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IBIA Convention 2020: Session summary of the APAC – Legal, Compliance and Regulations Panel

16 Nov 2020

Discussions at the Asia-Pacific edition of the Legal, Compliance and Regulations Panel took place on the second day of the International Bunker Industry Association (IBIA) Convention on Wednesday (11 November, 2020).

Representatives from INTERTANKO, Helmsman and Rajah & Tann spoke about the implementation of IMO 2020, legal frameworks for the purchase and physical supply of new and alternative marine fuels, and the handling of bunker claims in a session moderated by Singapore bunker publication Manifold Times.

INTERTANKO – IMO 2020 implementation and regulation of bunker suppliers

Elfian Harun, the Environment Manager and Assistant Regional Manager for Asia-Pacific at the International Association of Independent Tanker Owners (INTERTANKO), believes the implementation of IMO 2020 was not without problem, but the industry seems to have sorted out the issues based on the declining number of issues being reported.

“This is no thanks to the tremendous amount of work put in by the shipping industry, oil producers, International Maritime Organization (IMO), Member States and fuel standard setting organisations, not forgetting that the IMO 2020 regulation was first passed in 2008 by the IMO,” he said.

“Overall, at INTERTANKO we think more could be done in terms of regulating the bunker suppliers.”

Harun notes the MARPOL regulations seems to unfairly target ships, and believes this treatment to be unfair as bunker fuel related issues often stem from the supply side; this can be solved if bunker suppliers were regulated.

“INTERTANKO has been campaigning for the regulation of bunker suppliers,” he adds.

“In a simple analogy, if you stop suppliers from offering bad fuel into the market you won’t have any issues on the ship.

“Using the Houston contamination case as an example, if we knew the source of the cargo we could have prevented contaminated fuel from reaching Singapore. We feel this is something which a licensing regime could help.”

Helmsman – Bunker procurement contracts and ‘unfair’ treatment of shipowners

Maureen Poh, Director of international law firm Helmsman, shared shipping companies are increasing seeking advice from external lawyers to update their current bunker supply contracts.

“Bunker procurement contracts shouldn’t be created with just input from the commercial guys; advise should also be sorted from the technical personnel and legal teams as well,” recommends Poh.

“This year, I’ve actually advised on quite a number of bunker procurement contracts for owners and charterers.

“Now, we are observing bunker contracts adjusting to include greater timelines for quality disputes; bunker contamination due to the Houston problem; and maritime liens as a result of the OW Bunker debacle.”

Poh echoed INTERTANKO’s view of the parity between shipowner and bunker suppliers, where shipowners are being blamed for non-compliance of IMO 2020 related marine fuel regulations.

“It really seems that owners are bearing the brunt of all these regulations regarding low sulphur fuel and that is something quite unfortunate because I think shipping is really a cooperation between owners and charterers,” she says.

“And I guess it really depends on the bargaining power between both parties. We have seen many contracts where owners tried to allocate some of the risk regarding bunkers to charterers; but that doesn’t always work when you have well-balanced counterparties involved.

“Earlier in October, a number of big global traders came together to make a commitment towards lowering greenhouse gases emissions by implementing a transparent reporting system.

“So, I think that’s a way of making parties in the shipping chain more involved and more responsible. Regarding, greenhouse gas emissions, we surely cannot put most of the blame on owners, because that’s pretty unfair, my opinion. It needs collaborative efforts between owners, traders, bunker suppliers and regulators.”

Rajah & Tann – TSP & flashpoint cases, and the settlement of bunker claims

Max Lim, Partner at law firm Rajah & Tann Singapore, said he has encountered several bunker claims regarding total sediment potential (TSP) and flashpoints this year.

“However, thankfully, in my experience, many of these cases have actually reached settlement at a very early stage. I believe that the onset of the Covid-19 pandemic has greatly reduce any impetus or desire for long legal fights, be in arbitration or in the courts,” shared Lim.

“What has proven to be very instrumental in the outcome of these cases, is evidence.

“For shipowners, it is highly essential that evidence and samples are retained, and proper records are kept. Apart from seeking legal advice early in the game, shipowners will also benefit from retaining technical experts from the get go.

“So at the end of the day, really, this is all about having all your ducks in a row and being ready.”

Lim noted the Covid-19 pandemic has reduced the demand for air travel and this has resulted in jet fuel becoming a fairly popular blending component in the production of low sulphur bunker fuel for the marine industry.

The development has caused more off-spec claims due to lower flashpoint generated; the higher flammability of marine fuel may lead to a very serious safety risk for ships, he says.

Lastly, Lim noted mediation – a fairly popular and effective mechanism of dispute settlement between businesses – has not been as widely accepted by the bunkering industry as one would expect.

“Based on my personal experience as far as bunker claims go, be it for contamination or others, mediation somehow is not so common,” he notes.

“My personal take is this: For bunker players, given the network of relationships between the traders, they perhaps find it easier to resolve matters amongst themselves without having to resort to a neutral third party.

“So, if I may just summarise. Really, I think that at the end of the day the lesson learnt is all things in life is about finding the right mix and blending in.”

 

Photo credit: International Bunker Industry Association
Published: 16 November, 2020

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