WHAT LIES BENEATH? THE FUEL QUALITY CONUNDRUM - SHIPPING SANCTIONS ONBOARD FUEL MANAGEMENT SUSTAINABILITY FOCUS: ANTWERP IMO 2020: INDUSTRY ...
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www.bunkerspot.com Volume 15 Number 6 December 2018/January 2019
WHAT LIES
BENEATH?
THE FUEL QUALITY
CONUNDRUM
INSIDE:
SHIPPING SANCTIONS
ONBOARD FUEL MANAGEMENT
SUSTAINABILITY FOCUS: ANTWERP
IMO 2020: INDUSTRY VIEWPOINTS
legal issues – sulphur regulations
Direction of travel
Various signals suggest the French state intends to adopt
a firm repressive policy as far as violation of sulphur cap
legislation is concerned, writes Leïla Esnard, partner at
French law firm, Lewis & Co.
E
ntry into force on 1 January 2020 of Initially fixed at a maximum of 4.50%, sub- is currently supporting the creation of
the new sulphur cap for marine bun- sequently reduced to 3.50% as from 2012, a new SECA in the Mediterranean Sea.
kers provided for by Annex VI of the Annex VI now provides for a 0.50% sulphur Directive 2012/33/EU (amending directive
MARPOL Convention presents a new chal- cap in marine bunkers for all vessels and the 1999/32/EC) also banned, as from 1 January
lenge for the maritime industry entire world after 1 January 2020 (as per an 2015, the use of marine bunkers with more
Human health and the environment are amendment of 2008, which came into force in than 1.50% sulphur by passenger vessels
affected by emissions of sulphur oxide 2010). According to the text, in case of averred calling in the European Union, as well as the
(SOx). The consumption of bunkers con- unavailability of very low sulphur fuel by 2020, use of marine bunkers with more than 0.10%
taining sulphur by ships constitutes one of the deadline for the applicability of the new sulphur by vessels berthed for more than
the sources of these emissions. This is the sulphur cap could be postponed until after two hours in a port of the European Union.
reason why public authorities have targeted 2025. However, in October 2016, the Marine The new sulphur cap of 0.50% therefore
the maritime sector in their fight against air Environment Protection Committee (MEPC) of affects globally the entire maritime sector
pollution. The new 0.50% sulphur cap in the IMO, with the support of France, amongst and raises questions and uncertainties.
marine bunkers, as fixed by Annex VI of the others, decided to maintain 1 January 2020 as
MARPOL convention, arises in this context. the date of entry into force of the new sulphur TECHNICAL AND FINANCIAL
cap of 0.50%. It is now for the maritime indus- UNCERTAINTIES______________
try to be prepared for this new requirement.
THE CURRENT AND FUTURE
Other measures aiming at the reduction of Three main options are open to shipowners:
LEGISLATION_________________
the emission of SOx by vessels have also been 1. To use bunkers with a sulphur level
Annex VI of the MARPOL Convention 73/78 recently enacted. However, their applicability that does not exceed 0.50% (MDO 2 or
was adopted in 1997, entered into force in was limited to certain areas or types of vessels. ULSFO 3). This option does not require
2005, and was subsequently revised. It aims Indeed, the MARPOL convention allows major technical changes. However, the
at limiting and monitoring progressively air the creation of Sulphur Emission Control main and auxiliary engines will need to
pollution, and more specifically air pollu- Areas (SECA) in which the sulphur emis-
tion resulting from SOx emissions (Rule 14 sions are capped at 0.10%. Since 2015,
of Annex VI)1. Its provisions were integrated the English Channel and the North Sea
into European law by directive 199/32/CE as belong to a SECA and the French State
amended by directive 2012/33/EU (now cod-
ified by directive 2016/802/EU relating to a
reduction in the sulphur content of certain
liquid fuels). This directive was belatedly trans-
posed by France under order No. 2015-1736
of 24 December 2015 which amended and
supplemented article L.218-1 and following
of the Code of the Environment.
Bunkerspot December 2018/January 2019 www.bunkerspot.com 77
legal issues – sulphur regulations
be adapted to the new type of fuel. This LEGAL UNCERTAINTIES________ by the time charterer, unless the vessel is
option, however, implies a significant not adapted to the new sulphur regulations).
increase of the fuel budget (the current In addition to the technical and financial ques- Voyage charter
difference between HFO4 at 3.50% and tions, legal issues also arise. Given the uncertainties as to the availability
ULSFO at 0.50% would be approximately Waste generated by scrubbers of ULSFO fuel, it may be opportune to insert
$250 per metric tonne). It could be more
Scrubbers generate waste that can be harmful a clause in the charterparty providing for the
difficult for shipowners to charter their
to the marine environment. Certain categories possibility and consequences of a deviation
vessels, by reason of the increase of the
of scrubbers will discharge this waste at sea9. (and/or a delay) to obtain compliant oil.
price of the bunkers to be borne by the
If the IMO has not yet prohibited such a dis- Insurance
time charterer or to be passed on to the
charge, certain European ports have already The failure to comply with MARPOL new
voyage charterers/cargo interests by way
done so. It is likely that this trend will continue requirements could lead underwriters to
of freight increase, and, the unavailability
and that this discharge of waste at sea will consider the vessel is not seaworthy, and
of adequate bunkers in certain ports. The
eventually be prohibited by the IMO10. therefore not covered.
profitability of the vessel and/or of certain
lines is to be considered further. Oil fuel quality
2. To install a scrubber5 subject to the The decision to use ULSFO to comply with the THE SANCTIONS IN CASE OF
approval of the equipment by the adminis- new requirements is likely to generate more lit- FAILURE TO COMPLY__________
tration of the flag of the vessel. Recognised igation on fuel quality, in relation to the sulphur
as compliant under the MARPOL conven- level, but also in relation to possible instabili- The sanctions to be applied in case of non-
tion, this option requires an immediate ties of the oil mixtures made by oil producers compliant bunkers are determined by States.
and significant investment, without any to reduce the sulphur level (clogging of filters, As far as France is concerned, the rel-
certainty as to its future profitability in the propeller breakdowns, etc.). evant legislation has been enacted to
medium term, since it will depend in fact Construction sanction the breach of the regulations con-
on the evolution of the price difference If the SOx emissions are beyond the legal cerning sulphur emissions by vessels.
between HFO at 3.50% and ULSFO at requirements in spite of the installation of Article L218-15 provides for a maximum
0.50% which currently remains unknown. scrubbers, it is likely owners will be will- penalty of one year imprisonment and/or a
Oil suppliers have indicated they have ing to pursue shipyards that may not have fine of €200,000 against a master who has
already started reducing their HFO vol- complied with the expected performance. violated the rules of Annex VI of the MARPOL
umes, which suggests that the supply of Contractual terms with shipyards should Convention as set out at L218-2.1 or the
ULSFO products should increase, and therefore be carefully scrutinised. other European regulations regarding sul-
as a result the price difference could phur emissions. This sanction is expressly
Time charter
decrease. Conversely, a number of char- applicable in relation to the 0.50% sulphur
Issues concerning the respective liability of the cap to be imposed as from 1 January 2020.
terers have already indicated they would
parties could arise, and in particular: The owner or the operator of the vessel
accept higher freight rates for vessels
equipped with scrubbers, which sug- (i) As to the time and costs incurred for may also be liable for the fine if it was at
gests they consider there will remain a the maintenance of the scrubbers and/or the origin of the offence or did not take
non-negligible price difference between the handling of the waste they generate; the necessary measures to avoid it (arti-
the two types of products. (ii) In case of clogging / damage to cle L.218-20). French criminal case law
3. To install LNG 6 propulsion which releases propellers / breakdowns resulting considers that the charterer, or even the
very limited or even no SOx emissions. from the fuel supplied; manager, can fall within this definition.
However, such a modification can be Additionally, if the offenders are not phys-
(iii) In case of non-compliance of the fuel ical parties, the fine may be multiplied by 5
extremely complicated or impossible
supplied with the sulphur cap (including (article 131-38 of the Criminal Code). The fine
for most existing vessels7. New ship-
ship detention, guarantee to be pro- can therefore reach an amount of €1,000,000,
building with LNG propulsion implies a
vided, delays and commercial losses, in addition to the possible costs linked to the
more expensive construction and LNG
removing non-compliant bunkers, vessel detention by the French authorities
supply is currently available only in a lim-
criminal fines, etc.). which are to be borne by the owners. Article
ited number of ports.
4. Decisions as to compliance with these It is therefore recommended to (re)nego- L.218-30 indeed provides that the authori-
new regulations are not easy to take and tiate very carefully charterparties to ensure ties may detain the vessel and condition its
give rise to a number of discussions 8, that the risks/costs have in such situations release on the remittance of a guarantee.
while the availability of shipyards to install been clearly allocated between the parties It shall be a defence to prove that no com-
scrubbers by 1 January 2020 is shrinking. (we consider that the risk should be borne pliant fuel was available, and the master
SULPHUR CAP CURRENTLY AS FROM 1 JANUARY 2020
General 3.50% 0.50%
SECA 0.10% 0.10%
Passenger vessels in Europe 1.50% 0.50%
All vessels berthed in Europe (+ 2 hours) 0.10% 0.10%
78 www.bunkerspot.com Bunkerspot December 2018/January 2019
legal issues – sulphur regulations
gave notice to the flag administration and In this respect, a specific Concentrated The outcome of the case at first instance
the port of destination, and despite best Inspection Campaign (CIC) conducted by and the stance taken by the Public
efforts it was not possible to obtain com- several MOU (including Paris MOU), focused Prosecutor give an idea as to the future
pliant fuel unless the vessel deviates from on the sulphur content of marine bunkers trend so far as repression in France is con-
its intended voyage or the voyage is unduly from 1 September to 30 November 2018. cerned. The decision to be rendered on
delayed in order to achieve compliance. Various signals also lead us to believe appeal is awaited to assess further whether
the French state intends to adopt a firm the higher courts will follow this trend.
AN EXPECTED FRENCH repressive policy as far as violation of Another strong signal given by the gov-
REPRESSIVE RESPONSE________ sulphur cap legislation is concerned. ernment in its fight against air pollution was
In this regard, last spring, the Public the release of a technical note on 21 March
The a b ov e sanctions are far Prosecutor of Marseilles commenced crimi- 2017 which defines and details the proce-
from being theoretical. nal proceedings against the master and the dure to be followed in case of air pollution
The Paris MOU has already stated that owners of the Azura, Carnival. They were detected by drones. It relates to the use of
Port State Control inspections shall be pursued for allegedly having used marine drones equipped with sensors allowing them
extremely strict as early as 1 January 2020 fuel exceeding the 1.50% sulphur cap fixed to detect emissions of vessels exceeding
and the vessels may be detained in case for passenger vessels calling in France (the the authorised level of sulphur. In case it is
of failure to comply with the new sulphur fuel contained 1.68% sulphur when the vessel exceeded, the public authorities are informed
cap. The vessels will have to disclose their was inspected during its call in Marseilles). and immediately proceed to the taking of fuel
IAPP certificate (International Air Pollution After being adjourned, the case was even- oil samples on board the relevant vessel.
Prevention), the bunker delivery receipts tually pleaded on 8 October 2018 before the A programme for the development of such
(BDR) and the oil record book. Analysis of oil criminal court of Marseilles. The master did ‘sniffer drones’ is currently in progress.
samples taken on board will be conducted. not attend the hearing. The Public Prosecutor It is therefore very likely that the new
insisted on the fact the owners ‘had wanted to requirements will also fuel criminal litigation,
save money in disregard of public health, in a unless the entire maritime industry is fully pre-
context of major air pollution caused partly by pared to meet the deadline of 1 January 2020.
cruises’, while the master was well aware the
1 Rule 13 of Annex VI of the MARPOL Convention
sulphur content was higher than the applicable
also limits the emission of nitrous oxide (NOx). The
1.50% sulphur cap. The owners and master legislation concerning the emissions of this gas are
argued, amongst other things, that the 1.50% not considered in this article.
was not applicable because this rule was only 2 Marine Diesel Oil.
applicable to passenger ships operating on 3 Ultra Low Sulphur Fuel Oil. This covers in principle
fuel the sulphur level of which does not exceed 0.1%.
regular services to or from European Union LSFO (Low Sulphur Fuel Oil) contains a maximum
ports and the Azura did not fall within this def- level of 1.0% sulphur. There is currently no agreed
intermediary term. ULSFO in this article should be
inition (they alleged it was not on a regular considered as reference to fuel which does not ex-
service). Several environmental societies, as ceed 0.50% sulphur.
Leïla Esnard civil parties, also presented claims against the 4 Heavy Fuel Oil.
defendants for damage to the environment. 5 Pollution control devices that use liquid to wash un-
wanted pollutants (e.g. SOx) from a gas stream.
In a judgment rendered on 26 November
6 Liquefied Natural Gas.
2018, the court held the master liable for
‘The Paris MOU has a fine of €100,000, of which €80,000 is 7 This option may be available for vessels requiring
a limited volume of fuel (and therefore a relatively
to be borne by the owners. Three envi- small LNG tank).
already stated that ronmental societies, as civil parties, were 8 For instance, CMA CGM chose LNG propulsion for
its new containerships, the Compagnie du Ponant
Port State Control also each awarded €5,000 as damages.
An appeal has been lodged before the court
will have its vessels supplied with MDO or LNG for its
icebreaker, Maersk will use ULSFO, while Frontline,
inspections shall of appeal of Aix-en-Provence. Simultaneously, DHT, Star Bulk and Spliethoff are equipping their
vessels with scrubbers.
Carnival released the following statement:
be extremely ‘The Carnival group carries over 12 million
9 The ‘open loop’ devices with discharge at sea
are less complicated and less expensive than the
strict as early as 1 guests on its vessels each year and takes
its legal and moral obligations towards the
‘closed loop’ system.
10 Certain scrubber manufacturers have stated the
January 2020 and protection of the environment very seriously scrubbers can be easily adapted if this was to be
the case.
indeed. We were therefore very disappointed
the vessels may be to be prosecuted for this offence, which was
11 The Guardian, 26 November 2018
detained in case of based on a European law the French envi-
ronment ministry had explicitly informed the
failure to comply cruise industry would not be applied to cruise Leïla Esnard,
Avocat au Barreau de Paris,
ships and which, in any event, has still not
with the new been properly implemented. The captain was LEWIS & CO AARPI
sulphur cap’ using the fuel in good faith, as directed by us,
based on our understanding of the law. We
Member of WISTA France
have lodged an appeal and will consider the Email: leila.esnard@lewislaw.com
full decision of the court once it is available’11 . Web: www.lewislaw.com
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