Increase in Claims Spurs Shipowners' Club to Advise on Bunker Quality Disputes

Friday December 23, 2016

Mudit Singh, Claims Handler and Correspondent Manager at the Shipowners' Club has provided members advice on collating evidence and contractual terms to address bunker quality and contamination issues amid an increase in related claims.

"Bunker disputes are fraught with problems, both on an evidentiary and legal basis. This is perhaps not surprising given that both the bunker supplier and receiver are working to strict schedules often resulting in important aspects of the bunker delivery operations being overlooked," said Singh.

As bunker receivers may find supplier's terms "onerous," the Shipowners' Club encourages members to use BIMCO's Standard Bunker Contract as a starting point when negotiating a supply contract.

"It is also important that the correct grade of bunkers, based on the engine type and applicable regulations, is ordered and specified in sale and purchase agreement. To avoid any confusion, it is best to specify the grade of bunkers by making a reference to their ISO 8217 grade," said Singh.

"Blending of bunkers in the receiving ship's tanks or in the hoses should be avoided to ensure homogenous bunkers are delivered."

Singh notes that the ship's crew should check bunker delivery note (BDN) details correspond with the stemmed specification before taking delivery.

"Unfortunately, we have been notified of claims where the crew failed to perform these checks and when the discrepancy was realised, it was too late to rectify the mistake," explained Singh.

As sampling is relied should a dispute later arise over bunker quality, Singh stresses that samples of bunkers from the vessel's receiving tanks should be collected before the delivery of a new stem, while mixing of new and old bunkers should be avoided where possible.

Further, Singh says that to prevent engine damage and breach of regulations, newly supplied bunkers be used only after samples have been analysed and determined to be on-specification and free of contaminants.

Bunkers found to be off-spec or with contaminates should not be used, notes Singh, adding that, in such a case, a surveyor should be appointed to collect the samples immediately and jointly with the bunker supplier's own surveyor, if possible.

"Members are advised to also explore indemnity provisions in other relevant contracts, such as charterparties, when faced with bunker quality issues. Timely action and notification is the key to avoid expensive claims and successful indemnity action against third parties involved in the bunker quality dispute," said Singh.

Finally, Singh notes that the Legal Assistance & Defence Cover (LADC) provided by the Shipowners' Club includes support for legal costs in respect of the supply of inferior, unsatisfactory, or unsuitable bunkers.

"Therefore, if Members are faced with a scenario where they believe a claim of this nature may arise or has arisen, we encourage Members to contact the LADC team for assistance," concluded Singh.

In September, fellow P&I club West of England announced the release of two new guides to assist owners and operators in dealing with bunker quality disputes.