Under FuelEU Maritime, it is regulated that the ISM manager is liable for penalty payments to the European Union – even though he has no control over them.
As ship managers rarely have control over relevant decisions that affect FuelEU, there has been much discussion between owners, shipowners and managers in recent months. A new shipman clause from the shipping organisation Bimco is intended to provide clarity. Friederike Hesse, CEO of compliance company zero44, assesses the contract addendum.
In order to regulate responsibility, Bimco has introduced a new clause that can be used in the ship management contract (called “Shipman”) between owner and manager. Roles and responsibilities in relation to the regulation are thus contractually regulated.
FuelEU Maritime applies from January
FuelEU Maritime will enter into force on 1 January 2025. The regulation includes provisions aimed at reducing the greenhouse gas intensity of shipping – from 2% next year to 80% in 2050. The use of fuels from renewable sources is to be promoted, while penalties will have to be paid for fossil fuels. There is a Commission reporting and review procedure to monitor this regulation.
Friederike Hesse welcomed the Shipman clause drafted by Bimco and described it as a “clear and simple solution to the dilemma of the ISM manager who has to bear the risk but has no decision-making power”. The contract addendum states that the owner acts as the decision-maker and compliance balance holder, while the ship manager has reporting and communication duties towards the Commission, so that “in summary, he merely acts as a messenger”.
In return, the clause requires both parties to agree on “the appropriate form and amount of security, as may be adjusted from time to time, to be provided by the owner to cover the manager’s risk (if any) to the manager’s satisfaction.”
“Decision-making power and financial risk in one hand”
“Essentially, the clause regulates what the regulation itself has not previously regulated: Combining decision-making power and financial risk in one hand,” said Hesse on the occasion of the publication.
However, it remains to be seen to what extent the clause will prove itself in practice. Implementation is left to the owners and managers themselves, and there are numerous factors that need to be considered during implementation.
“The shipping industry is as diverse as the ability of owners to make decisions under FuelEU,” explained Hesse. “Many ship owners do not manage their ships themselves, but delegate this task to a ship manager. And/or they charter out the ship as part of a bareboat charter, where the charterer acts as the owner. However, the ship management contract is still held by the main owner. So how would a bareboat charterer and an ISM manager divide responsibility? And how does the Bimco time charter clause for FuelEU Maritime – published in November – and this Shipman clause fit together if the owner delegates compliance balance responsibility to a long-term time charterer?”
Although the owner’s “nominees” are mentioned in the new shipman clause, they are not directly accessible to the ship manager. Hesse warned that security would still have to be provided by the main owner. “This creates a triangular relationship that can prove problematic in practice.”
