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Reed Smith outlines some commercial and legal implications of EEXI and CII

Posted on: 14 December 2021

Global law firm Reed Smith has issued the following comments in relation to the latest developments around the IMO’s EEXI (Energy Efficiency Existing Ship Index) framework and CII (Carbon Intensity Indicator) measure, by Nick Austin (pictured), Shipping Partner.

“A host of commercial and legal issues are expected both before and after the EEXI and CII regulations come into force. An important commercial question will be who bears the cost and responsibility of complying with EEXI and CII as between owners and charterers of vessels under long-term period charters extending beyond 1 January 2023.

“New fixtures agreed before and after 1 January 2023 will also need to take the regulations into account, and voyage charters may also be affected.

“We expect to see the rapid emergence of template clauses (including from BIMCO) for use in time and voyage charterparties. These standard provisions should cover the key points and deal with the allocation of risk and cost between owners and charterers.

“However, some organisations will want clauses tailored specifically to their needs, and these may differ pre- and post-implementation, something Reed Smith is actively advising clients on.

“Three key points can be made now:

• For EEXI, owners are primarily responsible for ensuring a vessel’s compliance with MARPOL (assuming its flag state is a MARPOL contracting nation). The terms of most charterparties will say, or at least imply, that technical modifications required to comply with industry regulations lie with owners as part and parcel of their seaworthiness obligations.

• For CII, owners of time-chartered vessels must comply with charterers’ lawful employment orders. However, these orders could affect the vessel’s CII rating, which owners must still comply with. Also, decisions by owners to slow steam, reduce cargo-carrying capacity or deviate to maintain their CII rating could put them in breach of charter, and potentially liable in damages.

• Disputes under spot fixtures could arise if owners take operational measures to maintain a CII rating which result in, for example, delays to the voyage. Again, this could put them at risk of breaching their obligations to proceed with due or utmost despatch.

“With just 13 months to go, it is vital that the shipping industry gets up to speed with EEXI/CII and that owners/charterers devise and invest in appropriate strategies to ensure they are prepared for implementation in January 2023.”

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