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Saturday, November 17, 2018

Confusion reigns over EU North Sea/English Channel SECA – who cares or who dares? Who wins and who loses?

One month into the enforcement of the North Sea and English Channel SECA by the EU but not by the IMO, one might have thought that things would be settling down into some sort of routine. Far from it. The actuality is about complexity and confusion.


According to the EU Sulphur Directive, the North Sea and English Channel became a SECA on 11 August this year – more than three months before the area becomes a SECA according to the IMO's international regulation on 22 November. But there are still no official guidelines from any EU member state or from Brussels about how the EU will enforce this directive between 11 August and 22 November.


An owner's vessel relet on time charter is ordered to NW Europe. The owner requests the time charterer to supply  LSFO (low sulphur fuel oil) for steaming inside the North Sea/English Channel SECA. The time charterer advises that it does not plan to supply  LSFO.


This brings up two questions. First: Is the time charterer obliged to provide  LSFO so that the ship can satisfy regional regulation? Second: If the time charterer will not provide  LSFO, then is the owner liable, will the EU enforce a penalty on a non-EU flag ship between 11 Aug and 22 Nov, and what could that penalty be?  


First: The obligations of owner and charterer are set out in the charterparty. The time charterparty obliges the time charterer to "supply fuels of such specs and grades to permit the vessel, at all times, to comply with the maximum sulphur content requirements of any emission control zone when the vessel is ordered to trade within this zone". However, there is no obligation on any supplier outside the EU to provide fuel which complies with the EU directive, and a ship arriving in the EU may not be able to find  LSFO when/where it requires it in order to enter the SECA with compliant fuel. A detour from the direct route may be necessary.


So the time charterer refuses to provide  LSFO to the ship, arguing that only a handful of vessels have been inspected since 11 August by PSC for compliance with  LSFO regulations, and that entering the SECA without  LSFO is a low risk for the vessel to take. The owner argues that he will not take any risk.


Thus either the vessel stops outside the SECA until the time charterer complies with charterparty terms; or the vessel deviates and bunkers  LSFO for its own account, aiming to reclaim from the time charterer later – ironically, if a vessel has to deviate to bunker, this would probably mean more air pollution generated than that saved by changing to  LSFO; or the vessel does not bunker  LSFO and steams in the SECA with non-compliant fuel. If the ship is caught and penalised, who is liable and who would pay for those costs?


Second: Liability? What will happen is uncertain. It is more a case of what might happen. Article 4a of the EU Directive says that EU "Member States shall take all necessary measures to ensure that marine fuels are not used in the areas of their territorial seas, exclusive economic zones and pollution control zones falling within the SECAs if the sulphur content of those fuels exceeds 1.5% by mass. This shall apply to all vessels of all flags, including vessels whose journey begins outside the Community." So is the owner liable? Who is 'using' the non-compliant fuel? The owner or the time charterer?


Brussels has advised that the directive is binding law all over the EU; that all authorities have the obligation to control compliance; that while some Member States may be more active in enforcement than others, the obligation to comply is there for all ships; that there will be no difference in dealing with EU or non-EU flags. Does this mean warnings for the ship and its owner? Fines? Detentions? Arrests?


The EU's jurisdiction over non-EU flags in international waters may be challengeable but this will be of little comfort to an owner with a decision to make right now.


Notwithstanding the possibility that EU jurisdiction may be challengeable, and although PSC action to date is low, it is probably prudent for an owner to comply with the EU Directive during the period between August 11 and November 22. The actual cost of compliance is the cost differential between  LSFO and HSFO plus the cost in time and money of the bunkering call, including deviation if any.


At the heart of the problem here is unilateral legislation at variance with international legislation. If the EU dates for this SECA had matched the IMO dates, it is unlikely that the time charterer would have refused to comply. The LSFO would probably have been arranged and paid for by the time charterer.


What this unilateral legislation does is to put the ship owner right in the firing line. This situation highlights the difficult choices that have to be made. It becomes a case of who cares or who dares? And ultimately who wins and who loses?


Contact: Bill Box