OCEANSCORE ANALYSES BIMCO’S FuelEU MARITIME CLAUSE

BIMCO has now adopted its FuelEU Maritime Clause for Time Charter Parties to help stakeholders align their contractual frameworks in advance of the regulation coming into force in January 2025 .

BIMCO’s FuelEU Maritime Clause for Time Charter Parties 2024 is designed for incorporation into time charter parties. It is intended to be workable for most scenarios and commercial relationships. For longer period charter parties, the charterers will have the flexibility to decide on their compliance strategy whether that be utilising pooling, banking or borrowing.

Stinne Taiger Ivø, BIMCO Deputy Secretary General and Director of Contracts said: “This clause has been eagerly awaited by the industry. January is almost here, and the FuelEU Maritime regulation is complex. Because of this, we have carried out several industry consultations during the drafting process to make sure that we arrived at a clause that works in practice.”

Nicholas Fell, Chair of BIMCO Documentary Committee added: “The FuelEU Maritime regulation will significantly impact the shipping industry, even more so than the EU Emissions Trading System. The clause we have adopted today is the result of a collaborative process between owners, charterers, P&I and legal experts and other stakeholders.”

The company responsible for compliance with FuelEU Maritime under the new BIMCO clause is the shipowner. In reality, however, it may be a third-party shipmanager who has agreed to take over all the duties and responsibilities imposed by the International Management Code for the Safe Operation of Ships and for Pollution Prevention (ISM). BIMCO is therefore working on developing a clause for BIMCO’s ship management agreement, SHIPMAN.

In December 2023, BIMCO adopted a new Emission Trading Scheme Allowances Clause for BIMCO’s ship management agreement, SHIPMAN, and three ETS clauses for Voyage Charter Parties.

Maritime data analytics company OceanScore as examined the new BIMCO clause, and feels that there are still gaps to be filled before total cohesion can be reached.

According to OceanScore, creating Charter Party clauses which satisfy the wide range of needs of owners and charterers in shipping generally is a daunting undertaking. Some of OceanScore’s key observations and comments are:

1. Alignment with Long-Term Charters: The solutions proposed for long-term Time Charter Parties (those covering entire reporting periods, typically a year) are broadly aligned with market expectations and appear balanced between the needs of owners and charterers.
2. Role of DOC Holders: Under the regulations, DOC (Document of Compliance) holders are the designated responsible parties for FuelEU compliance. This means that any clauses within the Time Charter Party must also be reflected in the ship management agreement (shipman). Ensuring consistency across these agreements will be critical for seamless compliance, especially in the case of third party managers.
3. Timing Considerations: The clause proposes providing compliance balances for the prior two years, but this will not be feasible until at least 2027 due to the rollout timeline. Proofs of Sustainability (POS), which are critical to FuelEU compliance, take 4–6 weeks to become available post-bunkering. The proposed 15-day reporting deadline for ‘verified’ compliance balances can be unrealistic. The clause proposes for the charterer to notify the owner ‘x days before April 30’ of their intent to pool the compliance deficit. These requests should be made as early as possible., If the charterer decides to not pool but pay the ‘surcharge’, an earlier notification will help the owner (and DOC holder) to identify the commercially most attractive alternative – especially when it comes to finding an alternative external pool.
4. Pooling – Incomplete Framework: Pooling compliance balancing is likely the most efficient way to secure compliance. But while the clause mentions this in the context of long-term charters, it does not offer a meaningful framework for short-term or broader application. Charterers and owners might benefit from a clear, common understanding of how pooling will be used to achieve compliance – especially as this might be the commercially most attractive choice.
5. Compliance Surpluses – Practical Solution: The proposal on how to deal with compliance surpluses is balanced, the timing of the proposed steps practical. It will be critical to define the right applicable price (and not fall for a price at the level of the penalty in the case of compliance deficits). Given that pool prices will not be known until well into 2025 or even only when pooling starts in April 2026, it might make sense to opt for some flexibility mechanism in this proposed price for surpluses.
6. Pricing Compliance Balances – Unrealistic Approach: The guidance provided that compliance deficits will be compensated for at the level of the penalty (€2.400 / ton VLSFOe) is an attractive, clear solution for the owner. But we do not see this stand the test of intense C/P negotiations, as there will be cheaper ways to comply than to pay the penalty. Realistically, there will be two options: Either an adjusted surcharge below the penalty level or a flexibility mechanism reflecting the pool prices. It should be secured though that the DOC holder receives a fair compensation for his extra effort in securing compliance and for the risk he carries in doing so.

OceanScore MD Albrecht Grell observed: “The current BIMCO draft provides a foundation but leaves substantial room for improvement and C/P specific clarifications. Practical solutions must address timing constraints, pooling frameworks, surplus incentives, and pricing disputes. At OceanScore, we’re already working with our customers to implement forward-thinking FuelEU strategies that fill these gaps, supporting smart decision making and efficient processes between the different stakeholders. Our insights and solutions have demonstrated that multiple pathways  for turning regulatory challenges into opportunities – requiring proper understanding of these rules and quantification of different pathways. We applaud BIMCO for taking this admittedly difficult first step. The result is balanced, which is appreciated, but quite a few gaps remain that individual C/P clause discussions will have to close. It will be critical to mirror these into the Shipmans with the DOC holders eventually being responsible.”

Image: OceanScore MD Albrecht Grell (credit: OceanScore)