The International Maritime Organisation (IMO) has been working to reduce the harmful impacts of shipping on the environment, setting progressively stricter limits on the sulphur content of fuel oils used by vessels. Failure to comply with these new rules can lead to substantial fines.
Recently, the IMO has adopted a 2008 resolution that introduces a reduced global sulphur cap on marine fuels. The current global limit of 3.5% mass/mass (m/m) shall decrease to 0.5% m/m from 1 January 2020.
While the new regulation has been welcomed by all, there are challenges in ensuring its full compliance and enforcement. This page is dedicated to provide Members with the resources necessary to overcome these challenges.
The UK Defence Club has published a series of Soundings bulletins on the upcoming Sulphur Cap, each detailing the various issues that its Members will face leading up to the impending deadline.
The Defence Club has already received numerous queries on the cap. Who will have to pay the higher cost of low sulphur fuel? Can an owner be obliged to install scrubbers, in order to avoid having to stem low sulphur fuel? Who will be responsible for compliance with the new regulations?
One big issue Owners face is whether or not to install scrubbers on their vessels and the potential contractual issues that may arise. Who bears the time and costs required for scrubber installation? Who is responsible for maintenance and the consequences of defective scrubbers? Issues may also arise under ancillary contracts for the finance, installation and maintenance of scrubbers.
Ships without scrubbers, on the other hand, will need to be physically prepared for the 2020 switchover by ridding themselves of any high sulphur fuel on board. This in itself is likely to pose logistical and contractual issues and will require careful planning.
Once the regulations are in force, other issues are likely to arise during the “teething period”. There is a concern that there will be insufficient supplies of low sulphur fuel to satisfy demand and this may result in practical and contractual difficulties relating to fuel unavailability. Some ports have banned “open loop” scrubbers and this could lead to problems where ships are prevented from entering such ports and therefore unable to perform the chartered service.
Members will need to anticipate these types of issues when negotiating new contracts or amending existing charterparties in advance of 2020. With careful drafting and planning, it may be possible to mitigate the negative impacts of 2020. Nevertheless, this regulatory change is undoubtedly an area for potential dispute.
Visit the UK Defence Club's dedicated IMO 2020 webpage for all the latest updates from the Club. Members can download copies of the UK Defence Club Soundings bulletin below.