Connect with us

Legal

Law firm Reed Smith tackles critical questions on EU ETS in maritime sector

Nick Austin of Reed Smith addresses issues regarding EU ETS including which party is responsible for the cost of this scheme in a chartering contract and the recent list published showing which shipping companies have been allocated to which Member State’s Administering Authority within the EU ETS.

Admin

Published

3 years ago

on

RESIZED Shaah Shahidh on Unsplash

Nick Austin, transportation partner at global law firm Reed Smith, on Thursday (15 February) shared with bunkering publication Manifold Times his view on how the maritime operator holding account works which is required to submit allowances under the EU Emissions Trading System (EU ETS), which party is responsible for the cost of this scheme in a chartering contract, and a list published showing which shipping companies have been allocated to which Member State’s Administering Authority within the EU ETS:

It’s a brave new world for the maritime sector. Obviously, the EU ETS has been around for many years in other industries but it’s new to shipping from this year, with the recent inclusion of shipping in the EU ETS since 1 January. This is bringing with it significant implications as the EU continues to unveil new details, rules, and regulations on a regular basis.

Presently, the EU ETS covers ships of over 5000 tons, placing obligations on entities known as ‘shipping companies’ – In the coming weeks, these companies will need to set up a Maritime Operator Holding Account (MOHA) to comply with the evolving framework. The key responsibility lies in surrendering allowances corresponding to carbon emissions by September 30 each year, with verification required in the preceding March.

There are no free allowances being made available but instead a phase-in has been offered on the allowances that need to be surrendered. For 2024, it is 40% only of those emissions from intra EU voyages, and 20% from an EU port to a non-EU port or vice versa. Over time, these percentages will increase to 100% of emissions.

The scheme will also start tightening in terms of the vessels covered, including to offshore vessels. And the commercial consequences are significant – there are various estimates flying around of the additional cost to the industry of ETS – some have said it could be up to USD 100,000 for a US Gulf Coast to EU round trip in the tanker sector. Cruise ships will be hit particularly hard because their energy consumption needs tend to mean higher emissions.

There are significant implications for the chartering market – how does it all work in the complex contractual structures and who is going to pay?

A maritime publication recently reported that no owner or registered manager has been able to open a MOHA thus far.

An important question is how do you allocate the cost of this scheme in a chartering contract?

The starting point is the rules – the ‘shipping company’ is defined as the registered owner, or another company that has essentially assumed the running of the ship. That is going to be the bareboat charterer or a ship manager, either of whom can be the ‘shipping company’. 

It was originally thought this would happen automatically, in other words that if you were the bareboat charterer or the ship manager you could just set up an account – and that was the accepted view. However, it is now clear that the registered owner needs to produce a written mandate to the bareboat charterer or ship manager authorising it as the “shipping company” responsible for EU ETS compliance. So, in order to open a MOHA, the delegate will need a document that says ‘I am mandating the bareboat charterer or the ship manager to comply with these obligations’.

The second layer to this is the cost of compliance. It will vary from ship to ship, and place to place. Who is paying? The rules again tell you what happens, to an extent. 

The Member State associated with the “shipping company”, and where it must open a MOHA, must be identified. This Member State is required to enact legislation enabling the shipping company to recover the costs associated with surrendering EU ETS allowances from the party effectively directing the ship, purchasing the fuel or determining the cargo carried. This will include time and voyage charterers.

What I am seeing a great deal of is work and active discussion around the clauses in time charter parties, and to a lesser extent voyage charters where the contractual scheme is different and usually shorter in time. This means thinking about, through appropriate clauses, the allocation and mechanics of getting the charterer to pay the owner back for the cost of the allowances that they will have to submit every 30 September. And those clauses come in different shapes and sizes. They’re more complex in time charters because of the nature of that contractual arrangement.

Essentially, a time charterer must pay the shipping company for the cost of the allowances, either by opening its own account and transferring allowances in time for the shipping company to surrender them, or through an equivalent payment with hire, which means less administration for the charterers.

On 31 January 2024, the European Commission published a list showing which shipping companies have been allocated to which Member State’s Administering Authority within the EU ETS and in which the shipping companies must register to open a MOHA.  

However, the list has been described by some as “a mess”. It was created by an algorithm using a database of companies who were already reporting emissions in the EU under different rules. But the list lacks a consistent approach and contains owners, operators and managers with, in many cases, no obvious connection to the Member State assigned to them, creating several uncertainties and more questions.

The EU’s approach to producing the list has led to some countries accumulating a substantial number of companies assigned to them, notably Spain. But there may be a pressing need for those on the list to act swiftly, given that within 40 working days from 31 January, a crucial deadline for the registration of a MOHA looms – the clock is ticking.

However, challenges to the opening of a MOHA remain in Member States that are not as digitally advanced as others, adding another layer of intricacy to an already complex situation.”

 

Photo credit: Shaah Shahidh on Unsplash
Published: 20 February, 2024

Related Topics:
Continue Reading

Vessel Arrest

Malaysia: MMEA detains two vessels over suspected illegal ship-to-ship transfer off Johor

Other than the vessels, MMEA also seized a cargo of oil, bringing the total value of the seizure to MYR 260 million (USD 61.9 million).
Admin

Published

3 days ago

on

September 3, 2026

By

Malaysia: MMEA detains two vessels over suspected illegal ship-to-ship transfer off Johor

The Malaysian Maritime Enforcement Agency (MMEA) detained tugboat and dredger suspected of conducting an unauthorised ship-to-ship (STS) transfer in Malaysian waters.

The two Malaysian-registered vessels were detained at around 3.20am on Wednesday by an MMEA patrol boat after the agency received public information about two suspicious vessels seen operating alongside each other about 1.4 nautical miles northwest of Tanjung Buai.

MMEA Tanjung Sedili Zone Acting Director Maritime Commander Mohd Najib Sam said further inspection found that the tugboat was operated by five crew members, including its skipper, comprising Malaysian and Indonesian nationals aged between 26 and 58.

The dredger was operated by 13 crew members, including its skipper, all Malaysian nationals aged between 22 and 51.

“Further inspection also found a quantity of oil cargo believed to be without any documents relating to ownership and delivery,” Najib said.

Both vessels and the oil cargo have been seized for further investigation. The total value of the seizure, including the two vessels and the oil cargo, is estimated at MYR 260 million (USD 64 million).

The case is being investigated under Section 491B(1)(K) of the Merchant Shipping Ordinance (MSO) 1952 for allegedly conducting ship-to-ship activities without authorisation from the Malaysian Director of Marine.

The vessels are also being investigated under Section 491B(1)(L) of the MSO 1952 for allegedly anchoring without permission, as well as under the Customs Act 1967 in connection with the oil cargo suspected of lacking the required documentation.

 

Photo credit: Malaysian Maritime Enforcement Agency
Published: 3 September, 2026

Continue Reading

Bunker Claim

Rajah & Tann: Bunker disputes are won in the first 48 hours

Partner V Bala says bunker disputes depend heavily on evidence gathered in the first 48 hours, making disciplined preservation, accurate reporting and early expert involvement critical to protecting a claim or defence.
Admin

Published

4 days ago

on

September 2, 2026

By

Rajah & Tann: Bunker disputes are won in the first 48 hours

V Bala, a partner in Rajah & Tann Singapore’s Shipping & International Trade practice group, has highlighted the critical importance of preserving evidence in the first 48 hours of a bunker incident, outlining best practices for ship managers to protect potential claims and defences:

A vessel somewhere in the Indian Ocean reports abnormal fuel behaviour. Sludge is forming. Filters are clogging. Consumption looks wrong. Within hours, owners, charterers, managers, suppliers and insurers are exchanging messages. Everyone asks the same question: is there a claim? It is reasonable. It is also often premature. The better question is: what evidence will still exist in 48 hours to explain what happened?

For all the technical sophistication around modern bunker disputes, many are decided less by expert reports than by the first two days after trouble appears. The tribunal may sit years later. The factual foundation is usually laid before the vessel reaches its next port.

Bunker claims are commonly treated as technical contests about fuel specifications, ISO standards and competing laboratory results. They are that. But experienced litigators quickly notice a simpler pattern: the strongest cases are rarely built by the cleverest lawyers. They are built by the best recordkeepers.

The Vanishing Evidence Problem 

Unlike a collision, fire or grounding, bad bunkers leave few obvious visual traces. The evidence is scattered across tanks, samples, engine records, maintenance logs, performance data and electronic communications. Much of it can deteriorate, disappear or become contaminated with surprising speed.

A discarded sample cannot be recreated. A cleaned filter may tell a different story from one preserved immediately after failure. Electronic records overwritten in routine operations may never be recovered usefully. Crew change. Memories fade. The difficulty is that bunker incidents rarely feel like casualties when they first arise. They look like operational nuisances.

The Pressure to Move On 

A ship manager’s first duty is to keep the vessel trading. Engineers solve the immediate problem. Technical managers assess options. Owners watch delay. Charterers want assurance. The commercial pressure to restore normality is intense. It is also the moment when evidential mistakes are most easily made.

Fuel is blended before investigations are complete. Samples are mishandled. Machinery is repaired before it is properly photographed. Internal messages fill with theories. By the time experts arrive, the most useful evidence may already have changed.

The Danger of Instant Certainty 

Modern communication has made this harder. A concern raised in the engine room can reach executives across continents within minutes. The advantages are obvious. So are the risks.

The earliest explanations are often the least reliable. When machinery problems arise shortly after bunkering, the fuel is naturally blamed because it is the most visible recent change. Sometimes that is right. Sometimes it is not.

Yet once a theory enters circulation, it acquires momentum. Months later, early WhatsApp messages or emails written under pressure may be attached to witness statements, analysed by experts and scrutinised by lawyers. A passing operational remark can begin to look like a settled conclusion.

The Documentary Ship 

Shipping remains a documentary business. Despite digitalisation, disputes still turn on engine logs, maintenance reports, fuel transfer records, sounding measurements and superintendent correspondence.

What matters is not merely whether those records exist, but what story they tell together. Tribunals value contemporaneous documents because they were created before positions hardened. They are the closest thing to a real-time account.

Ship Managers at the Centre 

Ship managers sit at the centre of the network: owners, financiers, charterers, bunker suppliers, insurers and regulators. In bunker matters, their role now goes beyond technical operation. It includes preserving enough information to understand what happened if the matter becomes a claim.

What the Best Operators Do Differently 

If bunker disputes are won in the first 48 hours, what do the best operators do differently? They treat fuel incidents as evidential events as well as operational ones. While engineers restore function, someone asks: if this becomes a dispute, what will we wish we had preserved today?

They resist instant certainty. Communications distinguish facts from theories. There is a difference between recording that power loss followed consumption from a particular tank and declaring that the supplier delivered bad fuel.

They know samples are useful only if identity, seals, labels and custody can be proved. They keep samples alongside the full operational record: delivery documents, tank soundings, transfer history, engine logs, alarms, purifier settings, maintenance data and ship-to-shore messages.

They preserve physical evidence before routine work alters it. Filters, residues and affected components may contain information that disappears once cleaned or discarded. Photographs should capture the condition found, not just the condition after repair.

Finally, they bring the right expertise to the problem early. They also involve the right people early: surveyors, laboratories, technical experts, insurers and lawyers. A surveyor or technical expert can help identify what should be sampled, photographed, retained and recorded before the evidence changes. Lawyers and insurers can help ensure that notifications are made, communications remain measured and contractual deadlines are not overlooked. The point is not to turn every operational problem into litigation. It is to avoid discovering, months later, that the ingredients of a sound claim or defence were lost during the first voyage after the incident.

The first 48-hour discipline 

PRESERVE Segregate the suspect fuel where practicable. Secure representative samples, seals, labels and a documented chain of custody. Retain affected filters, residues and components before cleaning or disposal.
RECORD Capture tank soundings, transfer history, consumption sequence, engine parameters, alarms, purifier settings, maintenance data and photographs. Preserve original electronic records and contemporaneous logs.
COMMUNICATE Report observed facts, not untested conclusions. Keep a disciplined chronology of what happened, when it happened, who was informed and what action was taken.
NOTIFY Check contractual notice provisions and inform the relevant owner, charterer, supplier, manager, insurer or P&I club promptly. Delay can damage both evidence and rights.
DEPLOY Involve the appropriate surveyor, laboratory, technical expert and legal team before the condition of the evidence changes, not after positions have hardened.

The lesson is simple. In bunker disputes, the law often comes late. The evidence comes early. The party that preserves it calmly, completely and without premature blame gives itself the best chance of winning the argument when the dispute finally arrives.

 

Photo credit: Rajah & Tann Singapore
Published: 2 September, 2026

Continue Reading

Winding up

Singapore: Notices of intended dividend issued for Hua An Shipping and related firms

Creditors will need to produce proofs of debt to liquidators of Hua An Shipping, Hua Guang Shipping, Nan Hai Maritime, Nan Sia Maritime and Nan Zhou Maritime by 11 September.
Admin

Published

6 days ago

on

August 31, 2026

By

RESIZED Drew Beamer

Notices of intended dividend for Hua An Shipping Pte Ltd, Hua Guang Shipping Pte Ltd, Nan Hai Maritime Pte Ltd, Nan Sia Maritime Pte Ltd and Nan Zhou Maritime Pte Ltd were published on the Government Gazette on Friday (28 August). 

The following are the details of the notice of Hua An Shipping Pte. Ltd:

Name of Company : Hua An Shipping Pte. Ltd. (In Creditors’ Voluntary Liquidation)
Unique Entity No. / Registration No. : 200610919Z
Address of Registered Office : c/o Grant Thornton Singapore Private Limited, 8 Marina View, #40-04/05 Asia Square Tower 1, Singapore 018960
Last Day for Receiving Proofs : 11 September 2026 at 5:00 pm by email to [email protected]
Name of Liquidators : Paresh Tribhovan Jotangia and Ho May Kee
Address : c/o Grant Thornton Singapore Private Limited, 8 Marina View, #40-04/05 Asia Square Tower 1, Singapore 018960

Details of the notice of intended dividend for Hua Guang Shipping Pte. Ltd are as follows:

Name of Company : Hua Guang Shipping Pte. Ltd. (In Creditors’ Voluntary Liquidation)
Unique Entity No. / : 200610922R Registration No.
Address of Registered Office : c/o Grant Thornton Singapore Private Limited 8 Marina View #40-04/05 Asia Square Tower 1 Singapore 018960
Last Day for Receiving Proofs : 11 September 2026 at 5:00 pm by email to [email protected]
Name of Liquidators : Paresh Tribhovan Jotangia and Ho May Kee
Address : c/o Grant Thornton Singapore Private Limited 8 Marina View #40-04/05 Asia Square Tower 1 Singapore 018960

Details of the notice of intended dividend for Nan Hai Maritime Pte Ltd are as follows:

Name of Company : Nan Hai Maritime (Pte.) Ltd. (In Creditors’ Voluntary Liquidation)
Unique Entity No. /Registration No. : 200814299M
Address of Registered Office : c/o Grant Thornton Singapore Private Limited 8 Marina View #40-04/05 Asia Square Tower 1 Singapore 018960
Last Day for Receiving Proofs : 11 September 2026 at 5:00 pm by email to [email protected]
Name of Liquidators : Paresh Tribhovan Jotangia and Ho May Kee
Address : c/o Grant Thornton Singapore Private, Limited 8 Marina View #40-04/05 Asia Square Tower 1 Singapore 018960

Details of the notice of intended dividend for Nan Sia Maritime Pte Ltd are as follows:

Name of Company : Nan Sia Maritime (Pte.) Ltd. (In Creditors’ Voluntary Liquidation)
Unique Entity No.  / Registration No.  : 200814320Z
Address of Registered Office : c/o Grant Thornton Singapore Private Limited 8 Marina View #40-04/05 Asia Square Tower 1 Singapore 018960
Last Day for Receiving Proofs : 11 September 2026 at 5:00 pm by email to [email protected]
Name of Liquidators : Paresh Tribhovan Jotangia and Ho May Kee
Address : c/o Grant Thornton Singapore Private Limited 8 Marina View #40-04/05 Asia Square Tower 1 Singapore 018960

Details of the notice of intended dividend for Nan Zhou Maritime Pte Ltd are as follows:

Name of Company : Nan Zhou Maritime (Pte.) Ltd. (In Creditors’ Voluntary Liquidation)
Unique Entity No. / Registration No.: 200814295H
Address of Registered Office : c/o Grant Thornton Singapore Private Limited, 8 Marina View, #40-04/05 Asia Square Tower 1, Singapore 018960
Last Day for Receiving Proofs : 11 September 2026 at 5:00 pm by email to [email protected]
Name of Liquidators : Paresh Tribhovan Jotangia and Ho May Kee
Address : c/o Grant Thornton Singapore Private Limited, 8 Marina View, #40-04/05 Asia Square Tower 1, Singapore 018960

 

Photo credit: Drew Beamer

Published: 31 August, 2026

Continue Reading
Advertisement

OUR INDUSTRY PARTNERS



Trending