How to Avoid Bunker Related Claims in Marine Law

How to Avoid Bunker Related Claims in Marine Law

by | 26 Mar 2015

Every issue related to bunkering is highly regulated by marine law because of the high dangers included. Bunkering is not a funny business and making it work means constant adherence to hundreds of regulations and maintaining quite complex business relationships.

Bunkering in the marine law and industry is the process of loading fuel on to the vessel. This can take many forms as fuels and storage vary but is in any case an important, expensive and risky business.

Jurisdictions do not completely agree on many of the issues surrounding bunkering and this makes it hard to manage claims. In most legal systems bunkering claims are considered maritime claims.

Because of the nature of bunkering, there is so much room for claims and unresolved cases. As usually there are big investments and many regulations involved, we list the main issues that can cause bunker related claims in the marine law (plus how to avoid them!).

1.     Testing

Some of the most common bunker-related claims have to do with bunker fuel quality. Very often the delivered fuel is not of the same quality as the initial test samples that can negatively affect engines and the ship owner (too much sulphur and the vessel is breaking international regulations, for example).

The key to handling this issue is to have several tests performed from both the bunker supplier’s personnel and the ship crew.

2.    Contracts

Bunkering contracts are some of the most complicated agreements in the maritime law as a whole. There are many grounds for claims but the most common one is related to ship arrests.

Bunker suppliers would often agree to have only a partial amount of the price paid upon delivery and collect the rest of the fuel payment at a later date. To secure their money, however, they often include a contract clause that gives them the right to a maritime claim and/or a right to arrest the vessel to which the bunkers were supplied or her sister ship.

After the bankruptcy of the giant OW Bunker last year, bunker suppliers have been pressuring ship owners to make prompt payments realizing that even with good contracts they are not always protected.  The question that everyone is asking is if suppliers can take legal action against vessels they supplied bunkers to through OW Bunker.

Everyone in the industry starts realizing how unprepared they are for such occasions and for claiming what they are owed in times of crisis.

3.    Non-payment

The issue of non-payments for bunkers has been growing significantly and causing a lot of distress in the maritime industry. The main issue regarding claims is that it might be unclear who owes the money. These sort of claims are made even more difficult by the fact that there is not one single international law to abide to and many ships would run away to the waters that suit them, to avoid arrest.

The only way to avoid these kinds of claims is pay on time. However, very often bunkers ordered by the charterer need to be paid by the owner and here comes the mess.

Communication between all parties is key. Having more written agreements than seems necessary is a good idea.

Clear rights and responsibilities of charterers and owners make it easier to take decisions and avoid claims.

4.    Ownership

The ownership of bunkers is quite the issue and can be the reason for serious claims. In most law jurisdictions the vessel and her owner are not liable to pay for bunkers ordered by the charter. In the U.S. however, things are different. For these reasons, if the vessel trades on a worldwide basis, owners may expect an unpaid bunker supplier to attempt to arrest the vessel in the U.S.

A way to avoid arrest is to try and negotiate payment terms with the bunker supplier prior to claims and avoid the detention of funds and legal proceeding in the U.S.

Any bunker related claim can be avoided with careful preparation, checklists and dealing with reliable partners that are committed to adhering to regulations as well. As they say, failing to prepare is preparing to fail, and this is 100% valid when it comes to bunkering.

Read more about the legal issues related to bunkering here.

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