The countdown to 2020 has begun - are you ready?

The amendments to MARPOL which will bring in a global sulphur cap of 0.5% will be implemented on 1st January 2020. This regulatory change, although undoubtedly a positive one for the marine environment, nevertheless brings with it significant commercial, financial, legal and practical implications for owners and charterers alike. Over a series of bulletins leading up to 2020, we are going to look at some of the key issues that are likely to arise and to help guide our Members towards a trouble-free transition into 2020 and beyond.

THE COUNTDOWN TO IMO 2020
 

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We are already seeing numerous queries in preparation for 2020. 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?

Where operators have chosen to install scrubbers so as to avoid the need to stem low sulphur fuel, this in itself raises a number of potential issues, particularly where the existing charter arrangement was not drafted with such an arrangement in mind. 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. Read more about scrubber related issues here.

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. Read more about the general issues involved here.

We have already published various Soundings bulletins addressing some of these low sulphur fuel issues and will circulate further comments and updates over the coming weeks and months. 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. Potential bunker price fluctuations will also need to be accounted for.

Members are invited to sign up here to receive access to our regular updates can also access the latest news and resources here

Members are also invited to direct any specific enquiries to their usual contact at the Club or to our dedicated IMO 2020 team Philippa Langton and Caroline Avgerinou.

IMO 2020 Sulphur Cap

October, 2019 - Sulphur Cap - Fuel Quality Issues

October, 2019 - Sulphur Cap - Fuel Quality Issues

View all 2020 Soundings insights

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