A new Insight Brief by the Global Maritime Forum (GMF) explores the legal and contractual changes to enable operational efficiency in shipping featuring learnings from a series of meetings and workshops gathering perspectives from experts across the maritime value chain—shipowners, operators, charterers, ports, and NGOs—as part of the Short Term Actions Taskforce.
Speed optimisation is one of the most effective short-term operational measures to cut down on shipping’s greenhouse gas emissions. However, vessels have not historically had the right incentives to optimise their speed – in fact, the opposite is often true. In the days when vessels sailed under wind power and there was no way to track their position from shore, captains were given the incentive to sail as fast as possible, referred to as “utmost despatch”, so that cargo could be delivered quickly.
There was no way of knowing where a vessel was once out of sight of shore, and from the vessel there was no way of knowing how crowded a port might be.
According to GMF, with advances in satellite communications, GPS, vessel tracking using automatic identification system (AIS) data, route and weather optimisation software, and other digital technologies, there is now more than enough data to predict vessel progress and arrival with a great degree of accuracy. While the operational inefficiencies caused by a lack of information are no longer necessary, the contracts that govern the industry have evolved to lock in many of the inefficiencies they were initially designed to eliminate. Over time, shipping contracts have developed sophisticated mechanisms for allocating the financial cost of operational inefficiencies to shipowners or charterers (or buyers or sellers of cargo) through a range of contractual mechanisms: demurrage, laycan, speed warranties, etc.
Speed optimisation, including the uptake and use of VA clauses to allow vessels to preemptively adjust their speed to arrive just in time and reduce waiting times at port has shown promise for years but has seen little uptake. Conversations with industry leaders have yielded several barriers to speed optimisation from a legal perspective
While these are all areas for further exploration, owners, charterers, and terminal operators should, in the meantime, commit to acting on the win-win opportunities that are available now. To start with, there already exist many clauses that are either not used in contracts or don’t get significant uptake. This must change and companies should explore the possibility of adopting existing clauses that can help improve operational efficiencies.
For example, companies can take the following actions to:
- Use VA clauses with benefit sharing mechanisms as the default setting in all standard form charterparties, and commit to actively seek opportunities to invoke these clauses.
- Implement agreements to enable virtual notice of readiness (NOR) and engage with ports and terminals to activate these.
- Change speed and performance optimisation clauses to allow for more efficient operation, including broadening the contractual speed range to allow for more efficient speeds where allowable.
- Embed emissions targets in the chartering process, from pre-fixture throughout the conclusion of the voyage.
