The purpose of this clause is to allocate the costs and responsibilities for obtaining, transferring and surrendering emission allowances for ships operating under an emission scheme(s), such as the European Union (EU) Emissions Trading System (ETS), in a bareboat charter context.
BIMCO ETS – BARECON Emission Trading Scheme Allowances Clause 2026
Notwithstanding any other provision in this Charter Party, the Owners and the Charterers (together the "Parties" and each individually a “Party”) agree as follows:
“Administering Authority” means the authority that is responsible for administering the Emission Scheme in respect of the Vessel by law and/or by regulation.
“Emission Allowances” means an allowance, credit, quota, permit or equivalent, representing a right of a vessel to emit a specified quantity of greenhouse gas emissions recognised by the Emission Scheme.
“Emission Data” means data and records of the Vessel’s emissions in the form and manner necessary to calculate its Emission Allowances.
“Emission Scheme” means a greenhouse gas emissions trading scheme which for the purposes of this Clause shall include the European Union Emissions Trading System and any other similar systems imposed by applicable lawful authorities that regulate the issuance, allocation, trading or surrendering of Emission Allowances.
“Responsible Entity” means the party responsible for compliance with the Emission Scheme(s) applicable to the Vessel under this Clause.
(a) The Owners and the Charterers shall co-operate to facilitate compliance with any Emission Scheme(s) applicable to the Vessel in respect of the Charter Period.
(b) The Parties agree that the [Charterers (or their nominee/Owners)]* shall be the Responsible Entity.
(c) Where the Charterers (or their nominee) are the Responsible Entity:
(i) on the Charterers’ request, the Owners shall promptly provide:
(1) a duly executed mandate letter or equivalent document for the Charterers’ countersignature in the form required by the relevant Administering Authority and otherwise taking into account any requirements of the Owners and the Responsible Entity as to the terms of the mandate letter; and
(2) any other information, documents and cooperation as required by the Charterers and/or the relevant Administering Authority in relation to any Emission Scheme(s) applicable to the Vessel and otherwise to allow the Charterers to comply with their obligations under this Clause;
(ii) the Charterers shall comply with or procure compliance with any Emission Scheme(s) applicable to the Vessel in respect of the Charter Period at their expense;
(iii) on the Owners’ request, the Charterers shall promptly provide evidence of compliance with subclause (c)(ii) above;
(iv) on expiry of the Charter Period or earlier termination of this Charter Party, the Parties shall promptly co-operate to revoke, effective from the date and time of such expiry or termination (“Termination Date”), the mandate letter or equivalent document provided under subclause (c)(i)(1) above and, in doing so, provide all necessary assistance, documents and information to the Administering Authority and the Charterers (or their nominee) to ensure that the responsibility of the Charterers (or their nominee) for compliance with the Emission Scheme(s) applicable to the Vessel is ended with effect from the Termination Date. The Owners shall indemnify and hold harmless the Charterers (or their nominee) against and from any claims, losses, damages, costs, fines, penalties, liabilities or expenses that they or their nominee may suffer or incur wholly due to the Owners’ failure to procure or ensure that any such revocation of such mandate letter or equivalent document as may be required is effective from the Termination Date or any failure by the Owners to ensure that responsibility for compliance under the Emission Scheme(s) applicable to the Vessel is transferred away from the Charterers (or their nominee) with effect from the Termination Date; and
(v) in respect of the Charter Period, the Charterers shall provide and pay for the Emission Allowances, and be responsible for payment of taxes, charges, levies, fees, fines, costs or expenses incurred or imposed in connection with Emission Scheme(s) applicable to the Vessel without delay whatsoever, and the Charterers shall indemnify and hold the Owners harmless from all claims, losses, damages, costs, fines, penalties, liabilities or expenses arising from non-compliance with the Charterers’ obligations under this Clause.
(d) Where the Owners are the Responsible Entity:
(i) the Owners shall comply with or procure compliance with any Emission Scheme(s) applicable to the Vessel throughout the Charter Period at their expense save as otherwise provided in this Clause; and
(ii) to the extent that the Owners do not possess the relevant Emission Data, then at the Owners’ written request, the Charterers shall provide the Owners with accurate Emission Data in a timely manner and/or at regular intervals to be agreed between the Parties to enable compliance with subclause (d)(i) above; and
(iii)** This subclause (d)(iii) is applicable only if the Parties state “Yes” here: [ ].
upon demand and as directed by the Owners, in respect of the Charter Period, the Charterers shall provide and pay or the Charterers shall reimburse the Owners for the Emission Allowances (including for the purchase of Emission Allowances), taxes, charges, levies, fees, fines, costs or expenses incurred or imposed in connection with Emission Scheme(s) applicable to the Vessel without delay whatsoever, and the Charterers shall indemnify and hold the Owners harmless from all claims, losses, damages, costs, fines, penalties, liabilities or expenses arising from non-compliance with Charterers’ obligations under this Clause.
(iv)** This subclause (d)(iv) is applicable only if the Parties state “Yes” here: [ ].
in respect of the Charter Period, the Owners shall provide and pay for the Emission Allowances (including for the purchase of Emission Allowances), taxes, charges, levies, fees, fines, costs or expenses incurred or imposed in connection with Emission Scheme(s) applicable to the Vessel without delay whatsoever, and the Owners shall indemnify and hold the Charterers harmless from all claims, losses, damages, costs, fines, penalties, liabilities or expenses arising from non-compliance with the Owners’ obligations under this Clause.
(e) On giving reasonable notice, each Party may request, and the other Party shall in a timely manner make available, all documentation, information and records in respect of the matters covered by this Clause related to any Emission Scheme(s) applicable to the Vessel in respect of the Charter Period to the extent permitted by relevant legislation.
(f) If either Party fails to meet their obligations under this Clause, the other Party may give notice to the Party in default requiring it to remedy such failure.
(g) It is expressly agreed that the rights and obligations of the Parties set out in this Clause shall survive the expiration or termination of the Charter Party unless or until the Parties have fulfilled or satisfied their respective obligations under the Emission Scheme(s) applicable to the Vessel.
*If the parties do not elect one of the two options in subclause (b), the default shall be the Charterers (or their nominee).
** Subclauses (d)(iii) and (d)(iv) are alternatives. If Parties do not elect one of these alternatives, the default shall be subclause (d)(iii).
The clause has been developed for use with any applicable emission scheme(s). It permits the parties to elect who will take on the responsibility for compliance with ETS: whether it is the owners or the charterers. If no election is made, the Charterers (or their nominee) will take on such responsibility by the default under this clause.
BIMCO has published a standard template for mandating compliance with ETS obligations under Commission Implementing Regulation (EU) 2023/2599 which is made available as an independent, supporting document to this clause: Standard ETS Mandate 2024. Parties intending to use the BIMCO Standard ETS Mandate should be aware that the administering authority of a member state may have its own individual requirements which must be complied with.
Drafting Team
The ETS – BARECON Emission Trading Scheme Allowance Clause is the result of a collaborative and consensual process between owners, charterers, leasing companies, a P&I Club and other stakeholders. BIMCO is grateful to the drafting team for their considerable time, effort and commitment in producing this clause:
- Christian Gorrissen, TORM A/S (Chairperson)
- Brenda Y.Y. Chark, Wah Kwong Maritime Transport Ltd.
- Daniel Jepson, NYK Group Europe Ltd
- Wang Ying, BOCOM Leasing
- Hu Hua Fang, SPDB Financial Leasing Co., Ltd
- Helen Barden, NorthStandard P&I Club.
BIMCO Secretariat:
- Stinne Taiger Ivø
- Indu Chitran
- Natalie Wong
Explanatory Notes
These explanatory notes are intended to provide the background to and basis of the clause. They also explain how the clause is intended to operate and the allocation of obligations, rights and responsibilities between the parties. If you have any questions about the clause, please contact us at contracts@bimco.org and we will be happy to assist.
Key Features of the Clause
This clause has been developed for application with any emission scheme(s), including but not limited to the EU ETS.
For consistency, the clause is based on the BIMCO ETS – SHIPMAN Emission Trading Scheme Allowances Clause 2023, adopting the same definitions where appropriate and introducing new definitions for “Administering Authority” (meaning the authority responsible for administering the Emission Scheme(s) in respect of the Vessel by law and/or regulation), “Responsible Entity” (meaning the party responsible for compliance with the emission scheme(s) applicable to the Vessel under the clause) and “Termination Date” (meaning the date and time of expiry or termination of the bareboat charter party, whichever the earlier).
This clause is published as a clause which should be incorporated into BIMCO’s BARECON 2017.
This clause is intended for broad application, and parties should carefully assess their specific circumstances when applying it, as the parties are required to make express elections under subclause (b) as to who is the responsible entity for ETS under the clause.
Under subclause (b), the parties are required to specify whether the Charterers (or their nominee), or the Owners will be responsible for compliance with the relevant emissions scheme. In the absence of agreement or a specific election, such responsibility will default to the Charterers (or their nominee).
Where the Owners are designated as the responsible entity under the clause, it allows the parties to determine whether the Owners or the Charterers will ultimately bear the cost of Emission Allowances. Under subclause (d)(iii), the Owners may require payment from the Charterers or seek reimbursement from them for Emission Allowances; and under subclause (d)(iv), the Owners themselves pay for Emission Allowances. If no specific election is made, the default is that the Charterers are responsible for payment of Emission Allowances, reflecting the common practice that Charterers determine the vessel’s schedule, with Owners retaining this responsibility only in exceptional circumstances.
Subclause (a)
This subclause clarifies that the both the Owners and the Charterers shall cooperate to facilitate compliance with the applicable Emission Scheme(s) in respect of the Charter Period (defined in BARECON 2017 as the period stated in Box 16). This principle sets the tone for mutual support and transparency since compliance may require the exchange of information as well as action from both parties. It should be noted that it may be possible for more than one Emission Scheme to apply to a vessel. The phrase “in respect of the Charter Period” is deliberately included to encompass the fulfilment of any post-termination obligations, such as revoking the mandate letter (if necessary).
Subclause (b)
The parties should elect which party shall be responsible for compliance with the relevant Emission Scheme(s). The subcommittee’s view is that this flexibility should be provided in the clause in order to reflect operational realities.
Recognising that, in practice, it is often the case that third party ship managers oversee the day-to-day compliance requirements, the clause provides for such responsibility to be delegated to a third-party ship manager. The subcommittee believes that in practice, it will be the Charterers (or in most cases, their nominee) that will take on ETS obligations under this clause in the majority of cases. In this case, it is further expected that the Charterers (if they themselves are not the ISM company) will most likely have a third-party ship manager who is the ISM company, meaning it would naturally be the ship manager who will execute the mandate letter and take on ETS obligations. Accordingly, the phrase “(or their nominee)” is intended to refer to a third-party ship manager. If no election is made, the Charterers (or their nominee) are the default.
Subclause (c) – Charterers as Responsible Entity
Subclause (c)(i) imposes an obligation on the owners, upon charterers’ request, to provide an executed mandate letter (or its “equivalent” depending on the requirements from various administering authorities), and any other information, documents or cooperation needed to allow the charterers to fulfil their obligations under the clause.
Subclause (c)(ii) imposes an obligation on the charterers to comply with or procure compliance with (in cases where a third-party ship manager is mandated) any applicable Emission Scheme(s) at their expense in respect of the Charter Period. Subclause (c)(iii) then allows for the owners to request evidence from the charterers that they have complied with their obligations under subclause (c)(ii). The reasoning behind this is to ensure that the owners can verify compliance and protect their interests.
Subclause (c)(iv) imposes an obligation on the parties to cooperate in revoking the mandate letter or (its equivalent) promptly in order to transfer ETS responsibility back to the owners. The subclause also incorporates an indemnity in favour of the charterers in circumstances where the owners fail to procure or ensure the revocation of the mandate from the Termination Date to minimise exposure for charterers after termination. However, it should be noted that in hire‑purchase arrangements where the charterers have an option to purchase the Vessel at the end of the Charter Period and choose to exercise that option, meaning that the Charterers retain title to the vessel, this subclause may not be relevant. This is due to the fact that in these circumstances, the Charterers would become the registered ship owner meaning ETS obligations, as per the EU ETS directive, would default to them (or continue to remain with the same third-party ship manager) in any case.
Subclause (c)(v) imposes an obligation on the charterers to provide and pay for emission allowances and all related costs. The subclause also contains an indemnity in favour of the owners in circumstances where the charterers fail to comply with their obligations under the clause. The parties may wish to consider negotiating reciprocal indemnities if commercially desired.
Subclause (d) – Owners as Responsible Entity
Subclause (d)(i) mirrors subclause (c)(ii) imposing an obligation on the owners to comply with or procure compliance with any applicable emission scheme(s) at their expense in respect of the charter period except where the clause provides otherwise.
Subclause (d)(ii) allows the owners to request from the charterers accurate data and documentation where such information is not available to them. Such data and documentation should be provided “in a timely manner and/or at regular intervals to be agreed between the Parties”. The reasoning behind such drafting is that the charterers should provide data and documentation to allow the owners to comply with their obligations under the applicable emission scheme(s). The subcommittee believed the obligation to provide “accurate” data is important as the owners may not necessarily have access to all operational data. The parties may wish to consider whether additional obligations to validate the data via a third-party might be appropriate in their circumstances.
The parties are able to select one of two alternatives from subclauses (d)(iii) and (d)(iv) to determine whether the owners or charterers are responsible for paying for emission allowances.
Where no alternative is selected, the charterers are by default the party responsible for paying for emission allowances. The rationale behind this is that generally, it is the charterers who will determine the vessel schedule and issue orders. The parties are encouraged to carefully consider whether their situation differs from the usual practice and to elect accordingly.
Subclause (e)
This subclause builds upon the cooperation requirement set out in subclause (a) by permitting either party to request that the other provide any documentation, information, or records necessary to support compliance with that party’s obligations under this clause.
Subclause (f)
The parties are encouraged to carefully consider the remedies available in the event of a party’s default. While this subclause requires that the defaulting party be given notice to remedy its failure, the subcommittee recognised that the varied circumstances of bareboat charter parties make a universal remedy impractical. The remedy specified in the clause is intended as a minimum safeguard; accordingly, it is left to the parties to decide whether they wish to amend the clause to strengthen appropriate remedies as they consider necessary.