Introduction
A bunker dispute arises when an issue is found with the fuel provided to the vessel. In that scenario, the owner of the bunkers must act quickly to ensure that the engine is not damaged and to stay within the notice period to inform the supplier of the damage. There are potential defences for the supplier in case of an off-spec fuel that the supplier can raise to reduce their liability or even break causation. The below constitutes a practical guide in a real-life bunker dispute scenario.
Different Bunker Disputes
The most common bunker dispute arises when the Fuel delivered is off-spec. Charterparties provide for a testing regime of fuel. When Shipowners receive new fuel they test the fuel under the ISO Specifications provided in the Charterparty. When the fuel does not agree with the ISO Specifications then the Shipowner has a certain period to claim from the Charterer, who is usually the supplier of the Bunkers, the price of the fuel and compensation for any damages the fuel has caused to the engine or other equipment. The Charterparty also provides for the quantity of fuel that should be delivered or returned. Similarly, the receiver of the bunkers can claim the difference if the bunkers are delivered or returned without the appropriate quantity.
The Charterparty clauses
Once a bunker dispute arises the Parties should check the Charterparty and Supplier Contracts. The contracts include clauses that can guide the Parties to their next steps. Firstly, as mentioned above, the Charterparty contains a testing clause. That clause usually includes important information such as the bunkers’ specifications and the testing regime. For example, the Charterparty might provide for joint testing of the bunkers at a common lab and the bunkers should be tested on the ISO 8217 2017 standards. Another important clause is the ownership clause which usually contains wording such as “on delivery of the vessel, charterers shall “take over and pay for all fuel” and that, on re-delivery, owners do the same…”. The ownership clause shows who provided the bunkers and who can claim for off-spec fuel.
Notice and Sampling
The Parties need to know their notice periods and how notice should be given. The Charterparty provides information about the format and delivery of the notice, for example, it should be written and sent via email to the Charterer’s representative. Significant is the period that the Charterparty allows for claims and the comparison with the Supplier contract. For example, the Charterparty may allow 30 days to claim, however, the supplier contract may only allow 15 days, therefore, both parties should complete their due diligence and potentially test the bunkers themselves before supplying the vessel. In addition, once new Bunkers are delivered the Parties should take samples from the vessel’s manifold. Usually, a sample remains on the vessel, one is kept by a representative of the Charterers, one is kept by a representative of the suppliers, one is retained by the Shipowners, and one is sent for testing.
Bunker Delivery Note and Letter of Protest
Once the Bunkers are delivered to the vessel, the Chief Engineer signs a bunker delivery note to confirm that the Bunkers were delivered and that the samples retained were indeed collected in the manner that the Charterparty provides. In case there is an issue with the bunkers on delivery, for example, the sampling was not completed correctly, or the Suppliers supplied less fuel, the Chief Engineer issues a Note of Protest to inform the other party. If the Chief Engineer signs the Bunker Delivery Note and provides that the delivery of the bunkers was correctly completed, then the Shipowner is bound by that note and can only test the samples that are included in the Bunker Delivery Note.
Steps to Claim
Therefore, once the receiving Party suspects the fuel to be off-spec they first have to check whether they are within the notice period to claim from the supplying party. Then, they must test the sample as provided in the Charterparty. The claimant must also ensure that the Bunker Delivery Note and the Letter of Protest were completed correctly and cannot be used against them by the supplying Party. If the tests show that the bunker is indeed off–spec, then the damaged Party can claim for the price of the Bunkers and any damages caused to the engine or equipment of the Vessel.
Defences
Even if the fuel is deemed to be off-spec the supplying Party can still raise certain defences to reduce their liability. The first defence is to argue for a break in causation. For example, they might agree that they provided off-spec fuel but claim that the engine broke due to other issues and that they are not liable to repair the engine. The second defence is the supplying party arguing that the damages were caused by older fuel that was put in use by the crew. The third defence is to claim that the Master of the Vessel and her crew did not act diligently. For example, argue that as soon as the engine had a stoppage the crew should have removed the fuel and stopped using the engine and therefore the damage was worsened because the crew did not act diligently. Similar to this is the failure of the receiving party to take preventative measures or mitigate. For example, the receiving party did not test the bunkers before using them.
Conclusion
Each dispute is different, and the solutions should be tailored to the specific needs of the Parties. However, there are certain procedures and steps that should be followed to ensure that the damaged Party does not lose its claim. It is significant for the Parties’ legal representatives to act quickly, be aware of the Charterparty’s time bars and advise the client on their liabilities and the diligence that they must complete.
Αθηνά Ελένη Γιωργαλλέττου
Νομική Σύμβουλος, Αθανασίου & Συνεργάτες Δ.Ε.Π.Ε.
