Lawyers Reed Smith Weigh in on New BIMCO CII Clause

Reed Smith colleagues Nick Austin (l), Mike Adamson (c), and Laura Hyne (r). Image Credit: Reed Smith

Law firm Reed Smith has weighed in on the newly adopted and increasingly contentious BIMCO CII Operations Clause for Time Charters 2022.

In its latest blog post Reed Smith colleagues Nick Austin, Mike Adamson, and Laura Hyne have provided an analysis on what the clause actually says, what the key sticking points are, and how owners and charterers are positioning themselves before the CII Regulations come into force January 1, 2023

"Just as there is no easy route to decarbonisation, there is no straightforward way of balancing a shipowner’s obligation to comply with the MARPOL Carbon Intensity Indicator Regulations with a time charterer’s right to direct the employment of a vessel," the trio say.

Ultimately, the clause aims to balance shipowners' obligation to comply with the MARPOL Carbon Intensity Indicator (CII) Regulations, with the charterers' right to direct the employment of a vessel.

At its core the clause transfers responsibility for compliance with CII Regulations from the owner to the charterer. The parties then need to cooperate on improving the vessel's energy efficiency in line with the new rules.

A key worry is that in practice the new BIMCO Clause leaves the charterer with an absolute obligation to operate and employ the vessel in a manner consistent with the CII Regulations, whereas the owner’s obligation to operate the vessel in a manner that minimises bunker consumption is one of due diligence only.

"This imbalance has raised eyebrows with a few charterers," Austin, Adamson, and Hyne note.

Indeed, a group of 23 shipping heavyweights today called the new clause "imbalanced and unusable", saying they believe it places a disproportionate burden on charterers to comply with the upcoming CII rules, rather than recognizing that owners are the ones primarily responsible for compliance.

Reed Smith's full analysis can be found here: https://www.shiplawlog.com/2022/12/20/bimco-cii-clause-for-time-charters-the-dust-begins-to-settle/