Business

Galadari Advocates & Legal Consultants: Securing a bunkering claim in United Arab Emirates

Partner Abdelhak Attalah discusses possibility for a bunker supplier, whether a physical supplier or a trader, to arrest and enforce the statutory lien generated by their debt over a ship in UAE jurisdiction.

Published

2 years ago

March 13, 2023

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Law firm Galadari Advocates & Legal Consultants partner Abdelhak Attalah released an article to discuss the possibility for a bunker supplier, whether a physical supplier or a trader, to arrest and enforce the statutory lien generated by their debt over a ship in the United Arab Emirates (UAE) jurisdiction:

The right of ship arrest under UAE law for unpaid bunker

Relevant to our following discussion is that for ship arrest the UAE has adopted a “closed-list” approach for the definition of a “maritime claim”, where a list consists of limited numbers of maritime debts based on which only a ship could be arrested. These are reduced to fifteen (15) classes of maritime claims listed in Article 115(2) of the UAE Federal Law of No. 26 of 1981, as amended by Federal Law No. 11 of 1988, concerning the Commercial Maritime Law (“CML”). As for the bunkering claim, it is listed in paragraph (i) of the said Article which classifies it as: “Supplies of products or equipment necessary for the utilization or maintenance of the vessel, in whichever place the supply is made.” Thus, ship arrest in the UAE is a preservatory remedy to obtain security, in favor of an unpaid bunker claim in the merits whether commenced or to be commenced through court litigation or arbitration.

Bunker litigation in the UAE and the time-bar (a statute of limitations as known under common law jurisdictions)

Bunker claim is not only classified by the CML as “maritime debt” but a “priority debt” as stated forth in Article 84 (e) of the CML which classifies bunkering debt as:

“Debts arising out of contracts made by the master, and operations carried out by him outside the port of registration of the vessel within the scope of his lawful powers for an actual requirement dictated by the maintenance of the vessel or the continuance of its voyage, whether or not the master is also the owner of the vessel, or whether the debt is due to him, or to persons undertaking supply, or lenders, persons who have repaired the vessel, or other contractors.”

Thus, bunker claim takes precedence over some other maritime debts such as ship mortgage, demurrages, and insurance premium, and it ranks pari passu with other ship supplies. However, bunker claim would be time-barred within six (6) months as stated forth in Article 93 of the CML.

The validity of the incorporation of an English law clause contained in the General Terms and Conditions of the bunker supplier into their bunker delivery receipt under UAE law

The position of the UAE Courts has been clearly apparent regarding the incorporation by reference of a clause contained in another standard form contract or in the General Terms and Conditions of a trader stating for the application of the English law into an underlying contract as decided by the Dubai Court of Appeal in Cigna Insurance Middle East (S.A.L) v. Agribusiness United DMCC, Dubai Commercial Appeal No.2320 of 2021 and confirmed by Dubai Commercial Cassation No. 204 of 2022.

This ruling would have considerable benefit for bunker suppliers in raising their claims before UAE Courts, because, while unpaid bunker is not considered as a maritime claim under English law unlike the UAE law as confirmed in  the English case PST Energy 7 Shipping LLC v O.W. Bunker Malta Ltd [2015] EWCA Civ 1058 (‘Bunkers’) however, in the same case, the arbitrators, the first instance judge and the Court of Appeal decided that the price of the supplied bunker was due as a matter of debt. Therefore, the supplier’s claim is a straightforward claim in debt and as such is subject to section 5 of the Limitation Act 1980 which states:

“Time limit for actions founded on simple contract: “An action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued.””

Thus, whenever the terms and conditions of the bunker suppliers state for the application of English law to their supply contracts, they may rely on the extended statutory time limit of six years stated forth by section 5 of the Limitation Act 1980 instead of the six months stated forth in Article 93 of the CML.

The validity of the incorporation of an arbitration clause contained in the General Terms and Conditions of the bunker supplier into their bunker delivery receipt under UAE law

While Article 7(b) of the UAE Arbitration law of 2018 allows the incorporation of an arbitration clause contained in the General Terms and Conditions by reference those General terms and conditions however, the general rule of incorporation by reference is the “express terms” requirement where specific wording is used. Indeed, in Al Buhaira National Insurance Co. v. The Shipping Corporation of India Limited (Cassation No. 363 of 2011, Civil Appeal), the wording of incorporation of an arbitration clause stated that: “All terms, conditions and exceptions (including but not limited to Due Diligence, Negligence, Force Majeure, War, Liberties and Arbitration clauses) contained in which charter are herewith incorporated and form part hereof.” The court of cassation held that, the above incorporation wording in the bill of lading was sufficiently express to enable the charter party arbitration clause to be validly incorporated by reference. The requirement of express reference to the arbitration clause was confirmed by UAE Courts in recent rulings such as in the Dubai Courts Real Estate Cassations Nos. 603 and 693 of 2021.

Thus, the important aspect of the Court of Cassation’s ruling is that an arbitration clause contained in the General Terms and Conditions of the bunker supplier can be incorporated into their bunker delivery receipt by reference, as long as: (a) not only those General Terms and Conditions are incorporated by reference; but (b) the referral of disputes to arbitration as specified in the relevant General Terms and Conditions clause is also specifically incorporated into their bunker delivery receipt.

Photo credit: David Rodrigo on Unsplash
Published: 13 March, 2023

Alternative Fuels

South Korea launches USD 696 million green bunker fuel infrastructure fund

Out of KRW 1 trillion, KRW 600 billion will be invested to build port storage facilities capable of supplying alternative marine fuels while KRW 400 billion will be used for constructing four bunkering vessels.

Published

16 hours ago

January 22, 2025

Admin

South Korea launches USD 696 million green bunker fuel infrastructure fund

South Korea’s Ministry of Oceans and Fisheries and Korea Ocean Business Corporation recently held a launch ceremony in Seoul for a KRW 1 trillion (USD 696 million) infrastructure fund that will be used to support the development of storage facilities for green marine fuels and bunkering vessels.

Out of the KRW 1 trillion, KRW 600 billion will be invested to build port storage facilities capable of supplying LNG, methanol, and ammonia, and the remaining KRW 400 billion will be invested in constructing four new LNG and ammonia bunkering vessels by 2030.

The move is expected to meet growing demand for green bunker fuels for domestic vessels and ensure reliable fuel supplies for foreign ships calling at domestic ports.

The ministry also announced that the Ulsan Hyundai Liquid Cargo Terminal Expansion Project was selected as the new fund’s first project to support the demand for methanol bunker fuel for domestic and foreign vessels. The total cost of the project is KRW 240 billion, of which KRW 130 billion will be provided by the infrastructure fund.

In addition, the government plans to strengthen LNG supply capabilities through the Yeosu Myodo LNG Hub Terminal Project scheduled as the second project to be supported by the fund.

Minister of Oceans and Fisheries Kang Do-hyung, said: “Through the infrastructure fund, the government will flexibly expand the eco-friendly ship fuel supply infrastructure in line with future demand so that our ports can continue to secure a competitive edge as a global hub port.”

Photo credit: Ministry of Oceans and Fisheries of South Korea
Published: 22 January, 2025

Alternative Fuels

UECC green bunker fuel investments avert FuelEU surcharges for customers

UECC said it has been able to eliminate surcharges for its customers under FuelEU Maritime as proactive adoption of green marine fuels has drastically reduced its financial exposure to the regulation.

Published

16 hours ago

January 22, 2025

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UECC and Titan team up on bio-LNG bunkering operations in Port of Zeebrugge

United European Car Carriers (UECC) on Monday (20 January) said it has been able to eliminate surcharges for its customers under FuelEU Maritime as proactive adoption of green fuels has drastically reduced its financial exposure to the newly implemented regulation.

Currently, switching to low-carbon biofuels is generally seen as the most effective route to achieve compliance with progressively tighter carbon intensity reduction targets and thereby avoid penalties under FEUM, which is designed to promote uptake of alternative fuel technologies towards the goal of net zero.

However, this approach will typically entail higher fuel costs for shipping companies given that biofuels - which can deliver respective reductions of 85% and 100% in well-to-wake and tank-to-wake emissions - cost between 50-150% more than conventional fossil fuels, while there is also limited feedstock supply.

An additional ‘Energy Surcharge’ levied on shippers to compensate for this price differential can be as much as 2-5% with the use of biofuel, according to UECC’s Energy & Sustainability Manager Daniel Gent.

But he said: “UECC will change absolutely nothing about its pricing structure in relation to FEUM.”

Gent explained this is largely due to the fact that UECC has already achieved significant reductions in carbon intensity by expanding the use of biofuels across its 15-vessel fleet since 2020.

It has also adopted liquefied biomethane (LBM) on its five dual and multi-fuel LNG Pure Car and Truck Carriers under the Sail for Change sustainability initiative launched last year that is supported by several major vehicle manufacturers.

“Consequently, we are already running a compliance surplus in relation to FEUM with our current energy mix and this is expected to extend into the early 2030s,” he says.

“We have previously informed our customers that their support for our investment in multi-fuel LNG vessels would insulate them against regulatory penalties and this is exactly what is happening here. This demonstrates the clear benefits of being ahead of regulation, investing in progressive technology and in the process of generating savings for our customers.”

UECC’s fleet decarbonisation effort has focused on investments in eco-friendly newbuilds - with two more multi-fuel LNG battery hybrid PCTCs currently on order - as well as piloting alternative fuels, in addition to operational efficiencies and technical measures such as waste heat recovery and hull anti-fouling.

The company has rigorous fuel selection criteria based on sustainability, technical suitability and commercial viability. Its bio-products are compliant with Renewable Energy Directive (RED) criteria and sourced from Annex 9 feedstocks in line with regulatory requirements, while all fuels used are ISCC-certified.

Through a proactive fuel procurement strategy, UECC has secured volumes of alternative fuels for the longer term through agreements with suppliers like Titan Clean Fuels for LBM and ACT Commodities for biofuels to promote green fuel bunkering infrastructure. It is also diversifying its sources of supply, such as through a recent first truck-to-ship LBM refuelling operation with Naturgy in Spain.

“LBM from certain feedstocks or including carbon capture are the ‘heavy lifters’ on our decarbonisation journey and we see huge potential in these fuels,” Gent says.

UECC is firmly on track to achieve a minimum 45% reduction in carbon intensity by 2030 to surpass the IMO target, while it is also set to exceed the required FEUM reduction of 31% by 2040 versus a 2020 baseline of 91.16 grams of CO2 equivalent per megajoule.

This means that UECC will have a sufficient compliance surplus to provide a pooling opportunity for third-party vessels under FEUM “so that all stakeholders can benefit from our investments”, according to Gent. But he says the company is not resting on its laurels and intends to make further alternative fuel investments with the aim of phasing out oil-based fossil fuels by 2040.

“As we are going ‘above and beyond’ in terms of our commitment to alternative fuels such as LBM and biofuel, we expect to have a significant compliance surplus under FEUM. With the investments we are planning in such fuels, UECC will never be in a position of needing to buy or borrow compliance units,” Gent concluded.

Photo credit: United European Car Carriers
Published: 22 January, 2025

Research

Safetytech Accelerator trials show strong potential to cut methane emissions in shipping

Three technologies from Framergy, Sorama, and Xplorobot, which were selected by MAMII, show potential to detect, measure, and mitigate methane emissions on LNG-powered ships.

Published

16 hours ago

January 22, 2025

Admin

Safetytech Accelerator on Tuesday (21 January) said it has successfully completed three technology feasibility studies as part of its flagship Methane Abatement in Maritime Innovation Initiative (MAMII).

The studies were done in collaboration with Chevron, Carnival Corporation, Shell and Seapeak.

The results of these feasibility studies showed strong potential to cut fugitive methane emissions in the maritime industry.

MAMII is exploring options to advance these research projects to on-ship trials as soon as possible. 

While methane slip - unburnt methane released during the combustion process - remains the largest source of methane emissions on ships, emissions across the LNG supply chain, from loading to engine delivery, are also a concern.

These fugitive emissions are often unintended and short-lived, but identifying, quantifying, and mitigating them is essential to achieving industry-wide decarbonization goals.

Xplorobot, Sorama and framergy were selected by MAMII to help address the vital need to detect, measure and capture fugitive methane emissions from LNG-fuelled ships.

Each provider selected for the trials brings expertise in a different technology, including:

Xplorobot: Provides a handheld device and AI-powered platform to detect and measure fugitive methane on ships using computer vision to pinpoint leak locations, overlay real-time emission rate data, and integrate seamlessly with existing systems for quick issue resolution without requiring specialised training.
Sorama: Develops acoustic cameras that detect fugitive gas by visualizing sound and vibration fields in 3D. Integrated AI and onboard software identify anomalies and classify sounds, enabling direct leak localization without complex analysis.
framergy: Specialises in adsorbents and catalysts for methane emission management. Their product, AYRSORB™ F250GII, captures and stores fugitive methane by selectively filtering methane from the air, leveraging its ultra-high surface area and coordination chemistry.

Feasibility Study Results Show Promise For Methane Abatement

Xplorobot conducted a detailed evaluation of their Methane Compliance Solution, focusing on its efficacy in detecting and quantifying methane emissions on LNG carriers and LNG-powered vessels.

The study targeted emissions from the warm side of the gas fuel line and both planned and unplanned venting events. Utilising comparable on-land data, this desktop analysis assessed how the technology would perform in maritime settings.

The technology demonstrated accuracy levels of +/-30% for emissions over 500 grams per hour and +/-50% for emissions between 100 and 500 grams per hour, thanks to a refined neural network algorithm calibrated through controlled release experiments. Xplorobot's solution promises to reduce inspection time dramatically with the ability to inspect 50 to 100 components in under an hour—sometimes as quickly as 10 minutes.

This efficiency, combined with automated digital emission tracking and compliance reporting, make the solution cost-effective. The next step is to deploy the kit in the field to further validate and optimise the technology for widespread adoption across the maritime industry.

Photo credit: CHUTTERSNAP from Unsplash
Published: 22 January, 2025