MS Amlin updates clients on shipping industry decarbonization

Netherlands-based MS Amlin Marine NV (a captive managing general agent of MS Amlin) has issued an update on its August 2022 circular about the new IMO regulations that came into force on January 1st 2023 and the new EU plans on decarbonizing the shipping industry.

“A lot has happened since then, and we have been receiving more and more queries from our clients about the contractual and commercial considerations arising from the new IMO regulations”, the insurer said.

To prepare shipowners and charterers for the contractual implications of the new IMO regulations, BIMCO has issued a EEXI Transition Clause for Time Charter Parties and a CII Clause for Time Charter Parties.

In the meantime, there have also been changes on including the shipping industry in the EU Emission Trading Scheme. This was still in the concept stage when MS Amlin published the August 2022, “but it is now clear that EU institutions have reached preliminary agreement”.

The new IMO regulations that came into force at the start of 2023 introduced the EEXI and CII labels for vessels. “The introduction of these labels and the technical or operational modifications that shipowners need to carry out to ensure that the EEXI and CII label is retained or improved will affect the commercial operation of the vessel”, MS Amlin said.

It was therefore recommended that parties reach an agreement about the allocation of risks and costs of modifications and changes in the vessel’s operation. “The BIMCO EEXI Transition Clause for Time Charter Parties and the BIMCO CII Clause for Time Charter Parties are a good starting point for negotiations, and can be adapted to the specific circumstances”, MS Amlin said.

While it was up to the contracting parties to negotiate a commercial solution that suits both, MS Amlin said that one solution might be some kind of financial compensation for those charterers which could be disadvantaged by the change in the operation of the vessel or the time lost by modifications.

In addition to the IMO regulations, the EU confirmed that the EU Emission Trading Scheme (ETS) would apply to the international shipping industry as of 2024. In principle, the ETS will only apply to vessels with a gross tonnage of 5,000 or more that trade within EU waters. However, MS Amlin observed that “its scope may be broadened in the future. Contracting parties that enter into long-term agreements such as long-term time charter parties should take into account which party will be contractually responsible for the ETS allowances”.