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SCMA: Quality issues are the future of bunker disputes

06 Sep 2018

Implementation of the Technical Reference for bunker mass flow metering (TR 48) and the use of mass flow meters (MFM) for fuel oil bunkering operations at Singapore have significantly reduced bunker quantity claims, says the Executive Director of the Singapore Chamber of Maritime Arbitration (SCMA).

Dennis Chan told delegates at the Argus Media Singapore Bunker Fuel Seminar on Friday that parties generally do not bring their quantity disputes to arbitration.

“It is a known fact bunker disputes have been traditionally about quality and quantity,” says Chan.

“The introduction of mass flow meters and the emphasis in TR 48 operational practices has put in place a system that not only describes transfer practices but also provides industry transparency and efficiency.

“In many ways, it has effectively reduced the number of quantity claims associated with bunker delivery in Singapore”

Chan pointed out that parties have referred five bunker quality disputes to the SCMA for arbitration.

“Conversely, we think that Quality claims [at Singapore port] conversely would be much more apparent closer to 2020,” he forecasts.

“Quantifying quantity claims may be relatively straightforward but claims related to quality are very different and more complex.

“Such claims are also wider covering vessel engine damage, debunkering cost, towage chartering delays and also commercial claims.”

Moving forward, Chan noted it was important for stakeholders to maintain an up-to-date dispute resolution clause in bunker contracts to protect themselves.

“The key question is how are stakeholders positioned today to address potential disputes,” he says.

“It is not uncommon in the bunker industry to settle disputes amicably.”

“While this remains the best way to resolve disputes, contracts between buyers and sellers remain the single most important document governing their contractual obligations, and it is important to update and refresh your contracts to provide for the right forums to address such disputes, if it happens, in an efficient and cost-effective way.”

Chan highlights that both the Singapore Standard Code of Practice for Bunkering (SS 600) and TR48 already include a framework for the Singapore Bunker Claims (SBC) procedure as a quick and inexpensive avenue for dispute resolutions. The SBC Terms are administered by the SCMA and provide for a monetary cap on the time and cost of the arbitration process.

Here is where SCMA arbitration may function as a cost-effective and efficient way to handle disputes.

“We recommend that stakeholders incorporate the SBC Terms, which is the arbitration process recommended by the Maritime and Port Authority of Singapore as reflected in the SS 600 and TR48, into their bunker contracts, especially if you are taking bunker deliveries in Singapore,” he suggests.

“Parties may also, in an appropriate dispute, request that SCMA convert an SBC arbitration into a full-scale arbitration under the SCMA Arbitration Rules to accommodate larger or more complex bunker claims.”

Photo credit: Nadiah Zulkifle, IBIA (Asia)
Published: 6 September, 2018


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