New IMO regulations will pose contractual problems: BIMCO

Carbon emission regulations set to be adopted at the next meeting of the International Maritime Organization’s Marine Environmental Protection Committee (MEPC) will need to be addressed by shipowners’ legal teams as well as their technical departments, according to a study by independent shipowners’ association BIMCO and several other key stakeholders.

The impact assessment identified a range of contractual challenges in the proposed carbon regulations.

BIMCO has begun to prepare charter party clauses to help owners and charterers comply with the new regime.

Since charter parties that extend beyond 2023 were already being negotiated and agreed, BIMCO had given this task top priority.

BIMCO said that the main driver of its initiative was the amendments to chapter 4 of MARPOL Annex VI, which are due to come into force in 2023. Those changes will regulate more strictly the energy efficiency and carbon intensity of ships.

BIMCO said that the future regulatory framework might require shipowners to reduce engine power and speed to comply with the Energy Efficiency Existing Ship Index (EEXI). Meanwhile, the carbon intensity index (CII) requirements might also see shipowners having to reduce cargo intake, as well as taking measures that will affect the routes chosen and the speed of the vessel during its journey.

BIMCO warned that compliance with the new regime might mean that shipowners would be at risk of being in breach of their obligations in performing the voyage under standard charter party terms.

BIMCO said that the impact study indicated that the commercial implications of CII would be just as challenging as the contractual issues.

It observed that compliance would 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. A fair allocation of costs and responsibilities will be at the heart of the new BIMCO clauses to ensure that neither party is unduly disadvantaged by the carbon regulations.”

BIMCO said that it would also look closely at emission trading schemes currently under discussion and how they would be dealt with in charter parties. The association said that, although carbon levies could be considered a “tax” for the purposes of charter parties, and therefore covered by existing clauses in standard forms, it might be that a more prescriptive approach was called for.

BIMCO said that it had been encouraged by the willingness of several dry cargo and wet charterers to work together with shipowners and BIMCO to find contractual solutions.

BIMCO’s Documentary Committee will discuss the draft carbon clauses over the summer and review then for possible adoption in September.