BIMCO rolls out new carbon clause ahead of FuelEU

In light of the fast-approaching January 1, 2025, which will signal the start of the FuelEU Maritime regulation, BIMCO, the world’s biggest shipping association, has added to its portfolio a new carbon clause designed to be incorporated into time-charter parties.

As informed, the clause—called the FuelEU Maritime Clause for Time Charter Parties 2024 —was adopted on November 25, 2024.

Representatives from BIMCO have highlighted that as decarbonization regulations from the European Union (EU) and the International Maritime Organization (IMO) pile on, the shipping industry may need to “gear up in advance” and start introducing measures now.

“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,” Stinne Taiger Ivø , Deputy Secretary General and Director of Contracts at BIMCO, underscored.

Aimed at reducing greenhouse gas (GHG) emissions from the maritime industry, the FuelEU Maritime regulation got its clearing from the EU in July 2023, when it was accepted as a ‘vital’ part of Europe’s Fit for 55 package.

Set to take effect from January 1, 2025, it defined requirements for ships to progressively use cleaner fuels and improve energy efficiency, aligning with the European Union’s broader climate goals under the European Green Deal.

The regulation introduced measures like limits on carbon intensity and compliance mechanisms, such as penalties for non-compliance, to encourage the adoption of sustainable practices in shipping.

Since its introduction, FuelEU Maritime has prompted numerous organizations and businesses within the shipping industry to come up with solutions and get ready for it to take effect. One such example would be what is believed to be the ‘first publicly available FuelEU Maritime calculator’.

The platform—created by zero44, a German digital CO2 management solutions provider—was described as a ‘tool’ to help shipping companies understand the financial impact the regulation would have on their business, in an ‘easy and understandable manner’.

A “workable” clause for all scenarios As 2024 speeds by, the maritime industry is now in what might be the “final stage” before the rules change and it becomes a comply-or-fall-behind world.

Given the often-convoluted nature of commercial relationships and other, related scenarios, BIMCO elaborated that its committee’s focus while crafting the new clause was to find a ‘workable’ but ‘standard’ solution that’s applicable ‘across the board’.

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

According to the association, regarding longer-period charter parties, the charterers will have the ‘flexibility’ to decide on their compliance strategy, whether that be utilizing pooling, banking, or borrowing.

The company responsible for compliance with FuelEU Maritime under the new BIMCO clause is the shipowner. In reality, however, BIMCO has stressed that this may be a third-party ship manager who 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).

Because of this, the association revealed that it has been working on developing a new clause for its ship management agreement, SHIPMAN, which covers the management of traditionally crewed vessels.

Over the past years, BIMCO’s Documentary Committee adopted several, other sustainability-oriented clauses. In December 2023, the committee approved four: one Emissions Trading Scheme (ETS) allowances clause for SHIPMAN and three ETS clauses for voyage charter parties.

Before that, BIMCO introduced the Emission Trading Scheme allowances clause for time charter parties, the CII clause for voyage charter parties , the CII operations clause for time charter parties and the EEXI transition clause for time charter parties. Finally, in June this year, the committee greenlit three ETS clauses for contracts of affreightment.

Concerning ship management, BIMCO also recently introduced the ‘first’ management agreement intended for autonomous vessels, dubbed the AUTOSHIPMAN.

As explained, the main goal behind the deal was to lay down the foundation of a standardized contract-based system that lets third-party ship managers provide operational services for remote-controlled or fully autonomous ships.

The steps before ‘total cohesion’: another light into BIMCO’s new clause British insurance company North Standard underscored that time charter parties are not the only contracts that will need to address the FuelEU Regulations, however.

Other contracts such as sale and purchase agreements, contracts of affreightment, and ship management contracts, amongst others, may also need to include adequate contractual provisions, North Standard commented.

Hamburg-based maritime technology firm OceanScore put forward that BIMCO’s new time charter parties clause was “highly anticipated” in the industry as it marks a ‘critical’ step toward the industry’s decarbonization goals.

That said, OceanScore’s view aligns with North Standard in the sense that the firm has shared that there are gaps to fill yet before ‘total cohesion’ can be accomplished. More precisely, crafting charter party clauses that satisfy the wide range of needs of owners and charterers in shipping is seen as a “daunting undertaking.”

“We saw this with the EU ETS clauses, which were only partially adopted by the industry and with hesitation. With its additional layers of complexity, drafting clauses for FuelEU Maritime presents an even greater challenge,” the firm’s representatives spotlighted.

Some of OceanScore’s key observations are:

In summary, OceanScore suggests that, while the current draft of the clause has provided the foundation—more steps should be taken.

“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,” the firm concluded.