Nearly a year after FuelEU Maritime came into force, the first penalties under the regulation are already being incurred. Yet, many shipowners and charterers are still debating who pays, when and how, according to a legal briefing from Gard published on 24 November. Despite the BIMCO FuelEU clause being introduced in February 2025, it is still being heavily amended in negotiations as parties attempt to navigate unfamiliar compliance obligations.

Oliver Goossens, Senior Lawyer at Gard, said the industry continues to face a “complex web” of considerations ranging from fuel handling and emissions reporting to credit exposure, pooling rights and the allocation of the FuelEU multiplier penalty. Gard’s Defence team has been advising members on these topics throughout FuelEU’s first year of operation.

Biofuel blending raises technical concerns

Blending fossil fuels with biofuels remains the most common compliance pathway, but Gard warns that parties often overlook the technical risks while focusing mainly on costs and penalties. Issues of compatibility, fuel stability and potential microbial contamination can arise, especially if biofuels remain in tanks for long periods.

This affects timing decisions. Owners typically want biofuels used promptly because of their shorter shelf life. In contrast, charterers may purchase biofuels early when available but prefer to delay consumption until voyages fall under the FuelEU scope. Parties also need clear terms on what happens to any biofuel remaining on board at redelivery and how its value is calculated, particularly because biofuels nearing the end of their usable life may be worth less.

Until BIMCO publishes a dedicated Biofuels Clause, Gard advises parties to ensure their charterparties cover tank preparation, certification, testing, handling and vessel performance when using blended fuels.

Emissions reporting: frequency, accuracy and verification

Shipowners and charterers need to agree on how frequently owners provide emission information to charterers, according to the analysis. Charterers want to track emissions for governance and cost-recovery purposes, with some requesting daily updates and reports.

The club advised that owners should ensure any agreed reporting aligns with technical managers' capabilities and does not incur additional expense. Shorter data timescales make it more difficult for owners to ensure accuracy and avoid revisions, the club noted.

Any calculation will be verified by the administering authority under the MRV/EU ETS scheme, with payments adjusted accordingly, the club stated. For short-term charters, owners would likely want adequate funds on redelivery and before the payment deadline.

Penalty payment: credit, timing and alternative structures

The question of when charterers must reimburse owners for FuelEU penalties remains contentious. Owners generally prefer payment upon cost calculation or upon voyage completion, while charterers may wish to defer payment until the regulatory deadline, often more than a year later.

Owners rarely grant credit under time charterparties, as hire and fuel are typically paid in advance. Gard cautions that once a vessel is redelivered, enforcing payment becomes more difficult even though the charterer’s liability continues.

Some negotiations include hybrid approaches, such as allowing charterers to pay penalties shortly before remitting to authorities, provided the amounts remain below an agreed threshold, with higher sums payable as soon as they arise.

Other contracts attempt to avoid penalties entirely by having charterers pay for sufficient biofuel to generate a surplus, using an agreed index and reference date. This method only works if owners can source and consume the necessary biofuels; otherwise, they may still incur a penalty but only recover the marginal biofuel cost, which may be significantly lower than the penalty itself.

The 10% multiplier: unresolved liability between consecutive charterers

Where a vessel fails to meet targeted FuelEU reductions in two or more consecutive years, an additional 10% multiplier penalty is added. The allocation of this multiplier between consecutive charterers is unclear, according to the club.

For example, if charterer A incurs a penalty in year one and charterer B incurs one in year two, the second penalty will be 10% higher. It remains unclear whether the uplift should fall on charterer A, charterer B, or the owner.

The club suggested that owners could expressly agree in subsequent charters that the vessel cannot earn a penalty in the first year, making any penalty that triggers a multiplier a breach of contract. However, such restrictions would make the vessel less attractive to charterers, presumably lowering hire rates.

Pooling evolves as brokers enter the market

Various brokers have emerged offering services to identify pools and arrange agreements at a cost, the club stated. Charter provisions should specify who remains responsible for brokers' fees and entitle owners to object to pooling on reasonable grounds.

Many owners with larger fleets have devised strategies to pool the credits they earn internally across their own fleets, according to the club. In such cases, owners need to ensure they retain the right to pool credits earned, as standard clauses give charterers control over credits and pooling decisions.

Surplus credit valuation

When charterers redeliver a vessel with a positive compliance balance, they may prefer the owner to refund the value so the owner can pool or bank the surplus. The BIMCO clause allows a lump-sum payment per tonne of compliance, but new market indices now offer pricing benchmarks for FuelEU surpluses.

Gard notes several unresolved questions, including:

• At what point should the surplus value be measured: When bunkers were purchased, when the surplus was accumulated, or at redelivery?
• When should owners pay charterers for the surplus: Immediately on redelivery, or when owners later receive value from a pool or onward charter?

If charterers request credit terms for penalty payments, owners may reasonably seek symmetrical timing for repaying surplus balances.

Voyage charters: FuelEU exposure not yet reflected in freight indices

Under voyage charters, owners must develop their own FuelEU strategy, estimate cost exposure in advance and incorporate this into freight calculations. Existing freight indices do not yet include FuelEU costs, meaning these charges are currently not reflected in published market rates.

Suspension of performance remains controversial

The BIMCO FuelEU clause grants owners the right to suspend performance if charterers fail to make timely penalty payments. Gard notes that many charterers seek to remove this provision entirely, arguing it is disproportionate. A compromise could involve allowing suspension only when unpaid penalties exceed a specified threshold, such as USD 50,000.

Gard’s conclusion: complexity requires careful drafting

Gard emphasises that FuelEU introduces obligations, such as pooling and the multiplier, that do not fit neatly within traditional time charterparty structures. The BIMCO FuelEU clause is a helpful starting point, but it is frequently revised in practice.

Given the complexity and financial implications of the regulation, Gard recommends that parties thoroughly assess the consequences of any amendments and seek legal guidance where necessary.