contact us.

Recent News

Wednesday, 16 January 19
As we go through the first days of the year and just a few weeks before the Chinese New Year, the ship repair sector is witnessing a big difference ...

Monday, 14 January 19
KOREA SOUTHERN POWER INVITES BIDS FOR 320,000 MT OF MIN 3,800 NCV COAL South Korea state-owned utility Korea Southern Power Co. Ltd (KOSPO) issued a tender for 320,000 MT of min 3,800 kcal/kg NCV coal for ...

Friday, 11 January 19
Capesize Dashed hopes summed up the first full week of the New Year. A slow start followed by a busy 24 hours of improving rates and a firming ...

Thursday, 10 January 19
KNOWLEDGE TO ELEVATE Amendments to the bunker delivery note relating to the supply of marine fuel oil to ships which have fitted alternative m ...

Thursday, 10 January 19
World Trade World trade in thermal coal is estimated to have grown by 1.0 per cent to 1.1 billion tonnes in 2018 but it is expected to decline ...

   1 2 3 4 5   
Showing 1 to 5 news of total 5376
News by Category
Popular News
Total Members : 25,767
User ID
Remember Me
By logging on you accept our TERMS OF USE.
Forgot Password
Our Members Are From ...

  • Gupta Coal India Ltd
  • New Zealand Coal & Carbon
  • Asmin Koalindo Tuhup - Indonesia
  • Electricity Generating Authority of Thailand
  • Cosco
  • IMC Shipping - Singapore
  • Mitsui
  • Qatrana Cement - Jordan
  • Credit Suisse - India
  • Geoservices-GeoAssay Lab
  • Kumho Petrochemical, South Korea
  • Kapuas Tunggal Persada - Indonesia
  • SRK Consulting
  • CNBM International Corporation - China
  • Kideco Jaya Agung - Indonesia
  • EIA - United States
  • Coeclerici Indonesia
  • Essar Steel Hazira Ltd - India
  • Tamil Nadu electricity Board
  • Antam Resourcindo - Indonesia
  • PNOC Exploration Corporation - Philippines
  • TANGEDCO India
  • Bhatia International Limited - India
  • GNFC Limited - India
  • Rio Tinto Coal - Australia
  • World Bank
  • Reliance Power - India
  • VISA Power Limited - India
  • LBH Netherlands Bv - Netherlands
  • Heidelberg Cement - Germany
  • NALCO India
  • Barclays Capital - USA
  • Sree Jayajothi Cements Limited - India
  • The State Trading Corporation of India Ltd
  • Coal Orbis AG
  • Globalindo Alam Lestari - Indonesia
  • Meenaskhi Energy Private Limited - India
  • London Commodity Brokers - England
  • Bhushan Steel Limited - India
  • Bulk Trading Sa - Switzerland
  • MEC Coal - Indonesia
  • Barasentosa Lestari - Indonesia
  • Rudhra Energy - India
  • Siam City Cement - Thailand
  • Dr Ramakrishna Prasad Power Pvt Ltd - India
  • APGENCO India
  • Manunggal Multi Energi - Indonesia
  • Grasim Industreis Ltd - India
  • Ministry of Finance - Indonesia
  • Infraline Energy - India
  • Asia Cement - Taiwan
  • Ministry of Transport, Egypt
  • Total Coal South Africa
  • Star Paper Mills Limited - India
  • KOWEPO - South Korea
  • Toyota Tsusho Corporation, Japan
  • Economic Council, Georgia
  • Arutmin Indonesia
  • Bangkok Bank PCL
  • Aboitiz Power Corporation - Philippines
  • South Luzon Thermal Energy Corporation
  • Merrill Lynch Commodities Europe
  • Karaikal Port Pvt Ltd - India
  • Renaissance Capital - South Africa
  • PetroVietnam Power Coal Import and Supply Company
  • Sical Logistics Limited - India
  • Anglo American - United Kingdom
  • PetroVietnam
  • Latin American Coal - Colombia
  • Uttam Galva Steels Limited - India
  • globalCOAL - UK
  • Humpuss - Indonesia
  • Independent Power Producers Association of India
  • Mitsubishi Corporation
  • Tata Power - India
  • Directorate Of Revenue Intelligence - India
  • Neyveli Lignite Corporation Ltd, - India
  • Vale Mozambique
  • Eastern Energy - Thailand
  • Tata Chemicals Ltd - India
  • bp singapore
  • Bukit Baiduri Energy - Indonesia
  • Ambuja Cements Ltd - India
  • Directorate General of MIneral and Coal - Indonesia
  • Arch Coal - USA
  • Singapore Mercantile Exchange
  • SGS (Thailand) Limited
  • Kobexindo Tractors - Indoneisa
  • Mercator Lines Limited - India
  • PLN - Indonesia
  • ANZ Bank - Australia
  • Ernst & Young Pvt. Ltd.
  • Enel Italy
  • Kobe Steel Ltd - Japan
  • Coal India Limited
  • UOB Asia (HK) Ltd
  • Maheswari Brothers Coal Limited - India
  • RBS Sempra - UK
  • Bank of America
  • Global Coal Blending Company Limited - Australia
  • WorleyParsons
  • Adani Power Ltd - India
  • Krishnapatnam Port Company Ltd. - India
  • Kartika Selabumi Mining - Indonesia
  • Thomson Reuters GRC
  • Samtan Co., Ltd - South Korea
  • Maharashtra Electricity Regulatory Commission - India
  • ETA - Dubai
  • Agrawal Coal Company - India
  • European Bulk Services B.V. - Netherlands
  • ICICI Bank Limited - India
  • Lafarge - France
  • Indonesia Power. PT
  • PTC India Limited - India
  • Sakthi Sugars Limited - India
  • Tanito Harum - Indonesia
  • CIMB Investment Bank - Malaysia
  • Bukit Asam (Persero) Tbk - Indonesia
  • Thai Mozambique Logistica
  • Runge Indonesia
  • The India Cements Ltd
  • Moodys - Singapore
  • Holcim Trading Pte Ltd - Singapore
  • Platou - Singapore
  • Japan Coal Energy Center
  • PLN Batubara - Indonesia
  • Cement Manufacturers Association - India
  • IBC Asia (S) Pte Ltd
  • Kohat Cement Company Ltd. - Pakistan
  • PowerSource Philippines DevCo
  • Malco - India
  • Interocean Group of Companies - India
  • Surastha Cement
  • Maruti Cements - India
  • KPMG - USA
  • Thriveni
  • Port Waratah Coal Services - Australia
  • Ince & co LLP
  • MS Steel International - UAE
  • Berau Coal - Indonesia
  • Marubeni Corporation - India
  • Russian Coal LLC
  • Clarksons - UK
  • Borneo Indobara - Indonesia
  • Thailand Anthracite
  • Platts
  • JPMorgan - India
  • Straits Asia Resources Limited - Singapore
  • Minerals Council of Australia
  • Miang Besar Coal Terminal - Indonesia
  • Mintek Dendrill Indonesia
  • KEPCO - South Korea
  • Cigading International Bulk Terminal - Indonesia
  • Cemex - Philippines
  • IOL Indonesia
  • GAC Shipping (India) Pvt Ltd
  • Mitra SK Pvt Ltd - India
  • Xindia Steels Limited - India
  • Ministry of Mines - Canada
  • Parry Sugars Refinery, India
  • Videocon Industries ltd - India
  • Medco Energi Mining Internasional
  • Maersk Broker
  • Coastal Gujarat Power Limited - India
  • Vijayanagar Sugar Pvt Ltd - India
  • Asian Development Bank
  • BRS Brokers - Singapore
  • Indonesian Coal Mining Association
  • SUEK AG - Indonesia
  • Dong Bac Coal Mineral Investment Coporation - Vietnam
  • Salva Resources Pvt Ltd - India
  • Bangladesh Power Developement Board
  • Xstrata Coal
  • Deutsche Bank - India
  • BNP Paribas - Singapore
  • Attock Cement Pakistan Limited
  • Planning Commission, India
  • UBS Singapore
  • SMG Consultants - Indonesia
  • Idemitsu - Japan
  • Cargill India Pvt Ltd
  • Coaltrans Conferences
  • Adaro Indonesia
  • Australian Coal Association
  • KPCL - India
  • Wilmar Investment Holdings
  • U S Energy Resources
  • Binh Thuan Hamico - Vietnam
  • Thiess Contractors Indonesia
  • Power Finance Corporation Ltd., India
  • Thermax Limited - India
  • GHCL Limited - India
  • Filglen & Citicon Mining (HK) Ltd - Hong Kong
  • Samsung - South Korea
  • Central Electricity Authority - India
  • Banpu Public Company Limited - Thailand
  • Ceylon Electricity Board - Sri Lanka
  • ASAPP Information Group - India
  • TNB Fuel Sdn Bhd - Malaysia
  • Commonwealth Bank - Australia
  • Malabar Cements Ltd - India
  • White Energy Company Limited
  • Indian School of Mines
  • Simpson Spence & Young - Indonesia
  • Jindal Steel & Power Ltd - India
  • CCIC - Indonesia
  • Gujarat Mineral Development Corp Ltd - India
  • Parliament of New Zealand
  • The University of Queensland
  • Argus Media - Singapore
  • Wood Mackenzie - Singapore
  • Pinang Coal Indonesia
  • Oldendorff Carriers - Singapore
  • Panama Canal Authority
  • Bhoruka Overseas - Indonesia
  • Chettinad Cement Corporation Ltd - India
  • Deloitte Consulting - India
  • Goldman Sachs - Singapore
  • Vitol - Bahrain
  • Leighton Contractors Pty Ltd - Australia
  • Indian Oil Corporation Limited
  • Jaiprakash Power Ventures ltd
  • McConnell Dowell - Australia
  • World Coal - UK
  • Peabody Energy - USA
  • Alfred C Toepfer International GmbH - Germany
  • Central Java Power - Indonesia
  • Timah Investasi Mineral - Indoneisa
  • GVK Power & Infra Limited - India
  • ACC Limited - India
  • Metalloyd Limited - United Kingdom
  • Siam City Cement PLC, Thailand
  • Mjunction Services Limited - India
  • Gujarat Electricity Regulatory Commission - India
  • Indika Energy - Indonesia
  • India Bulls Power Limited - India
  • Riau Bara Harum - Indonesia
  • Australian Commodity Traders Exchange
  • Truba Alam Manunggal Engineering.Tbk - Indonesia
  • CoalTek, United States
  • IHS Mccloskey Coal Group - USA
  • OPG Power Generation Pvt Ltd - India
  • Bayan Resources Tbk. - Indonesia
  • Standard Chartered Bank - UAE
  • J M Baxi & Co - India
  • Glencore India Pvt. Ltd
  • Karbindo Abesyapradhi - Indoneisa
  • Romanian Commodities Exchange
  • Vizag Seaport Private Limited - India
  • Noble Europe Ltd - UK
  • Carbofer General Trading SA - India
  • Sucofindo - Indonesia
  • Eastern Coal Council - USA
  • Billiton Holdings Pty Ltd - Australia
  • Gujarat Sidhee Cement - India
  • Orica Australia Pty. Ltd.
  • Shree Cement - India
  • Gresik Semen - Indonesia
  • Lanco Infratech Ltd - India
  • Mechel - Russia
  • Edison Trading Spa - Italy
  • Mercuria Energy - Indonesia
  • Trasteel International SA, Italy
  • Africa Commodities Group - South Africa
  • Coalindo Energy - Indonesia
  • Vedanta Resources Plc - India
  • Sindya Power Generating Company Private Ltd
  • OCBC - Singapore
  • NTPC Limited - India
  • Pendopo Energi Batubara - Indonesia
  • The Treasury - Australian Government
  • Georgia Ports Authority, United States
  • GB Group - China
  • SASOL - South Africa
  • Jorong Barutama Greston.PT - Indonesia
  • Freeport Indonesia
  • Altura Mining Limited, Indonesia
  • Shenhua Group - China
  • Savvy Resources Ltd - HongKong
  • Bharathi Cement Corporation - India
  • GMR Energy Limited - India
  • HSBC - Hong Kong
  • Intertek Mineral Services - Indonesia
  • Inspectorate - India
  • Coal and Oil Company - UAE
  • Orica Mining Services - Indonesia
  • Larsen & Toubro Limited - India
  • Sojitz Corporation - Japan
  • Rashtriya Ispat Nigam Limited - India
  • Bank of China, Malaysia
  • Maybank - Singapore
  • Makarim & Taira - Indonesia
  • Cardiff University - UK
  • Posco Energy - South Korea
  • Aditya Birla Group - India
  • DBS Bank - Singapore
  • Sinarmas Energy and Mining - Indonesia
  • Inco-Indonesia
  • Petrosea - Indonesia
  • Price Waterhouse Coopers - Russia
  • Jatenergy - Australia
  • Formosa Plastics Group - Taiwan
  • Chamber of Mines of South Africa
  • CESC Limited - India
  • IEA Clean Coal Centre - UK
  • TeaM Sual Corporation - Philippines
  • McKinsey & Co - India
  • Madhucon Powers Ltd - India
  • Merrill Lynch Bank
  • Offshore Bulk Terminal Pte Ltd, Singapore
  • Indogreen Group - Indonesia
  • Bukit Makmur.PT - Indonesia
  • Fearnleys - India
  • Bahari Cakrawala Sebuku - Indonesia
  • International Coal Ventures Pvt Ltd - India
  • Dalmia Cement Bharat India
  • Core Mineral Indonesia
  • EMO - The Netherlands
  • Indo Tambangraya Megah - Indonesia
  • Indorama - Singapore
  • Kalimantan Lumbung Energi - Indonesia
  • Bank of Tokyo Mitsubishi UFJ Ltd
  • JPower - Japan
  • Energy Link Ltd, New Zealand
  • Ind-Barath Power Infra Limited - India
  • ING Bank NV - Singapore
  • Petrochimia International Co. Ltd.- Taiwan
  • Britmindo - Indonesia
  • TNPL - India
  • Kaltim Prima Coal - Indonesia
  • Permata Bank - Indonesia