INTRODUCTION
The development of regulations aimed at reducing greenhouse gas emissions in international maritime transport is making the use of alternative fuels to conventional marine fuels increasingly important. Within this transformation, biofuels have also come to the fore as one of the options that can be used in place of, or blended with, existing marine fuels at certain ratios. At the same time, however, the use of biofuel gives rise to new contractual risks in bunker supply and time charter relationships, in terms of the fuel’s quality, compatibility with the vessel, performance effects and regulatory documentation.
This article explains the ways in which biofuel is used in maritime transport and evaluates principal risks that may arise, together with how these risks may be allocated between the parties.
WHAT IS BIOFUEL AND HOW IS IT USED IN MARITIME TRANSPORT?
Under the Biofuel Clause for Time Charter Parties 2026 published by the Baltic and International Maritime Council (“BIMCO”), biofuel is addressed so as to cover fuels derived wholly or partly from biomass, as well as fuels formed by blending bio-based fuels with conventional marine fuels. Within this framework, bio-based fuel types such as FAME (Fatty Acid Methyl Ester) and HVO (Hydrotreated Vegetable Oil) may be used either on their own or blended with conventional marine fuels at certain ratios.
However, “biofuel” does not refer to a single type of fuel with standard characteristics. The type of biofuel used, the ratio at which it is blended with conventional fuel, and its compatibility with the vessel’s machinery and fuel systems may affect whether the fuel can be used safely and efficiently on board. For this reason, it is not sufficient for the contract merely to state that biofuel will be used; it is important that the technical characteristics of the fuel to be used and the permitted blending ratio are also clearly specified.
ISO 8217:2024, one of the current technical standards relating to marine fuels, also sets out the requirements and specifications for fuels to be used in marine diesel engines and boilers, and covers certain renewable-sourced fuels and fuel types containing FAME. Accordingly, what is decisive in contractual disputes that may arise from the use of biofuel is not merely whether the fuel is of biological origin, but whether the fuel delivered conforms to the quality and technical characteristics agreed by the parties and to the vessel’s conditions of use.
WHAT CONTRACTUAL RISKS DOES THE USE OF BIOFUEL GIVE RISE TO IN BUNKER AND TIME CHARTER RELATIONSHIPS?
One of the principal risks in the use of biofuel is that the fuel delivered does not conform to the quality and technical characteristics agreed by the parties. Since the type, content and blending ratio of biofuels with conventional fuels may vary, it is not possible for every biofuel to be used in the same way on every vessel. An unsuitable fuel may lead to a loss of performance in the vessel’s machinery and fuel systems, operational disruptions, the need for additional maintenance or tank cleaning, and, in certain cases consequences extending as far as the discharge of the fuel from the vessel (debunkering). Therefore, which fuel may be used, what technical characteristics the fuel must possess, and whether the vessel is suitable for using that fuel are matters of contractual importance. In cases where the biofuel is procured from a third-party bunker supplier, the risks arising from the quality and suitability of the fuel are not confined solely to the time charter relationship between the shipowner and time charterer. The same fuel delivery may also give rise to a separate contractual liability under the supply contract between the charterer and the bunker supplier. Therefore, it is important that the technical characteristics of the biofuel, the blending ratio, the sampling and testing procedures, and the consequences arising from non-conforming fuel are regulated consistently across both contractual relationships.
In order to manage these risks contractually, the BIMCO Biofuel Clause for Time Charter Parties 2026 provides for the type of biofuel to be used, its technical specification and the maximum permitted blending ratio to be clearly determined by the parties. The supply of a biofuel outside the agreed characteristics is made subject to the shipowner’s prior written consent. Prior to giving such consent, the shipowner may require that the fuel’s conformity with the applicable regulations, classification society requirements and the engine manufacturer’s requirements be tested by an independent laboratory to be jointly appointed by the parties.
Sampling and quality analysis mechanisms are also important for the subsequent proof of whether the fuel conforms to the contract. The BIMCO clause proceeds on the basis that the sampling and analysis procedures provided for conventional fuels under the charterparty are also to be applied to biofuels. In addition, it is provided that biofuels of different characteristics or belonging to different delivery batches are, as a rule, to be kept in separate tanks, and that the blending of fuels with one another is to be subject to the parties’ written agreement. This is intended to prevent any subsequent issues concerning quality, compatibility, and proof.
The use of biofuel may also affect warranties concerning the vessel’s speed and fuel consumption under time charters. This is because the energy content of biofuels may differ from that of conventional marine fuels. For this reason, the BIMCO 2026 clause allows speed and consumption warranties to be adjusted according to the energy value of the biofuel used. The clause further provides for the biofuel to be consumed within a certain period, and for a new quality test to be carried out where that period is exceeded. Unless a different period is agreed by the parties, the clause adopts a consumption period of ninety days.
WHAT ARE THE PARTIES’ RESPONSIBILITIES IN THE SUPPLY AND USE OF BIOFUEL?
The main distinction for determining liability in the use of biofuel arises between the fuel being procured in conformity with the contract, on the one hand, and the vessel being in a condition to use that fuel safely and properly, on the other. This is because a failure of the fuel delivered to conform to the agreed quality or blending ratio constitutes a problem arising from the supply of the fuel, whereas a biofuel that conforms to the contract but is incompatible with the vessel’s machinery or fuel systems may give rise to a separate area of liability relating to the vessel’s technical adequacy. Therefore, in assessing losses arising from the use of biofuel, it is important first to determine whether the problem
arises from the fuel, from the vessel’s technical condition, or from the parties’ operational practices.
The BIMCO Biofuel Clause for Time Charter Parties 2026 regulates the parties’ obligations on the basis of this distinction. Accordingly, the biofuel supplied by the charterer must conform to the agreed technical characteristics and blending ratio, be stable and homogeneous, and be suitable for use in the vessel’s main or auxiliary engines. Where damage, loss of time or consequences such as the debunkering of the vessel arise as a result of fuel that does not meet these requirements, the charterer’s liability may be engaged. The shipowner, by contrast, is responsible for the vessel being fitted and equipped to be suitable for using the agreed biofuel, and for the crew having the necessary competence and training to carry out biofuel operations safely. In this way, the BIMCO clause separates the risk relating to the fuel being procured in conformity with the contract from the risk relating to the vessel being technically ready to use that fuel safely.
As regards the consequences of non-conforming biofuel, the causal link between the source of the loss and the parties’ obligations is decisive. Under the BIMCO clause, where the shipowner or the vessel suffers loss as a result of the charterer’s breach of its obligations relating to the quality and suitability of the fuel, the loss and loss of time arising from that breach, together with the costs incurred for discharging the non-conforming fuel from the vessel (debunkering), may fall within the charterer’s liability. In this context, where non-conforming fuel causes damage to the machinery or fuel systems, the charterer’s liability may likewise be engaged, provided that it is established that the damage arose from the fuel’s non-conformity with the contract.
With regard to testing and tank-cleaning costs, the reason for which the costs were incurred must be assessed separately. For example, under the BIMCO clause, the costs of the quality test to be carried out prior to the shipowner’s consent for the supply of a biofuel outside the previously agreed characteristics are borne by the charterer, while the costs and loss of time relating to tank cleaning that becomes reasonably necessary as a result of the fuel supplied by the charterer in order for the biofuel to be supplied are likewise imposed on the charterer. Conversely, where the need for tank cleaning arises from fuel previously on board the vessel or from the vessel’s existing tank condition, it may be possible for these costs to remain with the shipowner
Where the biofuel cannot be consumed within the period agreed in the contract, liability is not automatically imposed on the charterer. Under the BIMCO clause, while the costs of the renewed quality test to be carried out where this period is exceeded, and any debunkering costs that may arise if the fuel is found to be non-conforming, are essentially for the charterer’s account, cases in which the failure to consume the biofuel within the period arises from the shipowner’s fault are excluded from this rule. As the clause does not further define the shipowner’s fault, it will be necessary, in any specific dispute, to determine separately which party’s act or omission caused the failure to consume the fuel within the period.
Whether the loss of time arising from non-conforming biofuel results in the vessel being placed off-hire must also be separately assessed. Although the BIMCO clause allocates between the parties the loss of time arising from the charterer’s breach of its obligation relating to the quality and suitability of the fuel, and provides that the shipowner is not to be liable for such consequences, it does not contain an independent provision as to whether the vessel is off-hire. For this reason, in a situation where non-conforming fuel causes, for example, damage to the machinery or the vessel’s inability to render service, the legal characterisation of the time lost must be determined by considering together the wording of the off-hire provision contained in the charterparty, the event giving rise to the loss of time, and the allocation of risk under the clause.
On the other hand, the general allocation of duties relating to time charters under Turkish law also allows for the establishment of a similar distinction. Under Article 1133 of Turkish Commercial Code No. 6102 (the “TCC”), the disponent owner under a time charter assumes the technical management of the vessel and is obliged to keep the vessel seaworthy and fit for the voyage, and suitable for the purpose specified in the contract, throughout the term of the contract. By contrast, under the subsequent provisions of the TCC, the commercial management of the vessel belongs to the time charterer, and the expenses arising from the commercial operation of the vessel, together with the expenses relating to the supply of the fuel necessary for the regular operation of the machinery, are likewise borne by the time charterer. Article 1137 of the TCC, in turn, regulates the time charterer’s liability for losses suffered by the disponent owner as a result of the commercial management of the vessel. These provisions; however, do not separately regulate risks specific to biofuel, such as its quality, blending ratio, technical compatibility with the vessel, or the debunkering of fuel that does not conform to the contract. For this reason, it is important for the parties to clearly specify in the charterparty the technical characteristics the fuel must possess, the vessel’s suitability for using that fuel, the sampling and testing mechanisms, and which party is to bear the costs and losses arising from non-conforming fuel.
Contractual risks relating to biofuel are also not limited solely to the physical or technical characteristics of the fuel. In order for the emission advantage expected from the use of biofuel to be obtained, the accuracy of information relating to the fuel’s source, production process and greenhouse gas intensity is also important. The 2024 Guidelines on Life Cycle GHG Intensity of Marine Fuels published by the International Maritime Organization (“IMO”) assess the greenhouse gas intensity of a marine fuel not solely on the basis of the emissions arising during its use on board, but also by taking into account the emissions arising throughout the process from the fuel’s production and delivery to the vessel through to its use on board.
For this reason, sustainability certificates and emissions data are important not only for regulatory compliance, but also for the realisation of the emission advantage that the parties expect from the use of biofuel under the contract. As documentation that is incomplete or inaccurate may result in the fuel being physically usable while the anticipated regulatory advantage is not obtained, together with contractual disputes arising therefrom, it is also necessary that the obligations to provide and verify documentation, and the liability arising from an incorrect or incomplete declaration, be clearly regulated in the contract.
HOW ARE LIABILITY UNDER BUNKER SUPPLY CONTRACTS AND CLAIMS THAT MAY BE BROUGHT AGAINST THE SUPPLIER TO BE ASSESSED?
Where the charterer, who is obliged to procure the biofuel under a time charter, purchases the fuel from a third-party bunker supplier, two separate contractual relationships arise in respect of the same fuel. On the one hand, there is the charterparty between the shipowner and the charterer, and on the other is the supply contract between the charterer and the bunker supplier. Therefore, in the event of a loss arising from non-conforming biofuel, the charterer’s liability to the shipowner and the bunker supplier’s liability to the charterer must be evaluated separately. For example, a charterer who is obliged under the charterparty to supply biofuel with certain quality and technical characteristics may be held liable to the owner, on account of non-conforming fuel, for costs relating to machinery damage, loss of time, testing, tank cleaning, or the debunkering of the vessel. However, whether the charterer may claim these losses from the bunker supplier will be determined not by reference to the provisions of the charterparty directly, since the supplier is not a party to the charterparty, but by reference to the obligations assumed by the supplier under the bunker supply contract. In this context, particular importance attaches to the undertakings relating to the conformity of the fuel supplied with the agreed specification, the sampling and testing procedures, the time limits for notifying non-conformity, limitations of liability, and the governing law.
Accordingly, the charterer’s ability to bring a claim against the bunker supplier does not mean that every item for which it is liable to the shipowner may automatically be recovered from the supplier. Depending on the circumstances of the particular case, such a claim may be based, not on a recourse claim in the technical sense, but rather on the charterer’s direct claims for damages or other contractual claims arising under the bunker supply contract. In particular, a failure to give timely notice of the fuel’s non-conformity, non-compliance with the sampling or testing procedures provided for in the contract, or a limitation of the supplier’s liability in respect of certain heads of loss, may prevent the charterer from passing on to the bunker supplier the full amount that it has paid to, or incurred in favour of, the shipowner. For this reason, it is important in practice for the time charter and the bunker supply contract to be aligned with one another as closely as possible. The obligations assumed by the charterer towards the owner in respect of fuel quality, technical characteristics, blending ratio, sampling and testing procedures, and the losses and costs arising from non-conforming fuel, should also find a corresponding counterpart in the contractual relationship established with the bunker supplier. Otherwise, the charterer may find itself in an area of risk in which it has assumed broader liability towards the shipowner while enjoying more limited rights against the bunker supplier.
Furthermore, in the event of a dispute, it is important that fuel samples be taken and preserved in accordance with the proper procedure, that laboratory results be retained, that any non-conformity be notified to the supplier within the time limits provided in the contract, and that the resulting heads of loss be documented. These matters may be decisive not only for proving that the fuel does not conform to the contract, but also for preserving the claims that the charterer may assert against the bunker supplier.
CONCLUSION AND OUR ASSESSMENTS
Disputes that may arise from the use of biofuel should not be assessed merely as a quality dispute relating to the technical characteristics of the fuel delivered. The fuel’s conformity with the contract, whether the vessel is technically ready to use the biofuel, the cause of the loss of time and machinery damage, the parties’ fault in the failure to consume the biofuel within the period, and the accuracy of the emissions information, must all be taken into account together in determining liability. Likewise, where the biofuel is procured from a third-party bunker supplier, the fact that the shipowner-charterer relationship and the charterer-supplier relationship are based on different contracts may result in losses arising from the same event producing different consequences under each relationship.
Accordingly, in time charters involving the use of biofuel, it is important to specify clearly not only the fuel’s technical specifications and blending ratio, but also which party is to bear the costs arising from off-hire and loss of time, testing and sampling procedures, tank cleaning, debunkering, and machinery damage. Where biofuel is supplied by a third-party bunker supplier, it is important, for the effective management of potential contractual risks, to align the supply contract as closely as possible with the obligations assumed under the charterparty and to specify in advance, in particular, the quality undertakings, notification periods, sampling and testing mechanisms, and rights of recourse against the supplier.
Frequently Asked Questions
How is the parties’ liability determined where biofuel cannot be used on board?
Liability should be determined according to the reason why the biofuel cannot be used. Where the fuel does not conform to the agreed quality, technical characteristics or blending ratio, the liability of the party that procured the fuel may be engaged. Conversely, where a biofuel procured in conformity with the contract is incompatible with the vessel’s machinery or fuel systems, the assessment must be made having regard to the obligations relating to the vessel’s technical adequacy.
Why is it important for the blending ratio of biofuel to be clearly specified in the contract?
The blending ratio may alter the fuel’s technical characteristics, its energy value, its compatibility with the vessel’s systems and its effect on performance. For this reason, it is important for the parties to clearly specify the maximum permitted blending ratio in the contract, both to ensure technical suitability and to prevent quality and liability disputes that might otherwise arise later.
Which party is liable for losses and costs arising from biofuel that is non-conforming or does not comply with the contract?
This is determined according to the allocation of contractual risk and the source of the non-conformity. If consequences such as machinery damage, loss of time, additional testing, tank cleaning, or the debunkering of the vessel arise because the fuel does not possess the agreed quality and technical characteristics, the liability of the party that procured the fuel may be engaged. That said, the specific provisions of the charterparty and the bunker contract in the particular case must also be taken into account.
What is the contractual significance of emissions and sustainability documentation relating to biofuel?
Obtaining the emission advantage expected from biofuel may depend not only on the fuel being physically usable, but also on the relevant sustainability and emissions criteria being accurately documented as having been satisfied. For this reason, it is important that the obligations to provide and verify documentation, and the liability arising from an incorrect or incomplete declaration, be clearly regulated in the contract.
Can the charterer bring a claim against the bunker supplier on account of non-conforming biofuel?
The claims that the charterer may bring against the bunker supplier must be assessed within the framework of the quality undertakings, sampling and testing provisions, notice periods, limitations of liability, and governing law set out in the bunker supply contract. As the charterer may not automatically be able to recover from the bunker supplier the entirety of the losses for which it is liable to the shipowner, it is important that the obligations under the time charter and the bunker supply contract be aligned with one another as closely as possible.
References
- BIMCO, Biofuel Clause for Time Charter Parties 2026.
- BIMCO, “BIMCO Biofuel Clause for Time Charter Parties 2026: What shipowners and charterers need to know”, 13 July 2026.
- ISO 8217:2024, Products from petroleum, synthetic and renewable sources – Fuels (class F) – Specifications of marine fuels.
- IMO, 2024 Guidelines on Life Cycle GHG Intensity of Marine Fuels, Resolution MEPC.391(81), 22 March 2024.
- Turkish Commercial Code No. 6102
