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HFW Helps BIMCO Draft Emissions Trading Scheme Allowances Clause

24 May 2022

Global, sector-focused law firm HFW has helped shipping association BIMCO draft a time charterparty clause for parties to allocate costs and responsibilities for obtaining, transferring, and surrendering greenhouse gas (GHG) emissions allowances for ships operating under an emissions trading scheme (ETS).

ETSs are ‘cap and trade’ schemes that permit the emission of greenhouse gases in exchange for allowances. Over time, the quantity of allowances available to industry are reduced as an incentive to reduce emissions through increased efficiency and the use of alternative fuels.

The new BIMCO clause passes on responsibility for meeting ETS costs to the commercial operators of vessels – in this case, the time charterers.

The owners must monitor the ship’s GHG emissions and provide the relevant emissions data and the basis of calculations to the time charterers. Using this information, the time charterers transfer the appropriate allowances to the owners monthly in order to achieve compliance.

The clause addresses the adjustment of allowances due to off-hire events and what happens if the time charterers fail to transfer allowances when due.

HFW London partner and shipping emissions expert Alessio Sbraga formed part of the drafting sub-committee for this clause. HFW was the only law firm on the sub-committee.

Alessio Sbraga, Partner, HFW: “This new clause provides much-needed certainty to the market in circumstances where the EU is still in the process of legislating for the formal inclusion of shipping in the EU ETS, and where parties are continuing to fix contracts well into 2023 and beyond.”

HFW has helped BIMCO draft several standard contract and clauses, including a recently-published “faster, simpler” ship sale and purchase agreement, and a model clause addressing force majeure events occurring under contracts. The firm also helped BIMCO draft “game-changing” carbon emissions clauses, the industry’s first standard contract for autonomous shipping, its first cyber security clause, the industry’s first standard offshore decommissioning contact, and two clauses relating to the International Maritime Organization’s 2020 sulphur emission rules.

HFW is widely recognised as the world’s leading shipping and maritime law firm, and has been serving clients in the industry for almost 140 years. The firm has more than 200 shipping lawyers and nine Master Mariners across its global network, specialising in dry shipping, admiralty and crisis management, and transactional work.

HFW has more top-tier rankings for shipping in Chambers and The Legal 500 than any other law firm, and its lawyers have featured in Lloyd’s List’s ranking of the top 10 lawyers and 100 most influential people in the shipping industry for four consecutive years.

The Lawyer’s Litigation Tracker shows that HFW has handled over 60% more shipping litigation cases in the English Courts since 2015 than its nearest rival.

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Chris Johnson
Chris Johnson
Head of Communications