FuelEU Maritime Series – Part 2: Exemptions and Responsibility

In the second instalment of our six-part series uncovering the FuelEU Maritime Regulation, we take a look at the exemptions which apply and identify which parties are responsible for compliance with the various regulatory requirements.

EXEMPTIONS - Do any exemptions apply to FuelEU Maritime?

Certain vessels may be exempt from the FuelEU Maritime Regulation (FuelEU Maritime) because they do not fall within the scope of the Regulation or are explicitly excluded, as explained previously in Part 1 of our series: FuelEU Maritime Series – Part 1: Vessels, emissions and scope : Clyde & Co

Additionally, EU Member States may exempt certain voyages from the application of FuelEU Maritime, even if the voyages that these vessels undertake fall within the scope of the Regulation. These exemptions are temporary and will not be applicable beyond 31 December 2029.

The exemptions are found in Article 2(3)-(6) and, in particular, apply to:

• energy used during a stay in a port of call or during a voyage, by passenger ships, other than cruise ships, where the location of the port of call is an island with fewer than 200,000 permanent residents and if the voyage is to/from such an island port from/to another port within the same Member State^[1].
   
• energy used during a stay in a port of call or during a voyage by all ships to which FuelEU Maritime applies, where the voyage is between ports of call located in outermost regions or where the energy is used within ports located in outermost regions, such regions being Guadeloupe, French Guiana, Martinique, Réunion, Saint-Barthélemy, Saint-Martin, the Azores, Madeira and the Canary Islands^[2].
   
• energy used during transnational voyages to the ports of call of other Member States or in ports of call during such voyages by passenger ships performing public service obligations or public service contracts for Member States that do not share a land border with any other Member State^[3].
   
• energy used by passenger ships under public service obligations or public service contracts, operating before 12 October 2023, for the specific routes between their mainland ports of call and ports of call under the jurisdiction of their Member State located on an island or in the cities of Ceuta and Melilla^[4].

The above-mentioned exemptions exist (i) to preserve connectivity between islands and peripheral regions of the EU^[5], in accordance with Article 174 TFEU ^[6] and (ii) to preserve accessibility and efficient connectivity of outermost regions of the EU, due to the remoteness and insularity of the latter^[7].

The exemptions are not mandatory, and Member States may choose to introduce them. Member States are to notify the European Commission before the exemptions are introduced. Therefore, it should be noted that (i) the exemptions will not apply beyond 31 December 2029, unless FuelEU Maritime is amended before then, and (ii) the exemptions may not be applicable in all Member States.

RESPONSIBILITY - Who is responsible for ensuring compliance with FuelEU Maritime?

The short answer is that the entity responsible for ensuring compliance with FuelEU Maritime is the “company”, as defined in Article 3(13) of the Regulation. However, this does not mean that certain provisions cannot be built into contractual agreements by the “company” to protect itself, as explained below.

The “company” means the shipowner or any other organisation or person that has assumed responsibility for the operation of the ship from the shipowner under the International Management Code for the Safe Operation of Ships and for Pollution Prevention, such as a manager or bareboat charterer^[8].

In light of this wide definition, it is crucial for appropriate wording to be included in bareboat charters and/or management agreements to ensure that:

1. responsibility is properly allocated and there are no grounds for disputing who is liable for compliance, and
2. compliance with FuelEU Maritime is adhered to and penalties are avoided.

The preamble to FuelEU Maritime^[9] recognises that the shipowner, bareboat charterer or manager, i.e., the “company”, may not always have control over the fuel purchasing or operational decisions. Therefore, FuelEU Maritime suggests that the entity making those decisions, in line with the “polluter pays” principle,  reimburse or compensate the company responsible for compliance through contractually agreed terms.

This does not mean that there is any less obligation on the “company” in terms of fulfilling monitoring and reporting obligations or paying FuelEU penalties, however, it gives that “company” an opportunity to be reimbursed for decisions of other entities that it cannot otherwise control and encourages all parties to a shipping venture to comply with FuelEU Maritime, even if not technically responsible under the Regulation.

Additionally, the preamble^[10] suggests that the “company” could enter into a contractual agreement with the fuel supplier to produce, supply and purchase predetermined quantities of certain fuels, whereby the fuel supplier is liable to compensate the “company” for penalties under FuelEU Maritime where the agreed fuel is not made available.

Therefore, if the parties agree that the shipowner should not be responsible for compliance with FuelEU Maritime or that any penalties for non-compliance are reimbursed by another party, it is important that there are clear and carefully drafted contractual provisions evidencing the parties’ understanding.

Recently, on 25 November 2024, BIMCO adopted its FuelEU Maritime Clause for Time Charter Parties 2024 to help stakeholders align their contracts in relation to compliance obligations under the Regulation. The Clause is also intended to assist shipowners, charterers, and other parties assign liability for potential penalties that might be incurred under the Regulation. 

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