The BIMCO Ship Manager Advisory Panel expresses concerns about EU ETS

At the recent BIMCO Ship Manager Advisory Panel meeting the main topic was not surprisingly, the ongoing negotiations about the future EU ETS.

It was pointed out that BIMCO's established principle is that the commercial party responsible for setting the speed and route of a ship should also provide for emissions allowances. This party is also the one paying for the actual amount of fuel used under a commercial shipping contract. The rule of thumb in relation to allowances is thus, “follow the fuel”.

Increasingly the ISM manager for a ship is being targeted by regulators as the company responsible for compliance. This works fine as long as it is about regulations directly applicable for each ship. Regulating shipping via requirements at the fleet level of an ISM company is a novelty and presents many complications for the industry including ship managers and shipowners.

Currently, the EU ETS proposal suggests the ship manager (ISM company) as the regulated entity responsible for EU ETS compliance. Placing the core responsibility for compliance with the ship manager is far from being the optimal solution, as the manager is usually not having any relation with the commercial operation of a ship.

The Chairperson of the BIMCO Ship Manager Advisory Panel, Managing Director Kishore Rajvanshy from Fleet Management says, “There is no sound basis for the ship manager to be the regulated entity, so many of us find it difficult to understand how we got here. Our only choice now is to look for practical solutions to protect ourselves and our individual clients (owners) by implementing this very cumbersome piece of regional regulation from the EU. Remember, ship managers are service providers to owners – this does not make us financially responsible for the ships we manage.”

In the current EU ETS proposal, compliance is at the company fleet level, which in practice is unattractive if multiple owners have ships in a manager's fleet, which is why other legal constructions need to be considered. This could be an ISM company per customer, which for smaller customers can be cumbersome as it would require e.g. more audits of the manager. Focus will now be on finding practical solutions for owners and ship managers.

The other main focus at the panel meeting was the ongoing revision of BIMCO's ship management contracts. A whole raft of issues is being considered in this context e.g. the consequences of the EU ETS proposal, handling of sanctions, pre-delivery services, and ship recycling among many others.

The recent panel meeting was the second meeting of this panel addressing issues of interest for ship managers within BIMCO's membership. The next panel meeting will take place in September 2022.

Source: BIMCO

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