By Tim Howse, Member of the IUMI Legal & Liability Committee and Vice President, Head of Industry Liaison, Gard (UK) Limited

The world economy is transitioning, with industries across the board seeking to reduce their carbon footprint and embrace more sustainable practices. As part of this, there is a huge effort within our industry to look to decarbonise, using alternative fuels such as biofuel, LNG, LPG, ammonia, methanol, and hydrogen.

Until now there has been much focus on carbon emissions and operational risks associated with the use of alternative fuels. This includes increased explosivity, flammability, and corrosivity. An ammonia leak causing an explosion in port could result in personal injuries, not to mention property damage, air, and sea pollution. In addition, alternative fuels may not be compatible with existing onboard systems, increasing the risk of breakdowns and fuel loss resulting in pollution. Apart from these safety concerns, which particularly concern crew, air pollution and other environmental impacts need to be addressed.

However, the green transition also presents us with a separate regulatory challenge, which has received less attention so far. So, whilst carbon emissions and safety concerns are rightly on top of the agenda now, the industry also needs to prioritise the potential barriers in the legal and regulatory frameworks which will come sharply into focus if there is an accident.

If anything, historic maritime disasters like the Torrey Canyon spill in 1967, have taught us that we should look at liability and compensation regimes early and with a degree of realism to ensure society is not caught off-guard. With our combined experience, this is perhaps where the insurance industry can really contribute to the transition.

Currently, existing international liability and compensation regimes do not fully cater to the changes that the use of alternative fuels will bring. For example, an ammonia fuel spill would not fall under the International Convention on Civil Liability for Bunker Oil Pollution Damage (Bunkers Convention), potentially resulting in a non-uniform approach to jurisdiction and liability. Similarly, an ammonia cargo incident would not fall under the International Convention on Civil Liability for Oil Pollution Damage (CLC). Uncertainties may also exist in the carriage of CO2 as part of Carbon Capture and Storage (CCS) projects, which may be treated as a pollutant, with corresponding penalties or fines.

A multitude of questions will arise depending on what happens, where it happens, and the values involved, many of which may end up as barriers for would be claimants. How will such claims be regulated, will there be scope for limitation of liability, and would there be a right of direct action against the insurers? In the absence of a uniform international liability, compensation and limitation framework, shipowners, managers, charterers, individual crew, and the insurers may be at the mercy of local actions. Increased concerns about seafarer criminalisation (even where international conventions exist, ‘wrongful’ criminalisation does still occur) may emerge, creating another disincentive to go to sea.

When being carried as a cargo, the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea (HNS), which is not yet in force, may resolve some of these issues for alternative fuels and CO2. However, until HNS comes into force, there will be no international uniformity to liability and compensation for the carriage of alternative fuels and CO2 as cargoes. This creates uncertainties for potential victims and their insurers, who may face increased risks and costs, due to the potential inability of existing regulations to provide protections.

The situation is even less clear in the case of bunkers. The rules for using alternative fuels as bunkers might require a separate protocol to HNS, a protocol to the Bunkers Convention, or a whole new convention specifically for alternative fuels.  Relevant considerations for the appropriate legislative vehicle include states’ preparedness to reopen the Bunkers Convention, the ability to conclude a protocol to HNS before it comes into force, and whether a multi-tier fund structure is needed for alternative fuels as bunkers (perhaps unnecessary because bunkers are usually carried in smaller quantities compared to cargoes).

Until then, what we are left with are the existing international protective funds, designed to respond at the highest levels to pollution claims resulting from an oil spill, without any similar mechanism in place to respond to a spill of alternative fuels, which are themselves so central to a green transition. Somewhat perversely, victims of accidents involving an oil spill may therefore enjoy better protections than victims of an alternative fuels spill.

In summary, while the use of alternative fuels will no doubt help to reduce the industry's carbon footprint, there are safety and practical hurdles to overcome. Stakeholders must also come together to find solutions to complex - and urgent, in relative terms - legal and regulatory challenges.

 

Photo credit: Manifold Times
Source:  International Union of Marine Insurance
Published: 13 June 2024

Bunkering firm Tumpuan Megah Development Sdn Bhd (TMD), the subsidiary of Malaysia-listed Straits Energy Resources (SER), on Wednesday (7 February) provided an update on its legal suit involving ING Bank N.V and O.W. Bunker Far East (Singapore) Pte Ltd.

SER is defending against a USD 937,000 bunker claim from ING Bank and O.W. Bunker Far East. 

According to SER in 2021, previously known as Straits Inter Logistics, ING and O.W. Bunker alleged that between 17 October 2014 and 29 October 2014, TMD and O.W. Bunker Singapore entered into contracts both made “orally or by yahoo messenger” whereby O.W. Bunker Singapore agreed to supply and/ or sell to TMD 423.73 metric tonnes (mt) of gas oil at a price of USD 753 per mt for delivery at the port of Pasir Gudang and 794.915 MT of gas oil at a price of USD775.50 per mt for delivery at the port of Kuantan respectively.

In the latest filing on Bursa Malaysia, SER noted TMD solicitors on 6 February informed SER that the Federal Court, the highest court and the final appellate court in Malaysia, had given the following directions in the case management held on 5 February:

1. written submissions, common core bundle and executive summary (if necessary) to be filed by 15 May 2024;
2. a case management on 16 May 2024 to monitor the filing of documents for the hearing on 16 May 2024;
3. hearing on 30 May 2024.

TMD’s solicitors had also informed Straits Energy Resources that a case management has been fixed on 20 February to fix a hearing date for an application to stay the proceedings in the High Court pending the decision of Federal Court.

TMD was acquired by Malaysia-listed Straits Inter Logistics for RM35.75 million in June 2018. Straits Inter Logistics Berhad in August 2021 changed its company name to Straits Energy Resources Berhad.

Manifold Times in November 2023 reported the legal trial between ING Bank N.V and O.W. Bunker Far East (Singapore) Pte Ltd against TMD was scheduled to take place at the High Court of Malaya, Kuala Lumpur on 5 December 2023.

Related: Malaysia: ING Bank, O.W. Bunker legal suit against TMD to be heard in early December
Related: Straits Inter Logistics to contest USD 937,000 claim from ING Bank and O.W. Bunker Far East
Related: Straits Inter Logistics files application to set aside ING Bank & O.W. Bunker Far East claim
Related: Straits Inter Logistics to acquire Tumpuan Megah Development for RM35.75 million
Related: Straits Inter Logistics undergoes name change to Straits Energy Resources

 

Photo credit: Straits Energy Resources Berhad
Published: 14 February, 2024

The High Court of the Republic of Singapore on 14 December 2023 issued a court order for the repayment of a USD 2.93 million (exact: USD 2,934,624.17) debt from Impex Marine (S) Pte Ltd (Impex) to ExxonMobil Asia Pacific Pte Ltd (ExxonMobil), according to documents obtained by Manifold Times.

In June 2020, Impex entered a marine fuel term sales contract with ExxonMobil for between 5,000 to 8,000 metric tonnes (mt) of DMA grade product; spot contracts were further recorded by both parties in the similar month.

Impex carried out five bunker deliveries and seven marine refuelling operations for the oil major respectively under the term and spot contracts; the total value of all contracts was worth USD 2.95 million (exact: USD 2,954,624.17).

The invoices went unpaid until 2 February 2021 when Impex remunerated USD 20,000 to ExxonMobil and offered to settle the outstanding balances through the provision of barging services.

This development led ExxonMobil to commence arbitration proceedings against Impex on 20 March 2023 at the Singapore International Arbitration Centre (SIAC).

However, SIAC could not begin the arbitration process as Impex did not pay for its share of the first tranche of deposits for proceedings to start despite sending eight payment reminders to Impex.

ExxonMobil started proceedings at the Singapore High Court in July 2023 and consequently obtained the court order from the institution in December for the repayment of its bunker claim.

 

Photo credit: Manifold Times
Published: 2 February 2024