Do bunker suppliers have charterers over a barrel?: Gard

Gard’s Kunbi Sowunmi, Senior Claims Adviser, Lawyer, New York, plus Marie Kelly

Vice President, Defence Claims, London, and  Siddharth Mahajan, Senior Loss Prevention Executive, Singapore, have compiled a detailed article on the problems faced by charterers of vessels when they fill a chartered vessel with fuel that turns out to be tainted.

The writers noted that time charterers supplying vessels with bunker fuel oil needed to ensure that they met the contractual specifications set out in the charterparty.

All versions of ISO:8217 at Clause 5 contain a catch-all provision to the effect that the bunkers do not contain any material in a concentration that is harmful to personnel, jeopardizes the safety of the ship or adversely affects the performance of the machinery. They noted that Clause 5 was necessary because the specifications tested for would not catch material that should not be found in bunkers.

The writers noted the recent headline case where chlorinated hydrocarbons were found in HSFO bunkers supplied in Singapore. The compounds were only found by enhanced gas chromatography – mass spectrometer testing.

This catch all provision means that even if the bunkers supplied by a charterer test on spec under ISO:8217 Table 1 for distillates or Table 2 for residuals, the fuel can still be rejected if it contains any material that can render the fuel unsuitable or unsafe to use. Accordingly, owners have wide powers to reject bunkers and demand replacement. Owners can also recover damages flowing from the breach such as the costs of cleaning or even replacing the vessel’s parts/engines that may be damaged.

There will, however, commonly be arguments about whether the bunkers caused the damage or if this was caused by pre-existing issues such as the owner’s failure to maintain the engines.

If the owners choose to use the bunkers in the knowledge that it is off-spec, there may be arguments that they have waived their right to make a claim, unless they have preserved their rights and/or obtained a suitably worded indemnity from the charterers.

Disputes over bunker quality can be time consuming and expensive, and the best solution is often for owners and charterers to take expert advice and seek a solution together, the writers said, before covering the topic in considerable detail.