The implementation of the FuelEU Maritime Regulation has introduced compliance mechanisms that connect legal, operational, and financial responsibilities. These changes affect ship owners, charterers, and ship managers while opening the door to even more players, such as fuel suppliers and EUA traders. This week, we explore the complex, evolving, and dynamic web of FuelEU stakeholders and discuss the opportunities and challenges ahead.
Stage 1: The ISM Company is at the Heart of Compliance
The ISM company is the entity officially recognized by the regulatory authorities as being responsible for compliance with FuelEU Maritime. This has been repeatedly criticized. The ISM company, most often the ship manager, is not responsible for supplying fuel to the ship and has, therefore, no option to influence the ship’s emissions. Yet, if a vessel’s compliance balance is negative, the ISM company is responsible for ensuring that penalties are paid. The ISM company’s role places it at the center of risk management under FuelEU.
Considering that ship managers who have ISM company status are not able to influence a ship’s compliance status, the liability is shared or passed on to the ship owner. The underlying legal document is the SHIPMAN contract.
Stage 2: Interdependence between Ship Manager and Ship Owner
BIMCO has published the SHIPMAN 2024 FuelEU Clause, which mandates the ship owner to be financially liable for penalties and compliance costs. This creates a relationship of interdependence:
Managers’ Duties:
Prepare and submit monitoring plans.
Oversee compliance balance tracking and reporting.
Notify owners of penalties or surpluses.
Owners’ Duties:
Provide necessary data (e.g., Bunker Delivery Notes, Proof of Sustainability).
Cover compliance costs, including penalties and management fees.
Provide security for potential penalties, which the managers may call upon in case of disputes.
Stage 3: Charterers and the Importance of Timeframes
Often (in time charter arrangements), the fuel-supplying entity is the charterer rather than the owner, creating the need for an additional cascade of responsibilities and duties. BIMCO recently published the FuelEU Maritime Clause for Time Charter Parties which introduced a set of responsibilities based on the charter period:
Short-Term Time Charters (<1 Year):
Charterers supply fuel but have no direct control over surplus trading or pooling.
They are liable for surcharges if the vessel accrues a deficit.
Long-Term Time Charters (≥1 Year):
Charterers gain control over compliance strategies, including banking, pooling, and borrowing compliance balances.
They remain liable for surcharges if the vessel accrues a deficit.
Note that special cases where charters start or end mid-year pose challenges for pooling rights and compliance responsibilities. Find out more about FuelEU Clauses for Time Charter Parties in our newsletter from December 2nd, 2024.
Did you know that BetterSea’s legal team specializes in FuelEU clauses for Time Charter Parties and is glad to help you craft a clause that meets your specific requirements? Reach out and talk to our experts below:
Stage 4: Fuel Suppliers and EUA Traders are Expanding Roles in Compliance Markets
The complex stakeholder chain is further accentuated by the appearance of fuel suppliers and EUA traders expanding their roles to play a pivotal role in the FuelEU compliance market. There is no standardized or widely recognized legal framework on how to include these stakeholders in the complex FuelEU web. Instead, a number of different approaches can be observed in the industry:
Broker Role in Surplus Trading: Acting as intermediaries between surplus-generating vessels and deficit holders in pooling and trading, executing trades on behalf of clients without any ownership or responsibility.
Compliance Ownership: Some suppliers and traders are assuming responsibility for surplus trading and pooling by taking ownership of the surplus, often also referred to as pooling rights. Note that responsibility for pooling and surplus trading does not necessarily equal compliance responsibility.
Strategic Agreements: Some fuel suppliers offer strategic collaborations with ship owners and charterers to formalize surplus allocation, compliance liability, and pricing mechanisms. Often offered as tailored solutions for surplus management and market participation while also taking compliance responsibility.
Stage 5: The Quintessence of Surplus Trading, the Pooling Agreement.
After the complex web of FuelEU stakeholders has identified and defined the responsible party eligible to trade surplus and pool, the remaining document to close the legal framework of FuelEU is the Pooling Agreement. This agreement is required if several responsible entities agree on a surplus trade and, as such, a pool. At its core, the agreement defines the liabilities between the pool participants and addresses potential financial and compliance risks.
Interested to learn more about the fine art of crafting pooling agreements? Subscribe below and stay tuned for one of the upcoming newsletters.
Conclusion: A Complex Web of FuelEU Stakeholders and Legal Frameworks
Navigating the complex legal landscape of FuelEU requires robust contractual frameworks, new agreements, and close collaboration among all parties.
Did you know that BetterSea’s FuelEU Compliance Platform not only helps in stakeholder alignment through voyage statements and reimbursement schemes but also created a robust legal framework for surplus trading, including standardized pooling agreements for external pools? Book a product demo to explore BetterSea’s FuelEU Compliance Platform below!
Stay tuned for more insights on navigating these complex challenges in our upcoming newsletters. If you have any questions or need further guidance on pooling, feel free to reach out!
Best regards,
The BetterSea Team
Contact Us: info@bettersea.tech
Follow Us on LinkedIn!
Subscribe to our weekly newsletter below!
Comments