Refining the EEXI Transition Clause further


Energy efficiency technologies/engine modification For owners or charterers who are looking at incorporating the EEXI Transition Clause into their charterparties, here are


some non-exhaustive considerations to bear in mind during your discussions.


Owners, who are considering installing such technologies or carrying out engine modifications to burn low- carbon fuel, should negotiate for the right to carry out such modifications under the charterparty. The default position under the EEXI Transition Clause is that any modifications other than or in addition to power limitation are subject to charterers’ approval and agreement. Owners could remove the uncertainty of having to seek charterers’ agreement or approval for such modifications to the vessel.


It is in charterers’ interests to agree to a proposal for installation of such modifications, which will improve the vessel’s performance and efficiency. This will benefit long term time charterers. Not only will the carbon footprint be reduced, a more efficient and better performing vessel will directly affect the vessel’s Carbon Intensity Indicator (CII) rating, its tradability around the world and in particular, the emissions units required to comply with any applicable Emissions Trading Systems (ETS). Given the focus of many voyage charterers on reduction of GHG in


80 | The Report • June 2022 • Issue 100


their operations, the modifications to the vessel will no doubt increase its marketability – a clear incentive for the time charterer to cooperate with the owner in modifying the vessel to reduce carbon emissions.


Should charterers be inclined to agree, parties should discuss and agree on a process for such modifications to be carried out, including but not limited to the notice to be provided to charterers such that there is minimal disruption to charterers’ operations, costs of the installation and certification of the modifications and the accompanying off-hire from the time the vessel is no longer at charterers’ disposal until the vessel is redelivered back to charterers after the installation and certification of the modifications.


The installation of energy efficient technologies may also require parties to consider how the other charterparty obligations are affected, such as:


Who owns the technologies and who is responsible for maintaining the same? If owners installed the


technologies at their time and costs, it would form part of the vessel’s hull and equipment. If charterers contributed to the same, then parties will need to discuss how to account for the value of the technologies when the vessel is redelivered.


If the technologies improve the vessel’s performance and efficiencies, parties should also consider updating the vessel’s warranties, including any efficiency warranties.


What is the interplay with off-hire when the technologies break down? A breakdown in such technologies may not result in the vessel sailing at a reduced speed but it could affect the emissions for a specific voyage. Where charterers are responsible for the emissions for the voyages carried out (particularly when the vessel is sailing in a jurisdiction which is subject to an emissions trading scheme), parties will need to work out the formula to calculate the additional emissions caused by a malfunctioning technology on board the vessel.


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