BIMCO’s new ETS clauses

In December 2023, BIMCO published three emissions trading scheme (ETS) clauses for voyage charterparties. The aim of the three ETS clauses is to provide the parties with different options for dealing with the surrender of emission allowances under the emissions trading scheme that applies at any one time. BIMCO’s new clauses have been drafted for use with any emission scheme, including, but not limited to the EU ETS.

As Nicholas Fell, Chairperson of BIMCO’s Documentary Committee stated “The new ETS clauses have been developed to help parties meet the requirements of the EU ETS as well as any applicable emission scheme we may face in the future”¹. 

From 1 January 2024, the EU ETS was extended to cover CO2 emissions from ships of 5,000 GT and above calling at EU ports, regardless of their flag. Ships engaged in voyages between two EU ports or between an EU port and a third country, will be captured by the EU ETS.

Below, we have summarised the main features of each clause.  

Emissions Scheme Freight Clause for Voyage Charter Parties 2023

Under this clause, which could be considered the most straightforward option, all costs, which arise from the surrender of emission allowances that correspond to the ship’s emissions for voyages completed under the charterparty, form part of the freight due under the charterparty. This would, consequently, mean that the relevant emission allowances are monetised (i.e., will be converted into a precise monetary value) when calculated as a portion of freight due. Opting for this clause may be considered as a more transparent choice since the amount that represents the quantity of emission allowances is identifiable.

Once the Owner receives full payment of freight, the Charterer is no longer liable to the Owner for any costs relating to the surrender of emission allowances for the voyage(s) performed under the charterparty. However, this is without prejudice to the Owner’s right to recover costs for additional emission allowances that result from the Charterer’s breach of the charterparty.

It is important to note that including the cost of the emission allowances in the freight may result in such cost being subject to brokers’ commission.

Emissions Scheme Surcharge Clause for Voyage Charter Parties 2023

This clause stipulates that a mutually pre-agreed amount shall be paid by the Charterer to the Owner by way of cash on the date of initial payment of freight (if freight is payable in instalments) or on the date the freight is due (if it is a one-off payment) or within a specified number of days after the ship’s departure from the load port. Such surcharge would not be subject to a brokerage commission, according to the BIMCO subcommittee. 

As with the Freight Clause, once the Owner receives the full payment of the pre-agreed amount, the Charterer is no longer liable for any costs arising from the surrender of the emission allowances for the voyage(s) performed under the charterparty, save where additional emission allowances result from the Charterer’s breach of the charterparty, in which case the Owner can still claim costs for such allowances.

It is important to note that non-payment of such Emission Scheme Surcharge will be treated in the same manner as non-payment of freight under the charterparty. 

Emissions Scheme Transfer of Allowances Clause for Voyage Charter Parties 2023

The idea for this clause was borne out of conversations with stakeholders of the shipping industry, where some charterers expressed their interest in obtaining trading accounts and being responsible for the transfer of emission allowances directly to the owners. 

The proposed wording for this clause is twofold: 

• the parties can either agree a quantity of emission allowances under sub-clause (a) which will reflect the commercial agreement between the parties and will not be subject to an adjustment, or 
• they can opt for a reconciliation mechanism under sub-clause (b) by leaving sub-clause (a) blank.

As with the previous two clauses, once the Owner receives the full quantity of emission allowances set out in subclause (a) or (b), the Charterer is no longer liable for any costs arising from the surrender of the emission allowances for the voyage(s) performed under the charterparty. This is also without prejudice to the Owner’s right to recover costs for additional emission allowances resulting from the Charterer’s breach of the charterparty.

The reasoning behind this clause stems from the fact that the main factor that impacts the duration of a voyage and, therefore, the quantity of emission allowances, is delays at port. Compensation for such delays are provided for by demurrage in the charterparty. Owners should take this into account when calculating the emission allowances ensuring that the laytime and demurrage rate in the charterparty are adjusted accordingly.

Comment

These clauses are intended to reflect the intention of the parties for dealing with the transfer of emission allowances under their commercial agreements. It is expected (and highly recommended) that the parties negotiate the wording of the ETS clause they select to ensure it is tailored to their specific transaction. 

Both parties should also ensure that the wording works with the remainder of the charterparty in a balanced way and clarifies any contractual ambiguities (for example, what happens with the emission allowances in the event of termination of the underlying contract or how are the Charterer’s rights affected if the Administrative Authority imposes penalties on the vessel for reasons of non-compliance with EU ETS regulations). 

For more information and assistance with the development/review of your ETS clauses for voyage charterparties, you are invited to contact Ioanna Tsekoura and Marie-Anne Moussalli. 

^{1 https://www.bimco.org/news/priority-news/20231208-four-ets-clauses}