A clause to be inserted as a rider to time and/ or voyage charterparties combining 'green' fuel use, reporting and disclosure obligations with a levy for using fuels with a higher carbon content.
Why use this?
Aiden’s Clause will increase transparency and accountability in the shipping industry and help parties to achieve their net zero targets by reducing their emissions of greenhouse gases. Companies choosing to adopt greener fuels can benefit from attracting clients looking to contract with environmentally aware counterparties.
How to use this clause
Disclaimer - please read
The clauses on this website (and published in our Climate Contract Playbook) have been prepared in good faith on a pro bono basis and are free to download and use. The clauses have been drafted and edited by a variety of lawyers and, as such, the approaches to drafting may not conform to any particular drafting norms. We acknowledge this as a consequence of the collaborative drafting process.
The clauses on this website (and published in our Climate Contract Playbook) are provided on an ‘as is’ basis and without any representation or warranty as to accuracy or that the clauses will achieve the relevant climate goal or any other outcome.
This website (and the Climate Contract Playbook) does not comprise, constitute or provide personal, specific or individual recommendations or advice of any kind, and does not contain legal or financial advice. The clauses are precedents for legal professionals to use, amend and negotiate using their professional skill and judgement and at their own risk.
While care has been taken in the drafting of these clauses, neither The Chancery Lane Project nor any of its contributors owe a duty of care to any party in relation to their preparation and do not accept any liability for any errors or omissions, nor for any loss incurred by any person relying on or using these clauses or any other person. Users should use their own professional judgement in the application of these clauses to any particular circumstance or jurisdiction or seek independent legal advice.
At present, all the clauses are based on the laws of England and Wales. We encourage the conversion of these precedent clauses for use in other jurisdictions.
Carbon Dioxide Equivalent (CO2e or CO2eq) means the standard metric measure used by [the UN’s Intergovernmental Panel on Climate Change (IPCC)] to compare the emissions from various Greenhouse Gases (GHGs) on the basis of their global warming potential over a specified timescale.
Climate Remediation Fee means an amount [equal to the cost of carbon credits that must be purchased to offset each metric ton of CO2e emitted during the voyage exceeding the quantity of metric tons of CO2e that would have been emitted if [the available alternative fuel/ a fuel with a CO2 Emissions Factor of [●]] had been used] [OR] [liquidated damages equal to [£GBP/ $USD[●]] per metric ton of fuel consumed during the voyage exceeding the CO2 Emissions Factor threshold specified in clause 1.3]. [Drafting note: Depending on which option is chosen here, consider including further language as in clauses 3.4-3.6 of Jessica’s Clause to avoid this being unenforceable as a penalty.]
CO2 Emissions Factor means fuel mass to carbon dioxide (CO2) mass conversion factors as set out on page 8 of the International Maritime Organisation’s Guidelines for Voluntary Use of the Ship Energy Efficiency Operational Indicator (as amended from time to time)
EEOI has the meaning given to it in clause [5.1].
Underlying Information has the meaning given to it in clause .
1. During the performance of this charter owners and charterers shall use [[best/ reasonable] endeavours to] [cooperate with a view to using]* bunker fuel with the lowest available CO2 Emissions Factor compliant with the Vessel’s bunkering infrastructure and operational requirements.** If a fuel of that type is not available owners shall propose alternatives to charterers that are available [on commercially reasonable terms], by reference to the agreed hierarchy of fuel types listed at Appendix [●.1] to this charter. In each instance:
1.1 owners shall not propose alternatives in a particular fuel type category if fuel types with a lower CO2 Emissions Factor are available (on a reasonable assessment) in the category above it;
1.2 subject to clause 1.1, charterers’ agreement shall not be unreasonably withheld; and
1.3 should charterers [or owners]*** elect to bunker fuel with a CO2 Emissions Factor of higher than [(>)] [●] when a fuel type with a lower CO2 Emissions Factor is available, charterers [or owner as relevant] shall pay the Climate Remediation Fee to [a registered [environmental charity/ charity with a primary focus on [tackling climate change/ reducing emissions in the shipping industry]], [as selected by owners and notified to charterers] within 30 days of the end of the voyage.
* [Drafting note: The standard may need to vary based on the nature of the charter.]
** [Drafting note: In certain charter arrangements and recognising the potential barriers noted above, this first sentence may be all that is commercially reasonable from this first clause. The balance of this first clause could be offered as an option.]
*** [Drafting note: Amend as appropriate if the owners may have a choice not to use a more efficient fuel, to avoid the charterer being penalised if it is the shipowner who decides to use a higher emission fuel.]
2. [During the performance of this charter owners and charterers shall use best endeavours to operate the Vessel in a manner that maximises the operational efficiency of the Vessel, thereby reducing the EEOI of the vessel, by deploying operational measures including but not limited to: slow steaming, virtual arrival, weather routing, trim/ draft optimisation, autopilot adjustments, auxiliary engine optimisation, and hull and propeller maintenance.] [OR] [Incorporate Otto’s Clause.]
[Drafting note: Omit clause 2 if this is already a term within the charter agreement (or amend such term with further detail accordingly). See, UMAS, ‘How can shipping decarbonise?‘.]
3. Within [●] days following the conclusion of any voyage, owners shall provide to charterers:
3.1 a comprehensive report of fuel consumed during such voyage in the form set out at Appendix [●.2] to this charter, including all information requested in that form; and
3.2 supporting documents reasonably available to the owners at the relevant time evidencing the figures reported, which may include bunker delivery notes, deck log-book data, noon reports, voyage reports and any other information requested by charterers, such information not to be unreasonably withheld,
(together, the Underlying Information).
4. A copy of all Underlying Information shall be kept by owners and charterers for [●] months following redelivery of the Vessel.
5. Within [●] days of receipt of the Underlying Information, charterers shall:
5.1 calculate the Vessel’s Energy Efficiency Operational Indicator (EEOI) for that voyage (or agreed number of voyages), as envisaged in the Appendix to the International Maritime Organisation’s Guidelines for Voluntary Use of the Ship Energy Efficiency Operational Indicator; and
5.2 themselves verify the calculation or forward to an authorised third party for verification (the costs of doing so to be borne equally by owners and charterers).
6. Once verified, and in any event within [●] weeks of the end of the voyage(s) in question, owners and charterers consent to the EEOI and Underlying Information being:
6.1 presented in email form by charterers to the list of parties set out at Appendix [●.3] to this charter; and
6.2 [made publicly available for inspection upon request] [OR] [publicised on the charterers’ website], for a period of [●] [months/ years].
[Drafting note: Insert an inversion of the fuel list set out at page 8 of the EEOI Guidance, perhaps with a further top row for ammonia/ hydrogen/ biofuels, though ultimately the hierarchy is to be determined by the contracting parties as per industry availability and relevant operational requirements of the particular vessel.]
[Drafting note: Insert a copy or expansion of the empty CO2 Indicator Reporting sheet set out at page 10 of the EEOI Guidance, subject to the parties’ discretion. In order to calculate the EEOI, this appendix should include details of fuel type(s), amount(s) of fuel(s) consumed, CO2 Emissions Factor for each fuel type (and other relevant fuel information), the amount of cargo carried (in metric tonnes), and the distance covered (in nautical miles).]
[Drafting note: Insert a list including owners, the non-chartering counterparty in the sale contract, the end receivers (if known) and other stakeholders in the supply chain including port authorities, whom the contracting parties may deem it commercially prudent to include.]
Glossary references: Carbon Dioxide Equivalent (CO2e or CO2eq)