Bunkering Clauses and Issues Peter Glover Senior Associate Norton Rose Fulbright LLP 11 September 2014

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1 Bunkering Clauses and Issues Peter Glover Senior Associate Norton Rose Fulbright LLP 11 September 2014

2 Standard Bunker Supply Clauses Common bunker clauses terms quality and quantity determination governing law warranties Problems and discussion 2

3 3 Quality and Quantity Determination

4 Quality and Quantity Clause 6.1 Products shall meet specifications that are applicable at the time and place of delivery. The Buyer shall be solely responsible for the selection and acceptance of Products tendered for delivery to the Vessel. 4

5 Quality and Quantity Clause 6.3 Bulk deliveries ex-barges, wagons and vehicles must be checked by tank-dipping to measure the contents and ensure full turn-out. Flow meters must be checked for seals correct settings and calibration and general condition. All these checks must be carried out before and after delivery of each consignment and each barge, wagon or vehicle tank load. The delivery must be supervised at all times and care must be taken in ensuring that all documentation is complete and accurate before signing and stamping. Any alleged discrepancies can only be accepted in the form of a Letter of Protest. No comments will be allowed to be written on the delivery receipt. The Seller will not accept any claims for short delivery or bad quality where these receiving procedures are not followed. 5

6 Quality and Quantity 4.1 Buyer shall have the sole responsibility for the selection of the proper grades of Bunker Fuels for use in the vessel being supplied and the Seller shall not be under any obligation to check whether the grade of Bunker Fuels is suitable for the Vessel. The Bunker Fuels shall be of the same quality generally offered for sale at the time and place of delivery, for the grade of Bunker Fuels ordered by the Buyer. 5.1 The quantity of Bunker Fuel delivered shall be determined from gauges/ullages of the barge or truck effecting delivery or by gauging/ullages of shore tank if delivery is by pipeline. Buyer has the right to have its representatives present during measurements, but determination of quantity shall be made solely by Seller, and will be conclusive. 6

7 Quality and Quantity Clause 10.1 The quantity of Bunker Fuel delivered shall be determined in accordance with Article 5.1. Any claim regarding the quantity of the Bunker Fuel delivered shall be notified verbally as well as in writing by the Buyer or the master of the Vessel to the Seller as soon as practicable at the conclusion of the delivery of the Bunker Fuels while the delivery hoses are still connected. In any event, such claim shall be deemed to be waived and barred. A notification inserted in the Bunker Delivery Note or in a separate protest handed to the physical supplier of the Bunker Fuel shall not qualify as notice under this section 10.1 and the Seller shall under no circumstances be deemed to have accepted such notice or protest handed to the physical supplier. 7

8 Quality and Quantity Clause 13.1 Any dispute as to the quantity delivered must be noted at the time of delivery in a letter of protest. Any claim as to short delivery shall be presented by the Buyer immediately upon completion of delivery, failing which any such claim shall be deemed to be waived and absolutely barred. 8

9 Quality and Quantity Clause 13.2 Claims concerning quality shall have to be submitted to the Seller in writing within 15 days from delivery, failing which the rights to complain or claim compensation of whatever nature shall be deemed to have been waived and absolutely barred for all times. If it is alleged that any equipment or machinery has been damaged by defective Products, full details must be given to the Seller at the earliest opportunity and the item must be preserved and made available for inspection on demand at any reasonable time or times to the Seller or its representative otherwise no such claim shall be accepted by the Seller. 9

10 10 Governing law

11 Governing law Clause 16.1 The Bunker Contract shall be governed by the laws of Denmark. However, the choice of law is for the sole benefit of the Seller and the Seller may apply and benefit from any law granting a maritime lien and/or right to arrest the Vessel in any country as stipulated in Section 9 hereof. 11

12 Governing law Clause 18 Expect as otherwise expressly agreed to in writing, the Agreement its performance and enforcement is governed by the Greek Law. All disputes arising in connection with this agreement or any agreement resulting hereof shall be referred to the Courts of Piraeus. Clause 18.1 This Agreement shall be governed and construed by the laws of the Republic of Singapore. 12

13 13 Warranties

14 Warranties Clause 4.2 DISCLAIMER. Any implied warranties, including the warranties of merchantability and fitness for a particular purpose that the Seller may be deemed to have made, are expressly excluded and disclaimed. Express attempt to avoid statutory warranties Success may depend: jurisdiction definitions value of service 14

15 15 Discussion

16 Starting position Fuel quantity: owners responsible for ensuring sufficient bunkers on board for voyage if charterers rely on information which is wrong they cannot be held liable In my opinion, this is to endeavour to give far too extensive an operation to the provision that the charterers are to provide and pay for all coal ; I think it leaves untouched the duty of the shipowners to render the ship seaworthy by seeing that there is on board sufficient coal for the use of the ship when she starts on each stage of her voyage. MacIver v Tate (1903) 8 Com. Cas. (C.A.). The provision in cl. 2 does not relieve the shipowners from the obligation of seeing that the vessel is in a seaworthy condition in respect of the supply of fuel: See McIver & Co. Ltd. v. Tate Steamers Ltd., [1903] 1 K.B Thus it is the duty of the master to give the charterers correct information, to enable them to provide the requisite quantity of fuel, Mammoth Bulk Carriers Ltd v Holland Bulk Transport B.V. (The Captain Diamantis ) [1977] 1 Lloyd s Rep

17 Discussion Charterers - fuel quality: charterers have absolute duty to provide proper bunkers Nippon Yusen Kaisha v Alltrans (20 February 1984, unreported) charterers to provide bunkers of a reasonable general quality suitable for engines fitted to the particular ship do not need to meet any unusual requirements of engine(s) unless specifically notified of same NYPE (1993 revision) 9. Bunkers (b) The Charterers shall supply bunkers of a quality suitable for burning in the Vessel s engines and auxiliaries and which conform with the specification(s) set out in Appendix A. 17

18 Problems Where are the bunkers coming from? access to bunker barge / tankers for readings access to terminal sampling Accuracy of supplier tank calibration tables Calibration of flow meter Metering devices ullage temperature fraud mistake 18

19 Problems Cappuccino effect Samples: whose samples? provenance? labelling security and chain of custody Notification when who requirements Where are the bunkers being stored? Requirements for use 19

20 Claims Charter party claim against charterers: what are the terms of the contract? main engine details bunker specification sampling jurisdiction and time bar Contract claim against supplier: time bar law and jurisdiction payment and ownership sampling 20

21 Claims ITC Hulls 1/11/95 6 Perils 6.2 This insurance covers loss of or damage to the subject-matter insured caused by negligence of repairers or charterers provided such repairers or charterers are not an Assured hereunder Provided that such loss or damage has not resulted from want of due diligence by the Assured, Owners, Managers or Superintendents or any of their onshore management. 21

22 Claims Institute Additional Perils Clause Hulls (1/11/95) In consideration of an additional premium this insurance is extended to cover 1.2 loss of or damage to the Vessel caused by any accident or by negligence, incompetence or error of judgement of any person whatsoever. 3 The cover provided Clause 1 is subject to all other terms, conditions and exclusions contained in this insurance and subject to the proviso that the loss or damage has not resulted from want of due diligence by the Assured, Owners or Managers. Masters Officers Crew or Pilots not to be considered Owners within the meaning of this Clause should they hold shares in the Vessel. Intertanko bunker clauses 22

23 Peter Glover Senior Associate Tel: +44 (0)

24 Peter Glover Senior Associate Peter is a disputes lawyer based in London. He focuses on marine insurance, shipping, and admiralty law. Peter s practice involves advising clients in relation to all aspects of wet and dry contentious and non-contentious matters and marine insurance disputes. He has attended casualties worldwide and has particular expertise in tanker related claims and oil pollution matters. In addition to shipping litigation, Peter advises on international trade issues and has appeared as an advocate for clients in board of inquiry and court environments. Peter has a PhD in maritime law, is a dual qualified English and Australian lawyer, holds a Master Class 1 Certificate of Competency and has over 20 years experience in the maritime industry. 24

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