Posted on: 25 November 2024
Antonia Panayides, partner in Reed Smith’s Transportation Industry Group, who serves on the BIMCO drafting committee for FuelEU Maritime, comments on BIMCO’s announcement that it has adopted the FuelEU Maritime Clause for Time Charter Parties 2024.
“The new FuelEU Maritime Clause for Time Charter Parties is important for the industry, as the Regulation expressly provides that parties should look to their contractual agreements to implement the ‘polluter pays’ principle.
“It is not only time charter contracts that need to take FuelEU Maritime into account, many shipping contracts will need to consider the impact of FuelEU Maritime such as contracts of affreightment, ship management agreements, bunker supply agreements and sale and purchase contracts.
“The clause for time charter parties introduces an approach whereby charterers pay a ‘surcharge’ to owners if the vessel incurs a compliance deficit during the charter period. The parties are to agree when such payment should be made. The surcharge represents the owners’ exposure to a FuelEU penalty, proportionate to the charter period.
“Where the charterer redelivers the vessel with a surplus, the parties can agree on a sum to be paid by owners to charterers for generating such surplus, where that surplus remains with the vessel and has value.
“Subject to the duration of the charter period, charterers may also instruct owners on pooling, borrowing and banking.
“The clause can be adapted by the parties to suit their commercial arrangements, such as taking into account charter duration and whether owners have already committed to pools etc.
“Everyone affected by the Regulation feels strongly about its impact, and the clause has been structured to help achieve compliance. By offering guidelines and accommodating flexibility, the clause aims to provide a foundation for parties to collaborate and meet the Regulation’s requirements.
“The new clause ensures that FuelEU Maritime compliance is integrated into time charters, emphasising shared responsibility under the ‘polluter pays’ principle.”
