BIMCO is starting preparing charter party clauses to help operators comply with complex new carbon regulations due to come into force in 2023.
amely, an impact study by BIMCO and several key stakeholders to identify the commercial and contractual implications of impending IMO carbon regulations has highlighted a raft of contractual challenges.
BIMCO’s documentary experts have now started to prepare charter party clauses to assist owners and charterers comply with the new regime.
Charter parties that extend beyond 2023 are already being negotiated and agreed, so this task has been given top priority by the organisation
The main driver for this initiative is the amendments to chapter 4 of MARPOL Annex VI, that are about to come into force in 2023, tightly regulating the energy efficiency and carbon intensity of ships.
The future regulatory framework is complex and challenging and may require shipowners to reduce engine power and speed to comply with the Energy Efficiency Existing Ship Index (EEXI). The carbon intensity index (CII) requirements may also see shipowners having to reduce cargo intake in addition to routeing and slow speeding measures
Now, compliance with the new regime may mean that shipowners are at risk of being in breach of their obligations in performing the voyage under standard charter party terms.
BIMCO’s impact study has also indicated that the commercial implications of CII will be as equally challenging as the contractual issues. As it explains:
Compliance will involve cost. This may take the form of capital costs installing new equipment to make the ship more efficient; or it may be costs related to cargo shutout and longer voyage durations
In addition, BIMCO will look closely at emission trading schemes currently under discussion and how they be dealt with in charter parties. Although carbon levies could be considered a “tax” for the purposes of charter parties and therefore covered by existing clauses in standard forms, it may be that a more prescriptive approach is called for.
As with the industry’s transition to low sulphur fuels in 2020, the carbon clauses will require operators to closely cooperate on technical and operational activities.
BIMCO’s Documentary Committee will discuss the draft carbon clauses over the summer and review then for possible adoption in September.