11 – BIMCO: the Standard Ets Mandate letter 2024 – Practical Aspects

Author: Chiara Raggi | 7 June 2024

BACKGROUND

When the BIMCO ETS Allowances Clause for SHIPMAN was introduced in December 2023, the intention was to develop a corresponding standard ETS mandate clause. This purpose was postponed, anticipating that the EU authorities might release a standard template.

The lack of a EU standard template has led BIMCO to adopt on 8th? May ?its own standard mandate to complement ?the?ETS – SHIPMAN Emission Trading Scheme Allowances Clause 2023?and?SHIPMAN 2024

The BIMCO Standard ETS Mandate 2024 may be accessed here (link).

BIMCO STANDARD ETS MANDATE LETTER TEMPLATE

The starting point is that the registered owner is in principle the “shipping company”, and thereby also responsible for monitoring, reporting and surrendering allowances.

According to Regulation (EU) 2023/2599 the registered owner and the Ship Managers may agree that the Ship Managers should be responsible instead of the registered owner. In practical terms, this means that responsibility may be transferred to the disponent owner in a bareboat charter party or to the technical manager of the vessel (depending on which entity is the Ship Manager for ISM purposes).

Whenever the parties agree that the Ship Managers assume the responsibility for the compliance with the ETS, they shall provide the relevant administering authority with a signed document, clearly indicating that the Managers have been mandated by the Owners with compliance obligations.

Parties intending to use the ETS Mandate should be aware that the administering Authority of a Member State may have specific requirements that must be met. Therefore, it is advisable to consult the relevant administering authority or authorities beforehand, prior to submitting the signed mandate agreement.

One of the key requirements, is that the registered owner and the Ship Manager company which is to take over responsibility, have to sign a “mandate letter”.

STRUCTURE AND CONTENT

As it results from the Bimco explanatory note, the ETS Mandate letter contains the traditional BIMCO box layout enabling the parties to fill in relevant information relating to the mandate.

Article 1, paragraph 2 of the Implementing Regulation stipulates that the mandate document must be signed by both the shipowner and the organization or individual appointed by the shipowner. The standard ETS Mandate includes signature boxes for this purpose.

Parties should also note that Implementing Regulation 2023/2599 does not address the termination of the mandate.

Article 2 only provides guidelines for listing ships and updating the list of ships for which the shipowner has assumed compliance responsibility. Consequently, parties may wish to address the termination contractually in their SHIPMAN agreement, including a clause that outlines the consequences of termination. This clause should obligate the shipowners to notify the administering authority that the managers’ mandate has ended and ensure the managers are no longer the responsible entity.

KEY POINTS

While the standard template simplifies the practical handling associated with allocating responsibility, it remains crucial for the parties to conduct thorough assessments of whether responsibility should be transferred and the consequences thereof. Parties are well advised to review the accompanying contracts to ensure that all consequences relating to EU ETS and the (potential) transfer or responsibility are in order and that the allocation of responsibility is carefully considered and adequately addressed.

Some of the key points to be considered by the parties in their contractual agreement are:

• security / guarantees: The parties should consider whether security is necessary, especially if the responsible entity only receives allowances one a year / with a low frequency.
• Cost allocation: Parties should consider incorporating reimbursement mechanisms to mitigate financial risks and ensure compliance.
• Comprehensive contractual provisions: Contracts should include provisions on “what, how and when”, including what needs to be surrendered (allowances, derivatives, or cash compensation), price, and timing of delivery.
• Termination and consequences of termination: The parties need to take into account that there currently is little guidance on termination of a mandate. Specific principles and guidelines on this should therefore be included. This is also outlined by BIMCO in its explanatory notes.

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