Bunker sector expects that the legal disputes will increase after the implementation of the 0.5% sulfur cap, since transparency and specialised knowledge still remain at poor levels. Consequently, it appears that many bunker traders and shipping companies are enhancing their legal and technical teams in an effort to better manage the upcoming challenges.
Bunker Holding, which is one of the largest bunker companies worldwide, is one of the companies which is already getting prepared to be able to manage a series of disputes after the new compliant fuels hit the market. According to the group’s CEO, Keld R. Demant, the company is currently strengthening its legal and technical departments while it is enhancing its existing credit facilities in order to be able to manage increased operating requirements. Furthermore, the company has invested plenty of time on training its personnel about the main aspects of the new regulation so as they can advise customers in the most efficient way.
“One should expect to see the number of claims, misunderstandings and situations of doubt grow, as no one really knows how new products behave,” Demant concludes.
Bunkering Holding is not the only company sharing such an opinion. The consulting firm 2020 Marine Energy also expects to see the number of legal disputes increase after the 1st January 2020. According to Per Funch, senior associate of the company with more than 25 years of experience in the oil and bunker industry, the industry will face some major commercial and legal challenges after 2020 with more cases of concern around the quality of the product delivered and the legal conditions that the bunkers were purchased.
According to 2020 Marine Energy, bunker traders, shipowners and operators pay higher attention on their technical departments recently and staff same with employees who hold specialised technical backgrounds. Such employees appear to be in high demand and really busy during the last few months, the company notes.
The situation is more complicated if we consider that an increase of such legal disputes might have a negative impact on the financial stability of the bunker companies, as Bunker Holding notes. In case legal disputes increase in number, the less financially strong bunker traders may struggle. The credit condition is in question since the banks, in an effort to manage their own risks, have reduced their financing participation in the bunker industry, at a time when higher credit is required in order for bunker traders to invest in the much more expensive low-sulfur fuels.
“If you don’t have the organization and the financial strength, you’ll come up short. Because as long as the dispute is ongoing – even if you may have delivered completely on-spec oil – you may not necessarily get paid. And not everyone can withstand this,” Demant concludes.
Under these circumstances, bunker traders such as Bunker Holding and World Fuel Services have recently secured additional credit facilities of up to USD 2.5 billion.