The Baltic and International Maritime Council (BIMCO), one of the world's largest
international shipping associations representing ship owners, is actively working on draft
clauses for time charter parties to help maritime stakeholders navigate FuelEU Maritime. In
today’s newsletter, we share our thoughts on key considerations for FuelEU charter clauses
and also touch upon implications on SHIPMAN agreements.
Key Considerations for FuelEU Maritime Charter Clauses:
Flexibility in Fuel Procurement: It’s important to build flexibility for charterers to supply fuels that meet the vessel’s greenhouse gas (GHG) intensity targets. Clauses should allow charterers to choose the combination of fuels and energy that aligns with their decarbonization strategies while ensuring that these choices are compatible with the vessel’s technical capabilities. Otherwise, the owner’s imposed mitigation strategy might not align with the charterers’ already ensured fuel supply and vessel operations.
Regular Reviews and Updates: Given future FuelEU reviews, charter clauses should include provisions for regular updates. This ensures that the contracts remain aligned with any changes to the FuelEU Maritime Regulation and continue to protect the interests of all parties involved.
Managing Surplus and Deficit Scenarios: A critical aspect of FuelEU compliance is how to handle the scenarios where a vessel either exceeds (surplus) or falls short (deficit) of its GHG intensity targets. Charter clauses should include clear provisions for managing surpluses and deficits, including options for banking, borrowing, or pooling. In this respect, it is essential to address how the value of any surplus will be determined, for which the charterer will be compensated, especially considering the potential volatility in trading markets. If this is not sufficiently done, charterers and owners will not be able to agree on the value resulting in corresponding disputes.
Time Charters less than a Full Compliance Year: It is likely (and advised) that charter clauses will allow passing on the ability to pool from owner to charterer. If the charter period is less than the compliance year, it must be ensured that a vessel is only pooled in one pool per compliance year. Therefore, the ability to pool shall preferably not be passed on to more than one charterer to avoid a complex stakeholder landscape requiring complex reimbursement and control mechanisms.
The Impact of FuelEU Maritime on SHIPMAN Contracts
The introduction of the FuelEU Maritime Regulation will further have implications for SHIPMAN contracts, which govern the relationship between ship owners and ship managers. A few initial thoughts below:
Risk Management and Liability: SHIPMAN contracts should clearly define the ship manager’s liability for non-compliance with the FuelEU Maritime Regulation. This is essential to protect both ship owners and managers from potential disputes.
Collaboration with Charterers: Given the flexibility charterers may receive to supply alternative fuels, ship managers will need to work closely with them to ensure appropriate technical facilities and crewing. SHIPMAN contracts may include provisions to facilitate this collaboration.
Regular Reviews and Updates: Just as the BIMCO FuelEU clauses include provisions for regular reviews, SHIPMAN contracts should incorporate mechanisms for periodic assessments to ensure compliance with evolving regulations.
Conclusion:
The FuelEU Maritime Regulation requires updated contracts, influencing not only charter parties but also ship management agreements. By updating these contracts to reflect the new compliance landscape, stakeholders must be aware of financial risks while ensuring alignment with their own decarbonization strategies.
For further guidance on integrating these new clauses into your contracts, for advice on managing FuelEU compliance, or to learn more about how BetterSea’s solution can help you, reach out! BetterSea is equipped to assist you in navigating these regulatory challenges with confidence.
Stay tuned for more insights on navigating these complex challenges in our upcoming newsletters.
Best regards,
The BetterSea Team
Contact Us: info@bettersea.tech
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