The introduction of the FuelEU Maritime regulations, which aim to reduce greenhouse gas emissions in shipping, is fast approaching. With just a few months left before implementation, many shipping companies are focusing on how to incorporate these rules into their charterparties—legal agreements between shipowners and charterers that define the terms under which vessels are hired.
What is FuelEU Maritime? FuelEU Maritime is a new set of regulations designed to cut greenhouse gas (GHG) emissions from ships trading in the European Union (EU) and the European Economic Area (EEA). The regulations encourage the use of cleaner fuels, shore-side electricity, and other eco-friendly technologies. By setting strict limits on the GHG intensity of energy used by vessels, it seeks to drive the maritime industry toward sustainable practices.
Impact on Charterparties Charterparties will need to adapt to these regulations. A key question for both shipowners and charterers is: who will bear the responsibility for complying with FuelEU Maritime rules? Since the regulations require careful fuel monitoring and reporting, new clauses will need to be added to contracts to outline responsibilities.
Responsibilities in Compliance
- Shipowners’ Role: In most cases, shipowners will be responsible for managing compliance with the regulations, including submitting monitoring plans and reports.
- Charterers’ Role: Charterers, on the other hand, will likely need to provide shipowners with information such as fuel delivery notes, which show the GHG intensity of the fuel purchased.
For example, if a ship is delivered with a specific type of fuel onboard, charterers may want to ensure that the fuel complies with the regulations. This means charterparties will need to be clear about what kind of fuel can be used during the voyage.
Fuel Choices and Penalties FuelEU focuses on the GHG intensity of fuels. If the ship only uses traditional fuels, the vessel may face penalties for excess GHG emissions when trading in the EU. Charterparties should clarify the types of fuels that are allowed and address whether the charterer is expected to source low-emission fuels.
Penalties and Credits For every voyage within the EU/EEA, the ship will either earn a credit (for meeting emission limits) or incur a penalty (for exceeding them). Charterparties must define how these credits and penalties are handled. Shipowners might want penalties to be paid as they arise, while charterers may prefer waiting until all voyages are verified.
Additionally, if a ship earns credits by using low-emission fuels, the charterer who paid for the fuel may expect to benefit from those credits.
Pooling and Borrowing Charterers may also want to pool credits with other vessels to offset penalties or borrow credits from future voyages. These practices need to be specified in the charterparty to avoid complications, particularly if multiple charterers are involved within the same year.
The Importance of Clear Contracts Since the FuelEU Maritime rules are new, there is no one-size-fits-all solution. The industry is awaiting a standard clause from BIMCO (a major shipping association), but until then, both owners and charterers must be careful to outline their expectations in the contract. By ensuring that these new responsibilities are clearly allocated, both parties can avoid disputes and prepare for the greener future of shipping.
With the upcoming implementation of FuelEU Maritime regulations, both shipowners and charterers need to carefully consider how to allocate responsibilities in their charterparties. By planning ahead and including specific provisions for fuel types, penalties, credits, and compliance, the industry can smoothly transition to more sustainable practices.
Certificate in Chartering
Certificate in Chartering
The chartering course provides participants with essential theoretical knowledge and practical skills to effectively manage chartering tasks. It covers the fundamentals of maritime transportation and chartering, delves into time, voyage, and bareboat charterparties, and concludes with voyage estimates and fixture conclusions. The goal is to equip participants with the expertise to handle chartering responsibilities autonomously.
Snapshot in Charterparty Negotiations & Completion of Standard Forms
Snapshot in Charterparty Negotiations & Completion of Standard Forms
The seminar is an intensive short course focused on chartering practices and negotiations. It emphasizes the importance of attitude, knowledge, and skill in influencing successful outcomes. Participants will gain core knowledge of chartering and shipping, including key charterparty terms (expressed and implied), relevant documents, types of charters, and the negotiation process. Topics like good faith and seaworthiness will also be discussed.
FuelEU Maritime and Charterparties: Preparing for Compliance
Prepare your charterparty for FuelEU Maritime regulations. Learn key contract adjustments for GHG compliance and penalties in EU/EEA trade.