Scrubber Clause for Time Charterparties

21 August 2019

1.       The Vessel shall be delivered with a fully functional Exhaust Gas Cleaning System (‘Scrubber’), as described in this charterparty {or insert description here e.g. open/closed loop/hybrid / maker and design} for use as an alternative/equivalent means of compliance with the global limits on sulphur content of fuel oil under Regulation 14 of MARPOL Annex VI (as amended from time to time) (‘MARPOL Annex VI’), including:

  1. the maximum 0.50% m/m for fuel oil used on board after 1 January 2020 when the Vessel is outside designated Emission Control Areas under Regulation 14.3-4 of MARPOL Annex VI (‘ECAs’); and
  2. the limit of 0.10% m/m on sulphur content of fuel oil within ECAs [Delete if vessel will use 0.10% m/m fuel oil in ECAs].

2.1.         Owners warrant that the Scrubber:

  1. has been tested, certified, surveyed and verified as required in accordance with the 2015 Guidelines for Exhaust Gas Cleaning Systems (MEPC 259/68) and any subsequent amendment thereto (the ‘2015 Guidelines’);
  2. is capable of scrubbing fuel oil with a maximum sulphur content of [3.50% / maximum sulphur content warranted by the scrubber manufacturer – delete as appropriate] and will be maintained in a good and efficient state throughout the charter period.

2.2.         Owners shall indemnify Charterers for any loss, liability, damage, fines, delay, cost or expense arising from or connected with Owners' failure to comply with the provisions of this Clause.

3.1.         Charterers warrant that they will provide fuel oil:

  1. with a maximum sulphur content of [3.50% / maximum sulphur content warranted by the scrubber manufacturer in the Scrubber Technical Manual – delete as appropriate} (‘High Sulphur Fuel Oil’);
  2. in accordance with the specifications in the latest version of ISO 8217 as at the time of supply and/or any other specifications and grades contained elsewhere in this charterparty;
  3. that is in all respects fit for purpose and suitable for burning in the main and auxiliary engines of the Vessel.

3.2.        Charterers shall further ensure that for all fuel supplied, their bunker suppliers shall provide:

  1. a bunker delivery note in accordance with and containing the minimum information specified in Appendix V of MARPOL Annex VI; and
  2. a representative sample of the bunkers delivered in accordance with Regulation 18.8.1 of MARPOL Annex VI and the strictly according to the guidelines set out in IMO Resolution MEPC.182(59) and any subsequent amendment thereto.

3.3.         Where bunkers are supplied by Charterers in a place where MARPOL Annex VI is in force, Charterers warrant that any bunker suppliers shall be registered if required, and shall comply with Regulations 14 and 18 of MARPOL Annex VI, including the provisions relating to sampling and bunker delivery notes.

3.4.         Charterers shall indemnify Owners for any loss, liability, damage, fines, delay, deviation, cost or expense arising from or connected to Charterers' failure to comply with the provisions of this Clause.

4.         Inability to burn High Sulphur Fuel Oil

In the event that the Vessel is unable to burn High Sulphur Fuel Oil due to:

  1. non-availability;
  2. restrictions on the use of the Scrubber by any applicable laws or regulations;
  3. Charterers’ instruction to the Vessel not to burn High Sulphur Fuel Oil;

Charterers shall allow the Vessel to burn any other bunkers on board or, at the Owners’ request, provide fuel of such specification and grade that enables the Vessel to comply with MARPOL Annex VI without the use of the Scrubber (‘Compliant Bunkers’). The cost of Compliant Bunkers including any deviation and time to source Compliant Bunkers shall be for Charterers’ account.

5.         Scrubber breakdown

For the purposes of this clause, ‘Scrubber breakdown’ shall mean any breakdown or malfunction of the Scrubber as recorded by the Vessel’s on board monitoring systems where the Scrubber no longer conforms to the 2015 Guidelines and that is not caused by or due to fault on the part of Charterers.

In the event of Scrubber breakdown, on each and every occasion:

  1. the Vessel will remain on hire during repairs not exceeding one hour;
  2. if there is loss of time exceeding one hour while the Owners make repairs to the Scrubber which prevents the full working of the Vessel, the payment of hire shall cease for the time thereby lost;
  3. Owners shall compensate Charterers by way of deduction from hire for the difference between the cost of Compliant Bunkers, either sourced or on board, and High Sulphur Fuel Oil based on Charterer’s last invoice price as if there had been no breakdown;
  4. Any deviation time and expenses to source Compliant Bunkers for use during Scrubber breakdown shall be for Owners’ account. Any distance made good shall be considered time on hire and any bunkers saved shall be deducted from expenses.

6.         Any speed and performance undertaking in this Charterparty is based on use of High Sulphur Fuel Oil. Any fuel changeover periods will be excluded from any speed and performance evaluation.

7.         Restrictions on use of open loop Scrubbers in port and during boiler operations

For Vessels equipped with an open loop Scrubber and/or whose boiler exhaust gases do not pass through the Scrubber:

  1. Owners will ensure that there will be no violation of any local, regional or national laws and regulations prohibiting the use of an open loop Scrubber in port;
  2. Owners will ensure that there will be no violation of local, regional, national or international laws and regulations during any operations where boiler exhaust gases do not pass through the Scrubber;
  3. At Owners’ request, Charterers will supply sufficient quantity of Compliant Bunkers to enable the Vessel to comply with any local, regional, national or international laws and regulations without the use of the Scrubber;
  4. If Charterers fail to comply with sub-clause 7.iii above, they shall indemnify Owners for any fine or other consequences that may arise for violation of local, regional, national and international laws and regulations.

8.         Supply and disposal of Scrubber Agents

For Vessels equipped with a hybrid or closed loop Scrubber:

  1. Charterers to provide any raw materials required for use with the Scrubber.
  2. Charterers will be responsible for the removal of Scrubber waste in compliance with any local, regional, national or international laws and regulations at their time, risk and cost.

Commentary

As with all INTERTANKO Clauses, the INTERTANKO Scrubber Clause for Time Charterparties is a ‘model’ Clause which can be negotiated and amended to meet the particular requirements of the charterparty or trade. It also needs to be amended to accommodate the exact particulars of the scrubber system installed.

These model provisions may be used in full or may be used as stand-alone provisions where for example a time charterparty already has adequate general bunker provisions. As a minimum, a time charterparty should include:

  • A clause that provides for compliance with MARPOL Annex VI Regulation 14.1, 14.3 and 18, such as the INTERTANKO Bunker Compliance Clause for Time Charterparties – General Provisions; or the BIMCO 2020 Marine Fuel Sulphur Content Clause for Time Charter Parties; and
  • A provision in the description of the fuel oil to be provided by charterers, that the maximum sulphur content should not exceed the maximum sulphur content warranted by the scrubber manufacturer (likely 3.50% m/m).

Further scrubber specific related requirements may be required to cover the following:

  • Inability to burn High Sulphur Fuel Oil
  • Scrubber breakdown
  • Local restrictions on use of open loop scrubbers in port
  • If boiler exhaust gases do not pass through the scrubber
  • Supply and disposal of scrubber agents

Clause 1 - requires the Owner to deliver the Vessel with a fully functional scrubber. This would be the case under general time charter provisions but the Clause provides the opportunity for Owners to spell out exactly the details of the scrubber system that has been fitted and to match the fuel oil required with the capability of the scrubber.

If the scrubber will not be used to produce the 0.10% low sulphur fuel oil required for ECAs e.g. due to cost, technical restrictions, malfunction/breakdown or local laws then Clause 1.ii will not be required. In that case, the bunker requirements in the charterparty will need also to provide for the supply by charterers of 0.10% m/m sulphur fuel oil for use in ECAs.

Clause 2.1 - details the warranties to be provided by Owners with regard to the scrubber operation and maintenance i.e. the Vessel must be ‘fitted for service’, as required under most charterparties. The 2015 Guidelines were adopted by the Marine Environmental Protection Committee in May 2015 (Resolution MEPC 259/68). Note that the Marine Environmental Protection Committee expects to review the 2015 Guidelines in 2020.

Clause 2.2 - this indemnity will apply where Charterers have fulfilled their obligation to supply High Sulphur Fuel Oil (as defined in Clause 3) and the fault lies with the Owners/Vessel which cannot scrub those bunkers to meet the 2020 requirements i.e. the Vessel is not fit for service. Any remedial measures then required will fall to Owners.

Clause 3.1 - requires Charterers to provide bunkers that are fit for use by the Vessel and the specific scrubber fitted, including the most current ISO 8217 standard (at the time of writing ISO 8217 -2017).

Clause 3.1.iii - also requires Charterers to provide bunkers that are fit for purpose. Bunkers may meet all the requirements of Clause 3.1.i and ii but may still cause issues for the Vessel if they contain other impurities or contaminants that have an adverse effect on the engine/auxiliaries. The Clause therefore contains a ‘back stop’ provision to cover this, similar to the provision used in the INTERTANKO Bunker Compliance Clause.

Clauses 3.2-3.4 - mirror the provisions of the INTERTANKO Bunker Compliance Clause (1.2.-1.4.) with regard to MARPOL Annex VI requirements for Bunker Delivery Notes (BDN) and Sampling, bunker supply contract terms and Charterers’ indemnities where they fail to supply High Sulphur Fuel Oil, so will not be required if the INTERTANKO Bunker Compliance Clause (or similar) is already included in the charterparty.

Clause 3.2.i - reflects the provisions of MARPOL Annex VI Regulation 14 and 18 which require certain minimum information about each consignment of bunkers to be recorded in a BDN that must be retained on board for inspection at any time by the authorities. The sulphur content must still be stated in the BDN even though the upper limit of 3.50% m/m has been removed from MARPOL Annex VI by the 2020 amendments. Owners need to ensure therefore that the actual sulphur content is recorded (not just e.g. ‘below 3.50% m/m’) so that the Vessel can adjust its operation to ensure efficient operation of its scrubber e.g. the flow of seawater or other scrubbing agent.

Clause 3.2.ii - reflects the sampling requirements of MARPOL Annex VI that provide that each BDN must be accompanied by a representative MARPOL fuel sample. IMO Resolution MEPC.182 (59) (referred to in the Clause) provides best practice for sampling bunkers in order to determine compliance with MARPOL Annex VI.

Clause 3.3 - provides for Charterers to use bunker suppliers who are registered on the lists maintained by local authorities in accordance with Reg 18.9.1 of MARPOL Annex VI and/or that their bunker suppliers will comply with MARPOL Annex Vi. Charterers can achieve this by incorporating the INTERTANKO MARPOL ANNEX VI Clause for Bunker Supply Contracts in their bunker terms in the event that they do not refer to MARPOL Annex VI requirements for example. This could easily be adapted to match the requirements under the charterparty e.g. with relation to ISO 8217.

Clause 3.4 - provides for Charterers to indemnify Owners if they do not supply High Sulphur Fuel Oil as defined. The consequences of breach could include sanctions and fines for breach of MARPOL Annex VI or losses that arise from off-spec bunkers that do not meet the ISO 8217 standard or are otherwise unfit to burn. It is preferable for such terms to be explicit in the charterparty in the event of a dispute.

Clauses 4 and 5 - allocate responsibility where the scrubber cannot be used.

Clause 4 - deals with situations when the Vessel may not be able to burn High Sulphur Fuel Oil for reasons that stem from the Charterers’ conduct and/or instructions. In that event, the consequences, e.g. the use of more costly low sulphur fuel oil, should rightly fall to the Charterers. We anticipate that most Vessels will carry 0.10% mm sulphur content fuel to cater for non-availability.

Clause 5 - addresses a common concern regarding what happens if the scrubber breaks down. The breakdown or malfunction of a scrubber does not detract from the obligation to comply with MARPOL Annex VI. This will involve the immediate use of low sulphur fuel oil, if on board, which will carry with it a price differential which should be for Owners’ account.

Clause 5.i - At their meeting in May 2019, the Marine Environmental Protection Committee of the IMO approved the Guidance on indication of ongoing compliance in the case of the failure of a single monitoring instrument, and recommended actions to take if the Exhaust Gas Cleaning System (EGCS) fails to meet the provisions of the 2015 EGCS Guidelines (resolution MEPC.259(68)) (MEPC.1/Circ 883 21 May 2019 – in particular paras 6 and 12).

The effect of this MEPC Circular is to provide an Owner with a one hour window to try to resolve any scrubber breakdown or malfunction before the Flag or port Administration will consider it to be a breach of MARPOL Annex VI. Within that one hour the Vessel must fix any breakdown; thereafter it must propose a course of action for repair and/or compliance to the Vessel’s administration. This ‘window’ is reflected in Clause 5.i as it would seem inappropriate to hold the Owner in breach of charter if he is not otherwise in breach of MARPOL Annex VI.

Clause 5.ii – 5.iv - provide for ‘net loss of time’ to be accounted for in the payment of hire. Owners will also pay the price differential for the use of Compliant Bunkers compared to the High Sulphur Fuel Oil last stemmed by Charterers. In addition, any costs or lost time to source Compliant Bunkers due to scrubber breakdown will naturally be for Owners’ account. 

Clause 6 - suspends speed and performance warranties unless High Sulphur Fuel Oil is being burned and when fuel changeover is taking place, at which time the Vessel may slow down. In either case there would be a false reading if these periods were to be included.

Clause 7 - we are seeing more and more ports issuing restrictions on the use of open loop scrubbers in port, albeit MARPOL Annex VI will permit this. As a consequence, a Vessel trading to a port which restricts the use of the scrubber will need to use low sulphur fuel oil. Clause 7.i and 7.iii caters for this, requiring Charterers to supply Compliant Bunkers where such a restriction applies. Owners may wish to include this as a standard provision to avoid having to monitor the open loop restrictions against trading warranties of the Vessel, in particular in a long term time charterparty.

In addition, for some tankers the gases of boilers do not pass through the scrubber. Examples of boiler use include, among others, the operation of steam-driven cargo pumps for discharge, cargo transfer or tank cleaning, the generation of inert gases or the use of heating coils for cargo heating. Care therefore needs to be taken when the boiler will need to run on Compliant Bunkers. This may be provided for elsewhere in the charterparty within general bunkering provisions, however to be certain it is covered, Clause 7.ii and 7.iii require Charterers to supply Compliant Bunkers in this event.  

Clause 7.iv - provides for Charterers to indemnify if they fail to supply Compliant Bunkers in each instance.

Clause 7 may be amended as appropriate to deal with either or both instances when the Scrubber cannot be used.

Clause 8 – allocates the responsibility for the supply of scrubber agents (required by hybrid and closed loop scrubbers) and waste removal. This will be a matter of negotiation as, in absence of agreement, Owners will be responsible for both the supply of scrubbing agents and waste removal.

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