Decarbonisation clauses in charterparties have moved from optional drafting innovations to core commercial protections. The reason is simple: shipping is no longer regulated only through traditional safety, cargo, and seaworthiness rules. It is now also regulated through carbon-pricing systems, fuel-intensity standards, energy-efficiency requirements, and annual performance ratings that can affect trading rights, costs, and vessel deployment. At the international level, the IMO’s 2023 GHG Strategy calls for carbon intensity of international shipping to decline by at least 40% by 2030 compared with 2008, for zero- or near-zero GHG energy sources to represent at least 5%, striving for 10%, by 2030, and for international shipping to reach net-zero GHG emissions by or around 2050. At the regional level, the EU now applies both the EU ETS and FuelEU Maritime to large ships calling at EU ports.
That shift has created a legal problem that traditional charterparty wording was never designed to solve. Public law usually makes one entity answerable to the regulator, but the commercial decisions that create emissions and fuel-intensity exposure may be made by someone else. A shipowner or ISM company may be the regulated party; a time charterer may decide speed, cargo, route, waiting time, or fuel procurement; a manager may handle data collection; and a verifier may sit outside both owner and charterer structures. Decarbonisation clauses exist because charterparties must now translate public-law compliance duties into workable private-law risk allocation.
The leading contractual response has come from BIMCO. BIMCO’s official materials now include the ETS – Emission Trading Scheme Allowances Clause for Time Charter Parties 2022, the EEXI Transition Clause for Time Charter Parties 2021, the CII Operations Clause for Time Charter Parties 2022, the CII Clause for Voyage Charter Parties 2023, and the FuelEU Maritime Clause for Time Charter Parties 2024. The fact that BIMCO has built an entire suite of carbon-related clauses is itself evidence that charterparties now need dedicated drafting for emissions trading, fuel efficiency, carbon intensity, and fuel-transition compliance.
Why Existing Charterparties Are No Longer Enough
The best summary of the problem comes from BIMCO’s own CII clause page. BIMCO says that existing (unamended) time charter parties are simply not geared to deal with the CII regime, and that the clause was drafted to give owners and charterers the contractual building blocks needed to operate ships in accordance with the new CII landscape. BIMCO also says the clause is intended to promote collaboration, transparency, and flexibility because the commercial employment of the ship, usually determined by charterers and traditionally outside owners’ control, can have a direct and significant impact on a ship’s carbon intensity.
That observation applies far beyond CII. Traditional time charter forms were built around bunker cost, speed, performance, off-hire, orders, laytime interfaces, and ordinary regulatory compliance. They were not built for a world in which a ship’s annual carbon rating, ETS allowance exposure, or FuelEU compliance balance may depend on choices made by multiple parties over a full reporting period. Without bespoke drafting, the parties are left to argue after the event about who should bear costs that the contract never specifically allocated.
EU ETS: Public-Law Responsibility and Private-Law Reimbursement
The EU ETS is the clearest example of the gap between public-law responsibility and private-law cost allocation. The European Commission states that the maritime EU ETS has applied since January 2024 to large ships of 5,000 gross tonnage and above entering EU ports, regardless of flag. It covers CO2 emissions from intra-EU voyages and from time at berth in EU ports, and it also captures 50% of emissions from voyages starting or ending outside the EU. The phase-in requires surrender of allowances for 40% of verified 2024 emissions, 70% of verified 2025 emissions, and 100% from 2026 onward.
The Commission’s ETS FAQ also makes the allocation problem explicit. It says the shipping company always remains the responsible entity for surrendering allowances. It further says that, where responsibility for purchasing fuel and/or operating the ship is assumed by another entity under a contractual arrangement, the shipping company is entitled to reimbursement from that entity for the costs arising from surrendering allowances, and that Member States must provide the necessary access to justice to enforce that entitlement. The Commission also explains that, for this purpose, “operation of the ship” means determining the cargo carried or the route and speed of the ship.
That is a powerful public-law statement, but it does not solve the charterparty problem by itself. A regulatory entitlement to reimbursement is not the same as a clean commercial mechanism for monthly data exchange, allowance transfer, dispute resolution, interim payment, or treatment of overlapping charter periods. That is why the Commission itself says shipping companies and entities responsible for fuel purchase or operation are expected to develop contractual clauses to pass on ETS surrendering costs appropriately. In other words, EU law now expects the parties to do the private-law drafting work themselves.
BIMCO’s ETS clause is built exactly for that purpose. BIMCO says the purpose of the ETS Allowances Clause for Time Charter Parties 2022 is to allocate costs and responsibilities for obtaining, transferring, and surrendering greenhouse-gas emission allowances for ships operating under an emissions scheme such as the EU ETS. BIMCO also states the basic commercial logic of the clause: the party paying for the fuel under the time charter is the party responsible for providing and paying for the allowances, while owners monitor emissions and provide the relevant emissions data and basis of calculation so that charterers can transfer the appropriate allowances monthly.
From a legal-strategy perspective, that clause matters because it converts a broad reimbursement principle into a working charterparty process. It deals not only with ultimate cost incidence, but also with timing, information rights, and operational administration. Without that kind of clause, even a party with a strong substantive argument about ETS allocation may still face practical disputes over whether reimbursement must be paid now or only after surrender, whether the calculation was verified, and whether charterers must provide allowances in kind or only money.
FuelEU Maritime: A Different Type of Risk
FuelEU Maritime creates a different legal challenge. The European Commission states that FuelEU applies to ships above 5,000 gross tonnage calling at European ports, regardless of flag, and that it sets maximum limits for the yearly average GHG intensity of the energy used on board. The reduction path starts with a 2% decrease in 2025 and rises progressively to 80% by 2050. The Commission also says the first reporting period is 2025, that monitoring plans had to be submitted by 31 August 2024, and that a ship-specific FuelEU report must be provided to the verifier by 31 January of each verification period.
FuelEU is also linked to at-berth obligations. The Commission states that containerships and passenger ships above 5,000 GT must comply with the zero-emissions-at-berth requirement from 1 January 2030 in AFIR-covered EU ports and from 1 January 2035 in all EU ports with OPS, unless an exception applies. It also explains that penalties apply for a GHG-intensity compliance deficit and for non-compliant port calls, and that the company must pay the penalty by 30 June of the verification period.
The responsible entity under FuelEU is not framed exactly like ETS, but the commercial tension is similar. The Commission says the responsible “company” is the entity responsible for compliance with the ship’s ISM Code. In practice, that may be the shipowner or another organization or person distinct from the shipowner. The Commission also says FuelEU and the maritime EU ETS are complementary regimes: FuelEU is a low-GHG fuel standard, while ETS is a cap-and-trade pricing system.
This means a charterparty can no longer deal only with carbon costs; it must also deal with carbon performance. ETS is mainly about who pays for allowances. FuelEU is about whether the vessel’s annual energy mix and at-berth behavior produce a positive or negative compliance balance. That is a much broader operational problem because it can depend on bunkers, biofuel blending, port rotation, waiting time, auxiliary loads, and voyage profile across an entire reporting period.
Banking, Borrowing, and Pooling: Why FuelEU Requires New Drafting
One of the most legally novel features of FuelEU is that it allows banking, borrowing, and pooling. The Commission states that pooling allows over-compliance of one ship to compensate under-performance of another, provided the total pooled balance is positive. It also states that banked compliance surplus does not expire, that borrowing is allowed subject to a later deduction plus a 10% surcharge, and that there is no central registry for compliance units; instead, compliance is recorded in the FuelEU database on a ship-specific basis.
These flexibility tools are commercially useful, but they also create new charterparty disputes. If a charterer’s fuel orders or operational choices create a positive compliance balance, who owns that value? If a vessel borrows from the next reporting period, who bears the future compliance penalty if redelivery happens before the next year closes? If a ship is entered into a pool with other vessels, who decides, and who bears the risk if the pool fails to remain compliant? None of those issues is solved by the FuelEU Regulation itself. They are private-law questions that require contractual answers.
BIMCO’s FuelEU Maritime Clause for Time Charter Parties 2024 is the current market response. BIMCO explains that the rationale includes ensuring the vessel is equipped to connect to onshore power supply as required by FuelEU and, more broadly, allocating responsibilities and costs under the regime. In its explanatory material, BIMCO says the clause gives charterers rights in relation to banking, pooling, and borrowing in specified circumstances, places pooling costs and failed-pool risk on charterers, and provides a surcharge mechanism to reflect expected FuelEU penalties where a negative compliance balance exists.
That makes the FuelEU clause legally important for a different reason than the ETS clause. The ETS clause mainly allocates allowance cost and transfer obligations. The FuelEU clause also allocates strategic control over compliance flexibility mechanisms. In practice, that means the clause can shape the economic value of low-carbon operation over time, not merely the reimbursement of a public-law payment already made.
IMO CII and EEXI: Why Voyage and Time Charter Clauses Diverge
EU regulation is only part of the decarbonisation clause story. The IMO’s EEXI and CII framework has already created a second layer of charterparty drafting. IMO states that the MARPOL Annex VI amendments entered into force on 1 November 2022 and that the EEXI and CII certification requirements took effect on 1 January 2023. IMO also states that ships rated D for three consecutive years or E for one year must submit a corrective action plan to show how they will reach a rating of C or above.
BIMCO’s response reflects the difference between technical compliance and operational compliance. Its EEXI Transition Clause for Time Charter Parties 2021 says it addresses compliance with EEXI and allocates responsibility and costs for implementing EPL and SHAPOLI modifications under a time charter. That is essentially a ship-side technical compliance clause. By contrast, BIMCO’s CII Operations Clause for Time Charter Parties 2022 is designed around cooperation, transparency, and flexibility because charterers’ commercial orders can directly affect the ship’s carbon intensity. BIMCO’s CII Clause for Voyage Charter Parties 2023 then addresses the voyage context by allowing agreed adjustments to course, speed, or RPM as a tool to support compliance with the MARPOL carbon-intensity regulations.
This difference is critical for legal drafting. EEXI is mainly about whether the ship is technically fit to trade under the efficiency rules. CII is about how the ship is actually employed during the reporting period. That is why time-charter and voyage-charter decarbonisation clauses do not look the same. A time charter needs rules for continuous cooperation and data sharing. A voyage charter often needs a clause permitting adjusted speed or course within agreed limits. Trying to solve both problems with one generic “green clause” is usually inadequate.
Data, Verification, and Evidence
One of the biggest hidden legal risks in decarbonisation clauses is data quality. The Commission’s FuelEU Q&A makes clear that monitoring plans, annual reporting, verifier involvement, and penalty assessment all depend on detailed operational and fuel data. The ETS regime likewise depends on emissions reporting and surrender obligations that remain attached to the shipping company even if another party performs parts of the data or operational function. In both systems, poor data governance can destroy not only regulatory compliance but also a private-law reimbursement claim under the charter.
This is why decarbonisation clauses increasingly operate as evidence clauses as much as cost clauses. Owners need rights to demand data, use it for verified reporting, and prove the basis of any claim for allowance transfer, surcharge, or penalty recovery. Charterers need auditability and transparency so they can challenge incorrect calculations and verify whether the owner’s regulatory payments were actually caused by charterers’ commercial decisions. A clause that allocates cost but ignores data access and validation is incomplete.
Main Disputes We Should Expect
The first predictable dispute type is ETS reimbursement: whether the owner, manager, or ISM company can recover allowance cost from the charterer and on what basis. The second is FuelEU surcharge: whether a negative compliance balance or port-call penalty was correctly calculated and whether the charterer must fund it during the charter period or only after final verification. The third is CII operational responsibility: whether charterers’ orders pushed the vessel into a poor rating and whether owners were entitled to alter speed, route, or RPM. The fourth is period-splitting risk: where charter periods do not match reporting periods and multiple commercial users may affect one year’s regulatory outcome.
A fifth dispute category concerns redelivery and residual compliance exposure. FuelEU penalties are payable in the verification period, not always while the charter is still running. ETS surrender obligations may crystallize after a company change. The Commission’s ETS FAQ specifically notes that, where responsibility changes mid-year, the shipping company that was responsible during the relevant period must surrender allowances for that part of the year. That means contract drafting must handle not only live-period cost allocation, but also trailing exposure after redelivery or company change.
Practical Drafting Strategy for Shipowners and Charterers
For shipowners, the best strategy is to treat decarbonisation clauses as a package, not a single provision. ETS cost-transfer language, FuelEU flexibility and surcharge language, EEXI modification language, and CII operational language solve different problems. Owners should also ensure that data-sharing rights, verification rights, redelivery adjustments, and survival provisions are built into the clause structure. Otherwise, the owner may remain the public-law target while lacking a workable contractual recovery path.
For charterers, the best strategy is to focus on operational control and evidentiary fairness. If charterers are expected to fund ETS allowances or FuelEU deficits because they control fuel and voyage decisions, they should negotiate transparent data rights, validated calculations, and clear rules on pooling, borrowing, and end-of-charter settlement. They should also examine whether the vessel is technically capable of compliance — especially for OPS-related obligations and EEXI/CII performance — before accepting broad carbon-cost allocation.
For both sides, the main commercial lesson is that decarbonisation clauses should now be treated with the same seriousness as speed-performance clauses, off-hire clauses, sanctions clauses, and war-risk clauses. They are no longer experimental. They are part of the economic core of the charterparty.
Conclusion
Decarbonisation clauses in charterparties now sit at the center of shipping contract law because carbon regulation has created a mismatch between public-law responsibility and private-law control. The EU ETS places the surrender obligation on the shipping company but recognizes reimbursement rights where another entity controls fuel purchase or vessel operation. FuelEU Maritime imposes annual fuel-intensity and at-berth obligations on the ISM company, while leaving banking, borrowing, pooling, cost allocation, and many timing issues to private contracts. IMO’s EEXI and CII rules add further technical and operational compliance pressures that standard legacy charterparties were not designed to absorb.
The practical answer is not to rely on broad good-faith cooperation language. It is to use targeted drafting that matches the specific decarbonisation problem in question: ETS allowance transfer, FuelEU compliance balance and penalties, EEXI modifications, or CII operational adjustment. In modern shipping, carbon compliance is no longer just a regulatory burden. It is a charterparty allocation problem, a data-governance problem, and increasingly a dispute-resolution problem. The better the clause, the lower the litigation risk.
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