Operational decisions are linked to economic consequences.
Data sharing, compliance with instructions, and cost allocation.
It reaches deep into technical and commercial operations management.
Verify whether operational reality aligns with the clause.
The FuelEU Maritime Regulation (EU 2023/1805) obliges ship operators to progressively reduce the greenhouse gas intensity of their onboard energy consumption from 2025 onwards. For time charters, this creates a structural problem: the charterer controls operations – route selection, speed, port lay times – whilst the owner, as “Company” under the ISM Code, carries the regulatory responsibility. Without dedicated clauses, it remains unclear who bears the compliance costs when the charterer’s operational decisions push the GHG intensity above the threshold.
BIMCO published a FuelEU clause for time charters in November 2024 addressing three core areas: first, the charterer’s obligation to manage fuel specifications and voyage profiles so that the agreed compliance pathway is maintained; second, the mutual sharing of data on bunker deliveries, consumption figures, and port calls within the EU/EEA; third, the allocation of costs in the event compliance deficits arise – whether through penalty payments, the acquisition of compliance surpluses from other vessels (pooling), or the carry-forward to future periods (banking/borrowing).
The interaction with the EU ETS is critical. Since 2024, shipping emissions fall under the Emissions Trading System, and the cost allocation for ETS allowances overlaps with FuelEU logic. If a charterer bunkers cheaper but more carbon-intensive fuel, both ETS costs and FuelEU compliance deficit risk increase. The clause must address both regulatory frameworks simultaneously without creating gaps or contradictions.
Data collection is where it becomes technically demanding. The EU requires well-to-wake emission values, encompassing the entire fuel supply chain including production and transport. This requires bunker suppliers to provide verified Proof of Sustainability certificates. The charterer, who orders the bunker, must ensure this documentation is available – an obligation that simply does not exist in many legacy charter agreements.
In practice, this means that technical superintendents and fleet managers must be involved in charter negotiations early. Whether a vessel can adhere to the FuelEU pathway depends on its machinery concept: can the main engine burn alternative fuels? Is a scrubber installed which reduces SOx but worsens the CO2 balance? Does the vessel have an onshore power supply connection for EU ports, where its use becomes mandatory from 2030?
For the owner, a new dimension of disclosure arises. Before concluding the contract, they must provide the charterer with reliable data on the vessel’s current GHG intensity value, on any existing compliance surpluses or deficits from previous periods, and on the technical capability to use certain fuels. Without this information, the charterer cannot calculate the economic consequences of their operational decisions.
On the charterer’s side, the clause demands a changed bunkering strategy. The pure price advantage of conventional VLSFO loses significance if the resulting compliance costs exceed the savings on fuel price. This requires new calculation models that consider FuelEU penalty payments, ETS allowance prices, and fuel costs in an integrated manner.
A commonly encountered scenario: a charterer bunkers conventional VLSFO in Rotterdam despite a biofuel blend being available. At year-end, the vessel shows a compliance deficit. The owner faces a penalty payment and seeks to pass it through to the charterer. Without a clause governing the link between bunker selection and compliance costs, this ends in dispute – or worse, in protracted arbitration.
Another practical example concerns pooling: an owner with multiple vessels wishes to transfer compliance surpluses from one vessel to the chartered vessel. The charterer refuses because this diminishes their future borrowing potential. Many contracts lack a clear provision on who decides about the use of pooling mechanisms.
These conflicts are not hypothetical. They arise from the fact that FuelEU compliance is measured at vessel level rather than fleet level, whilst economic decisions are often taken at charterparty level. The clause must resolve this asymmetry.
Before adopting or adapting a FuelEU clause, four dimensions should be assessed. First, the data dimension: which consumption, bunker, and emission data can both parties actually deliver? Second, the cost dimension: how are penalty payments, pooling costs, and alternative fuel surcharges allocated? Third, the control dimension: who may issue instructions on fuel selection and voyage speed? Fourth, the time dimension: how are mid-year charter changes and partial periods handled?
A pragmatic approach is to create a clause matrix that defines, for each of the four dimensions, which party takes the lead, which data must be delivered by when, and which escalation mechanisms apply if a party fails to meet its obligations.
Many FuelEU clause discussions assume a straightforward owner-charterer relationship, but a large share of tonnage moves through sub-charters and charter chains where the head charterer is not the party actually deciding on bunkers or routing. When a time-chartered vessel is further let to a voyage charterer or a pool, the operational decisions that affect GHG intensity sit with a party that may never have seen the original FuelEU clause. This creates a compliance gap: the head charter allocates responsibility cleanly between owner and charterer, but the sub-charter often reverts to standard terms that say nothing about fuel intensity, pooling rights, or data sharing.
Owners fixing vessels into pools or trading arrangements with multiple layers should insist that FuelEU obligations flow down through every sub-charter, not just the head charter. In practice this means adding a back-to-back clause requirement: any sub-letting must incorporate equivalent FuelEU terms, and the head charterer remains responsible for ensuring the sub-charterer supplies the same bunker and consumption data. Without this flow-down provision, an owner can end up with a compliance deficit generated by a party they never contracted with directly, and with no contractual route to recover the associated costs.
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