Julien Rabeux, Head of Claims (Singapore) at maritime insurance provider West of England P&I Club (West P&I), warns that without clear clauses in ship management agreements and time charterparties, parties risk costly disputes, particularly as the first compliance assessments under FuelEU Maritime approach:
The maritime fuel landscape is shifting rapidly, and with the introduction of FuelEU Maritime on 1 January 2025, shipowners, managers, and charterers operating in Europe now face one of the most complex compliance frameworks to date.
The regulation is designed to reduce the greenhouse gas (GHG) intensity of shipboard energy consumption, incentivise the use of onshore power supply in EU ports, and accelerate the uptake of alternative fuels. However, while its environmental ambitions are clear, its contractual implications are not – and that’s precisely where the risk lies.
Compliance liability lies with the ‘Shipping Company’ – but who pays?
Under FuelEU Maritime, the ‘Shipping Company’ – typically the Document of Compliance (DOC) holder – bears legal responsibility for compliance. That may be the registered owner, a third-party technical manager, or a bareboat charterer. Ships that fail to meet the required GHG intensity targets face remedial penalties. If non-compliance persists for two consecutive years, the ship could be issued an expulsion order.
To manage emissions, companies may bank or borrow compliance surplus or deficit across reporting years, and pool vessels to balance compliance within a fleet. These options may offer operational flexibility – but without contractual clarity, they also raise critical questions: Who pays the penalties? Who controls pooling decisions? Who retains the value of overcompliance?
West is urging all stakeholders to address these questions now – not after a penalty has already been incurred.
Contract clarity under SHIPMAN agreements
Where a technical manager is the DOC holder, the management agreement must clearly reflect FuelEU responsibilities. The BIMCO FuelEU Maritime Clause for SHIPMAN 2024 is a practical tool that helps allocate compliance obligations, including monitoring, reporting, and submission of plans to the relevant authorities.
In addition to administrative compliance, the contract should specify who controls the vessel’s compliance strategy – including decisions around banking, borrowing and pooling – and who benefits from any associated cost savings or revenue. It should also set terms for indemnity, including the timeframe for transferring funds to reimburse penalties, the provision of security, and what happens if reimbursement is delayed or withheld. Without such provisions, parties risk serious operational and legal disruption.
Time charterparties: don’t assume indemnity where none is written
The stakes are equally high in time charter arrangements. In the absence of a clause dealing explicitly with FuelEU compliance, owners may not be able to refuse to enter EU waters or seek an indemnity for penalties caused by charterer-supplied fuel – even if that fuel results in non-compliance. As such, relying on implied terms or assumptions is an unnecessary gamble.
The BIMCO FuelEU Maritime Clause for Time Charter Parties 2024 provides a robust contractual framework to address key issues and allocate responsibilities for compliance between owners and charterers. It requires owners to inform charterers of the vessel’s compliance balance on delivery and during the charter, mandates a monitoring plan and GHG reporting, and allows charterers to supply compliant fuel or pay a surcharge when necessary. It also provides mechanisms for compliance flexibility such as banking, pooling, borrowing, and surcharge payments, with rights to reimbursement and for owners to suspend performance if the surcharge is unpaid.
However, the BIMCO clause does not cover several critical areas, which must be considered and negotiated in addition to incorporating the standard clause:
Fuel specifications: The clause allows charterers to supply fuel but does not mandate standards or certifications (e.g. Renewable Energy Directive compliance, ISO specifications, GHG intensity). Separate provisions should specify which fuels are acceptable, certification requirements, and documentation to support compliance.
Performance warranties: The clause not address the impact of alternative fuels on vessel performance. Charterparties should include provisions for suspending or adjusting performance warranties when the calorific value of alternative fuels affects vessel operations.
Expulsion risk: While the clause covers surcharges and compliance mechanics, it does not address what happens if a vessel is expelled from EU waters due to non-compliance under FuelEU Maritime. Charterparties must clarify whether charterers can terminate or be liable in such scenarios.
Avoid assumptions, adopt structure
As we move toward the first full compliance assessments under FuelEU Maritime, disputes are likely to arise unless roles, risks, and rewards are properly apportioned. The 2024 BIMCO clauses – both for SHIPMAN and time charterparties – offer a practical, industry-consensus framework to help stakeholders avoid ambiguity and litigation.
This is not a theoretical risk. FuelEU Maritime brings with it financial penalties, operational restrictions, and reputational consequences. Contractual silence will not offer protection.
For owners, managers, and charterers alike, adopting standardised clauses and revisiting contract structures will not only provide legal certainty but also support operational planning and commercial agility. West is on hand to support its Members navigate these changes, review clauses, and manage contractual exposure.
Photo credit: West P&I
Published: 8 September, 2025