BIMCO and bunker purchasing

Bunker purchases have long been a source of dissatisfaction with buyers forced to accept often onerous terms imposed by suppliers resulting in frequent disputes. Past attempts to create standard conditions have met with only limited success. However, after a year of discussions and with the active involvement of the bunker industry, as well as input from Singapore interests, a new form, BIMCO TERMS 2015 Standard Bunker Contract, was issued in January.

 The contract terms address central practical issues concerning fuel specifications, quality, quantity, sampling, delivery, price and payment as well as equally important legal provisions including risk/title, claims and compliance with international trade sanctions. The result is a balanced set of terms for use as a starting point for buyers and sellers to negotiate provisions responding to their individual needs.

Virulent disease

The recent outbreak of Ebola highlighted the need for an issue-specific provision to deal not only with the present situation in West Africa but also in the wider context of other virulent disease. This has resulted in the development of a new BIMCO Infectious or Contagious Diseases Clause issued respectively for time and voyage charter parties. The provisions are intended for use in response to extreme illness as opposed to more commonly encountered widespread diseases and are based on the principles in BIMCO’s war and piracy clauses.

Subject to a decision based on reasonable assessment of the situation, owners may refuse to go to an area at high risk of infection, quarantine or if restrictions might be imposed either at the time or at a later port of call. If, however, that option is waived and owners consent to proceed, charterers will be responsible for any resulting liabilities and costs.

Seeking to pre-empt arrest

Arrest of a vessel for charterers’ unpaid bunker debts is an age-old problem. The purchase contract is between the time charterer and the bunker supplier who, often through intermediate traders, arranges for physical delivery of fuels ordered. The shipowner is therefore not a party to the arrangements but the vessel is often seen as an easy target for security for a claim in the event of charterers’ default.

In order to protect owners’ interests, a new Bunker Non-Lien Clause for Time Charter Parties requires time charterers to inform their counterparty seller at the outset that bunkers are being ordered and supplied to the vessel for their account and credit and that no lien can be placed over the vessel. While the provision may not always prevent determined seller interests from arresting a vessel, a copy of charterers’ note to sellers can be used as evidence by owners to refute their liability in any arbitration or litigation.

Ship to ship operations

A new clause has been developed to accommodate charterers’ requirements to undertake ship to ship cargo operations which were not contemplated, or agreed, at the time of fixing. The BIMCO Ship-to-Ship Transfer Clause for Dry Bulk Voyage Charter Parties (ship to ship transfer is a standard term in tanker charters and therefore not covered by the new clause) is for cargo operations to or from another vessel and includes floating cranes and barges.

Cargo operations are permitted at any safe location so, significantly, by agreeing to the clause a safe berth charter could be broadened to working at anchorage. This, in turn, is likely to have implications for time counting and so an in-built mechanism protects owners’ interests against the added risks of delay in such circumstances. Other provisions cover charterers’ obligations to provide any specialist equipment required and obtain authority, if needed, from regulatory authorities as well as the Master’s right to suspend or discontinue operations on safety grounds.

Infestation

The on-board discovery of Asian Gypsy Moth will have serious implications for owners who, in the absence of contractual agreement with charterers, will have to bear the removal and other associated costs. In order to respond to this situation, a time charter party clause has been drafted apportioning the risks between the parties. Owners must deliver the vessel free of Asian Gypsy Moth and charterers, while not precluded from trading to areas of risk, will be responsible for any resulting liabilities and must redeliver the vessel free of infestation. The BIMCO Asian Gypsy Moth Clause for Time Charter Parties is being prepared for publication at the time of writing. 

Continuing activity

As well as the many completed tasks, work continues on other documents and clauses. Revision of the New York Produce Exchange Time Charter to take account of changes in commercial practice and legal developments since it was last updated in 1993, has been a complex task involving BIMCO, ASBA, who are the copyright holders, and the Singapore Maritime Foundation. As a result, many different, and conflicting, views have had to be considered, negotiated and sometimes comprises reached. However, it is hoped that work will be completed and the new document ready for adoption at the next meeting of the Documentary Committee in June.

Anti-Corruption

BIMCO has been working on an Anti-Corruption Clause to protect owners when demands are made for so-called “facilitation payments” by port or other officials as the price of carrying out their duties such as ship or customs clearance. Discussions are continuing to ensure that the content is structured so that the provision will be applied only for its intended purposes and cannot be manipulated as an excuse for exiting an inconvenient charter.

Future work

A major new project is the revision of SUPPLYTIME 2005. While this is one of BIMCO’s most used documents, changed practices in the ten years since it was last updated mean that it is now time to look again at the content. A small sub-committee is being formed to take undertake the detailed work which is scheduled to begin shortly.

Donald Chard is a chartered shipbroker and Fellow of the Chartered Institute of Arbitrators. After more than 38 years at the UK Chamber of Shipping, he now takes appointments as an arbitrator and acts as a part time Consultant with BIMCO’s Legal and Contractual Affairs Department.