Shipping Should Review Contractual Arrangements in Time for EU-ETS: North P&I

The EU is preparing to start charging the shipping industry for its emissions from 2023. File Image / Pixabay

The shipping industry should review its contractual arrangements in good time to avoid any unexpected compliance costs when the European Union's new decarbonisation measures come into force in 2023, according to insurance association North P&I.

The European Union is set to start charging vessels over 5,000 mt in gross tonnage for their emissions from 2023, with both intra-EU and international voyages from EU ports affected.

Both shipowners and charterers will need to review their arrangements to see where the liability lies, Alvin Forster and Helen Barden of North P&I said in an emailed note.

"Compliance with the EU-ETS will, in the first instance, be the responsibility of the 'shipping company', which the EU defines as "the shipowner or any other organisation or person, such as the manager or bareboat charterer, that has assumed the responsibility for the operation of the ship from the shipowner" in accordance with the ISM Code," they said in the note.

"However, given that it will be the charterer's trade of the vessel that will result in the shipowner's liability under the EU-ETS, inclusion of a suitable clause in the charter party will be necessary to pass the liability down to charterers.

"If shipowners wish to pass the liability down per voyage, rather than claiming at the time their liability has been verified and becomes due under the EU-ETS (by latest April of the following year), while the emissions can be calculated by reference to the EU-MRV emission equation, a mechanism will need to be included in the charter party clause to ascertain the EUA price at the relevant time."