CONTRACTS AND CLAUSES

CII OPERATIONS CLAUSE FOR TIME CHARTER

PARTIES 2022

Overview Related Help &

Advice
New regulations on the carbon intensity of international shipping
will come into force on 1 January 2023. The complex CII regulations
are expected to significantly impact the future operation of ships. COVID-19 Advice on
Shipowners and charterers must embrace new ways of cooperation,
charter parties and
other contracts
and new clauses for charter parties will be needed to help owners
and charterers succeed. Bills of lading advice
Time charter advice
CLAUSE EMISSIONS DECARBONISATION Voyage charter advice
Booking notes
General average
Miscellaneous
CII OPERATIONS CLAUSE FOR TIME CHARTER
PARTIES 2022

On 1 January 2023, the International Maritime Organization’s (IMO’s) Create or edit a

Carbon Intensity Indicator (CII) regime under the International Convention contract
for the Prevention of Pollution from Ships (MARPOL) in the form of
Resolution MEPC 328(76) (together with associated guidelines)
(hereinafter “The MARPOL Carbon Intensity Regulations”) enters into The one-stop digital shop
effect and apply to ships of more than 5,000 gross tons. for all the standard
maritime contracts and
The MARPOL Carbon Intensity Regulations will impact time chartering as clauses you’ll ever need.
we know it today. Although the owners and the charterers have different
roles in a time charter context, the nature of the CII regime itself cuts
Find out more
through that traditional relationship, such that it will inevitably require
both parties to come together to collaborate and cooperate so as to seek
to reduce the carbon intensity of ships' operations on an ongoing basis.
Existing (unamended) time charter parties are simply not geared to deal
with the CII regime. The CII Operations Clause for Time Charter Parties
therefore seeks to provide the necessary building blocks for the parties to
operate ships in accordance with the new CII playing field. The clause is
drafted to assist both the owners and the charterers to navigate
contractually within a time charter party context. It seeks to promote
collaboration, transparency and flexibility between the parties, especially
in circumstances where the commercial activities and employment of a
ship as determined by the charterers and, traditionally, outside of the
owners' control, are likely to have a direct and significant impact on a
ship's carbon intensity and it also appreciates the role that the owners play
in maintaining the energy efficiency of the vessel. Reducing carbon
intensity is therefore a shared responsibility which needs to be reflected
clearly in a time charter party context.

The clause sets out a way forward for the parties to contribute towards
reducing the ship's carbon intensity as required by the MARPOL Carbon
Intensity Regulations. Commercial elements have been included in the
clause to assist the owners and the charterers to cooperate and
collaborate in a balanced way. Sharing and being transparent on ship data,
focusing on ship energy efficiency and flexibility in ship operation and
employment are fundamental principles underlying the clause which are
designed to make it work in practice.

The clause is intended to be a “stand-alone” clause that can be

incorporated into existing or new time charter parties. While the clause
provides a reasonable and pragmatic blueprint of how to deal with the
new CII regime in practice, parties are encouraged to consider how it fits in
with their respective industry segment, the particular trade, the duration
of the time charter party arrangement and the commercial relationship
between the parties.

The clause is not a “compliance” clause. This means that parties will have
to familiarise themselves with the MARPOL Carbon Intensity Regulations
and the exact requirements applicable to the ship.

To ensure that the clause continues to stay fit for purpose, a clause review
will be conducted once there is a clear understanding of how the MARPOL
Carbon Intensity Regulations are working in practice.

Clause
Notwithstanding any other provision in this Charter Party, the Owners and
the Charterers (the "Parties") agree as follows:

“Agreed CII” means the values in gCO2/(dwt.nmile)* set out in subclause

(d).

“CII” means Carbon Intensity Indicator, as provided for in the MARPOL

Carbon Intensity Regulations.
“CII Rating” means the Vessel’s attained operational carbon intensity
rating, expressed as a rating from A-E, in a calendar year, as calculated in
accordance with the MARPOL Carbon Intensity Regulations.

“C/P Attained CII” means the CII value in gCO2/(dwt.nmile)* attained by

the Vessel, applying any regulatory correction factors and voyage
adjustments applicable to the Vessel and excluding fuel consumed and
distance travelled during off-hire periods in excess of [___] accumulated
days (if left blank, zero (0) days shall apply), measured in the relevant
calendar year from the start of the calendar year to date or, if the Charter
Party begins during a calendar year, from date of the Vessel's delivery
under the Charter Party to date.

"Delivery Attained CII" means the CII value in gCO2/(dwt.nmile)* attained

by the Vessel for the calendar year to date as calculated at the time of
delivery into the Charter Party.

“Effective Date” means 1 January 2023.

“MARPOL Carbon Intensity Regulations” means the regulations contained

in Chapters 1, 2 and 4 of Revised MARPOL Annex VI which relate to
“Regulations on the Carbon Intensity of International Shipping” and
Resolution MEPC.328(76) implementing the CII and any associated
guidelines and/or subsequent amendments, including the Ship Energy
Efficiency Management Plan (SEEMP).

"Projected Attained CII" means the C/P Attained CII extrapolated over the
remainder of the relevant calendar year (or the charter period should
redelivery be sooner than the end of the calendar year) and used to
demonstrate the trajectory of the Vessel's C/P Attained CII.

“Required CII” means, for each relevant calendar year of the charter
period, the middle point of CII Rating level C equivalent to the required
annual operational CII set out in Regulation 28.6 of the MARPOL Carbon
Intensity Regulations or as otherwise specified in the Guidelines for the
MARPOL Carbon Intensity Regulations.

*use gross tons (gt) instead of dwt, where applicable to the Vessel type.

(a) The Parties acknowledge and accept that as from the Effective Date the
Vessel is required to comply with the MARPOL Carbon Intensity
Regulations and that this Clause shall govern the relationship between the
Parties and their obligations relating to those regulations.

(b) During the Charter Party, the Parties shall cooperate and work together
in good faith to:

(i) share any findings and best practices that they may identify on potential
improvements to the Vessel’s energy efficiency; and

(ii) collect, share and report on a daily basis any relevant data that may
assist the monitoring and assessment of the Vessel's compliance with the
MARPOL Carbon Intensity Regulations and for planning prospective
voyages.

(c)(i) As from the Effective Date or date of the commencement of the

Charter Party, whichever is the later, the Charterers shall:

(1) operate and employ the Vessel (including the planning of voyages and
supply and selection of fuel) in a manner which is consistent with the
MARPOL Carbon Intensity Regulations and subclause (c)(i)(2), which may
require alternative or adjusted voyage or employment orders, instructions
or sailing directions to be issued to and performed by the Vessel from time
to time during the charter period; and

(2) not permit the C/P Attained CII to exceed the Agreed CII by the end of
each relevant calendar year or, if the charter period or period remaining
under this Charter Party is less than a full calendar year, by the time of
redelivery, but always subject to the provisions of subclause (g).

(ii) Any existing warranties as to despatch, speed and consumption or to

maintain the Vessel's description provided for elsewhere in the Charter
Party shall continue to apply to the Charter Party. In the event of any
breach of such warranties, the Charterers shall be entitled to pursue a
separate claim against the Owners, save that any such breach shall not be
relied upon by the Charterers as a basis to avoid meeting their obligations
under this Clause, including where subclause (g) has been validly invoked.

(d)(i) The Agreed CII by calendar year shall be as follows:

Year Agreed CII values* Corresponding to a predicted CII

Rating
2023
2024
2025
2026

* BIMCO recommends that Parties agree that the Agreed CII values should
be the Required CII or better, consistent with the MARPOL Carbon
Intensity Regulations.

(ii) Where the Parties fail to agree in writing the Agreed CII for the relevant
calendar year(s) of the charter period or otherwise fail to populate the
above table with such values for the relevant calendar year(s), then the
Parties expressly agree and acknowledge that the default Agreed CII for
the Vessel shall, subject to subclause (d)(iii), be the Required CII.

(iii) If the Charter Party extends beyond 31 December 2026 the Parties
shall review and incorporate the Agreed CII in accordance with any new
annual carbon intensity targets under the MARPOL Carbon Intensity
Regulations as set by the IMO for the remaining calendar years under the
Charter Party.

(iv) Upon delivery, the Owners shall provide the Charterers with the
Delivery Attained CII together with details of the types and quantities of
fuels consumed and distance travelled to date for the current calendar
year. The data provided to the Charterers pursuant to this subclause shall,
to the best of the Owners' knowledge, be accurate and complete.

(e) (i) The Charterers may at their discretion provide, in writing to the
Master, orders or instructions to adjust the Vessel’s speed or RPM (main
engine Revolutions Per Minute) to meet a specified time of arrival, or
closest thereto, at a particular destination or to proceed at a specified
main engine fuel consumption, which shall constitute the Charterers’
orders with which the Master shall comply, but subject always to:

(1) the Charterers complying with their obligations under this Clause; and

(2) the Master’s obligations in respect of the safety of the Vessel, crew and
cargo and the protection of the marine environment.

(ii) The Charterers shall not be entitled to request an adjustment of speed

or consumption or RPM outside the existing safe operational limits of the
Vessel or which shall result in the Vessel’s engine(s) and/or equipment
operating outside the manufacturers’/designers’ recommendations as
published from time to time.

(f) From the Effective Date, the Owners shall:

(i) exercise due diligence to ensure that the Vessel is operated in a manner
which minimises fuel consumption, including but not limited to:

(1) maintaining the Vessel, its engines and hull, and any of its equipment
relevant to the Vessel’s energy efficiency, in accordance with the Charter
Party and the MARPOL Carbon Intensity Regulations/SEEMP, subject to any
express provisions elsewhere in the Charter Party that place maintenance
obligations on the Charterers, and reporting any associated deficiencies to
the Charterers;

(2) when passage planning, adjusting the Vessel’s trim and operating the
Vessel’s main engine(s) and auxiliary engine(s);

(3) making optimal use of the Vessel’s navigation equipment and any
additional aids provided by the Charterers, such as weather routing,
voyage optimisation and performance monitoring systems; and

(4) unless otherwise instructed by the Charterers, proceeding by the most

fuel-efficient route, but the Master may deviate from the route if he has
reasonable grounds to believe that such a route shall compromise the safe
navigation of the Vessel or the safety of the Vessel, crew or operation of
equipment.

(ii) monitor and calculate the actual consumption of the Vessel on a daily
basis and provide the Charterers with details of the types and quantities of
fuels consumed and distance travelled as required by the Charterers and
any other relevant data the Charterers may reasonably request for the
purpose of this Clause. This data shall be used to calculate the C/P Attained
CII value which shall be compared against the Agreed CII for the relevant
calendar year or charter period and shared with the Charterers. The
Owners undertake that the data provided to the Charterers pursuant to
this subclause shall, to the best of their knowledge, be accurate and
complete; and

(iii) comply with the SEEMP, provided always that the Charterers adhere to
their obligations under this Clause.

(g) If, at any time, based on the data shared in accordance with this Clause,
the trajectory of the C/P Attained CII is deviating from the Agreed CII, the
Owners shall give the Charterers advance warning of this. If, despite such
warning, the C/P Attained CII continues to deviate from the Agreed CII and
this indicates that there is a reasonable likelihood that the Charterers may
fail to meet their obligations under subclause (c), then:

(i) The Owners shall request in writing and the Charterers shall provide to
the Owners within two (2) working days of Owners' written request, a
written plan detailing any proposed commercial operation of the Vessel for
at least the next voyage.

(ii) If, upon assessment of a Charterers’ written plan, the Owners can
reasonably show that following this written plan will result in the
Charterers failing to meet their obligations under subclause (c) and that,
on the basis of the Projected Attained CII, the Agreed CII for the relevant
calendar year (or for the charter period should redelivery be sooner than
the end of the calendar year) would be exceeded, then the Owners shall
communicate this in writing to the Charterers within two (2) working days
of receipt of the Charterers’ written plan. The Parties shall cooperate and
work together in good faith to agree within two (2) working days
thereafter an adjusted written plan for the next voyage or voyages which
brings the C/P Attained CII in line with the Agreed CII. Any such adjusted
written plan agreed between the Parties shall be deemed to constitute the
Charterers' orders as if they had been given by the Charterers at the
outset.

(iii) Until such time that the Parties agree an adjusted written plan (or
where a written plan is not received from the Charterers as per subclause
(g)(i)), the Owners shall, where they have validly exercised their rights
under this subclause (g), be entitled:
(1) not to follow a Charterers' order and/or a written plan and/or an
adjusted written plan (which has not been agreed), without being in
breach of any of the Owners' obligations under the Charter Party, and with
the Vessel remaining on hire throughout, and instead

(2) to reduce the Vessel's speed or, where a speed reduction is anticipated
by the Owners to be insufficient, to require the Charterers to provide all
requisite instructions, orders and sailing directions to the Vessel which
bring the C/P Attained CII in line with the Agreed CII for the relevant
calendar year (or the charter period should redelivery be sooner than the
end of the calendar year).

(h) Compliance with any Charterers’ orders, a Charterers’ written plan or

an adjusted written plan validly issued and agreed in accordance with
subclause (g) shall not:

(i) be deemed a breach by the Owners of any of the Owners' obligations

under this Charter Party, but shall be considered due fulfilment of this
Charter Party; and/or

(ii) in any way lessen the Charterers’ responsibility to comply with their
obligations under this Clause.

(i) *The Charterers shall ensure that the terms of the bills of lading,
waybills or other documents evidencing contracts of carriage issued by or
on behalf of the Owners provide that compliance by the Owners with this
Clause does not constitute a breach of the contract of carriage. The
Charterers shall indemnify the Owners against all consequences and
liabilities that may arise from bills of lading, waybills or other documents
evidencing contracts of carriage being issued as presented to the extent
that the terms of such bills of lading, waybills or other documents
evidencing contracts of carriage impose or result in breach of the Owners’
obligation to proceed with due despatch or are to be held to be a deviation
or the imposition of more onerous liabilities upon the Owners than those
assumed by the Owners pursuant to this Clause.

(j) The Owners shall be entitled to claim from the Charterers any losses,
damages, liabilities, claims, fines, costs, expenses, actions, proceedings,
suits or demands suffered by the Vessel and/or the Owners which have
been caused by any breach by the Charterers of their obligations under
this Clause.

* Subclause (i) not applicable in the liner trade.

CLAUSE EMISSIONS DECARBONISATION

Background
The IMO has so far adopted three different kinds of measures in MARPOL
Annex VI. Resolution MEPC.328(76) focuses on either the design and
technical energy efficiency of a ship or the ongoing operation of a ship.

The below gives a brief overview:

1. Design measure: The Energy Efficiency Design Index (EEDI) is aimed at

improving the Design efficiency of new ships. Depending on year built,
new ships are required to satisfy different phases of increasing design
efficiency (currently newly built ships are required to satisfy EEDI phase 2).

2. Technical measure: The Energy Efficiency Index for Existing ships (EEXI) is
aimed at improving the design efficiency of existing ships, to a level
equivalent to EEDI phase 2, by applying technical measures or
improvements.

BIMCO has developed a clause for this transition: EEXI Transition Clause for
Time Charter Parties 2021.

3. Operational measure: The Carbon Intensity Indicator (CII) is aimed at

improving the energy efficiency of ship’s operation, requiring the ship’s
yearly carbon intensity not to exceed a certain predefined threshold and
ships are subsequently rated A to E in accordance with their yearly carbon
intensity results.

The CII is an operational efficiency indicator that measures a ship’s carbon

intensity over time and is expressed in grams of CO2 emitted per cargo-
carrying capacity and nautical miles travelled. It applies to all segments of
the shipping industry for all ships above 5000 gross tons.

CII is assessed and calculated annually (not per voyage) based on a ship’s
reported Annual Efficiency Ratio (AER) – which is the annual fuel
consumption multiplied by the CO2 emissions factor (this factor is
determined by the IMO and is based on fuel type), divided by the distance
sailed by the ship (in ballast and laden condition) and the DWT capacity.

The CII regime came into force on 1 November 2022 but takes effect from
1 January 2023. It applies to ships of more than 5,000 gross tons. Ships will
receive a CII Rating of A, B, C, D or E in the following year based on their
emissions from the previous year. This means that ships will not have a CII
Rating in 2023. CII emissions are not cumulative year on year. This means
that at the end of each calendar year the “emissions counter” for each ship
is reset. Whatever CII Rating a ship has in one year will not affect the
assessment of the ship’s operational efficiency the following year.
Drafting team
The CII Operations Clause for Time Charter Parties 2022 is the result of a
collaborative and consensual process between owners, charterers, P&I
clubs and legal experts. BIMCO is grateful to the following individuals:

Peter Eckhardt, F. Laeisz (Chairman)

Panos Zachariadis, Atlantic Bulk Carriers Management, Ltd.
Takaaki Hashimoto, NYK
Lars Bagge Christensen, Navigare Capital
Harry Fafalios, Union of Greek Shipowners
Kyriakos Kourieas, Interorient Marine Services Limited
Ann Shazell, Cargill Ocean Transportation
David Sale, BP Shipping
Kelly Vouvoussiras and Divek Chinnadurai, Rio Tinto
Alessio Sbraga, HFW
Helen Barden, North P&I Club
Lasse Brautaset, Nordisk Legal Services

BIMCO representatives:

Lars Robert Pedersen

Søren Larsen,
Stinne Taiger Ivø
Grant Hunter
Mads Wacher Kjærgaard

Guidance Notes
These guidance notes are intended to provide an insight into the thinking
behind the BIMCO CII Operations Clause for Time Charter Parties 2022.
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.

Definitions
The following are (non-exhaustive) comments made in respect of the
definitions contained in the clause.

“Agreed CII” is a numeric value for each relevant calendar year expressed
in grams of CO2 per DWT.nautical mile (or gross tons (gt) if applicable to
the particular vessel type) that the parties will have to discuss and agree
upon. The grams CO2 values are found by using the annual fuel
consumption multiplied by the CO2 emissions factor (this factor is
determined by the IMO Resolution MEPC. 281 (70) and is based on fuel
type).
“C/P Attained CII” is a measure of the vessel’s carbon intensity expressed
in grams of CO2/ DWT.nautical mile (or gross tons (gt) if applicable to the
particular vessel type). The C/P Attained CII is intended to reflect the actual
consumption of the vessel in real time and to compare the progress of a
ship's carbon intensity against the Agreed CII.

It should be noted, however, that the C/P Attained CII may differ from
“Attained annual operational CII” provided for in the MARPOL Carbon
Intensity Regulations, which represents the total annual emissions from a
ship calculated in accordance with the AER metric and compared to the
“Required annual operational CII”. This is because the “Attained annual
operational CII” does not factor in nor makes any allowance for off-hire
periods. Whereas the C/P Attained CII does contemplate off-hire periods
(see comments below).

The C/P Attained CII is calculated on a “to date” basis, being measured
either from the beginning of the calendar year or, if the charter
commenced after the start of the year, from the start of the charter
period. The intention is that this measurement and calculation will
continue to the end of calendar year or time of redelivery of the ship (if
prior to that).

When calculating the C/P Attained CII the parties are required to take into
account any regulatory correction factors and voyage adjustments
applicable.

When calculating the C/P Attained CII, the parties should also take into
account off-hire periods, if agreed. The parties may have agreed that for
example only off-hire (accumulated) periods in excess of 10 days should be
deducted from the calculation. This will mean that fuel consumed and
distance travelled during off-hire periods in excess of 10 days will be
excluded from the C/P Attained CII calculations. In all circumstances, care
should be taken where any off-hire periods are excluded from the C/P
Attained CII calculation as the C/P Attained CII may not reflect the
"Attained annual operational CII" as required by the MARPOL Carbon
Intensity Regulations (as discussed above), so, at the very least, the owners
will have to monitor two sets of data when it comes to assessing the ship's
carbon intensity i.e. one for the purposes of the charter party and the
other for regulatory compliance. If the parties have not agreed a number
of “buffer” off-hire days, then, by default, all fuel consumed and distance
travelled during off-hire periods will be excluded, when calculating the C/P
Attained CII. Care must be taken when reviewing this provision.

“Delivery Attained CII” is the "Attained annual operational CII" calculated

as per the MARPOL Carbon Intensity Regulations (see Formula 1 above),
but on a “to date” rather than annual basis ie using fuel consumption and
distance travelled from the start of the year to the time of delivery.
"Projected Attained CII" means the C/P Attained CII (see above description)
projected over the remainder of the relevant calendar year (or the charter
period should redelivery be sooner than the end of the calendar year) and
used to demonstrate the ship's C/P Attained CII trajectory as compared to
the Agreed CII (see above). At any point in time, the C/P Attained CII
already contains all the prior relevant information which makes up the
carbon intensity value of a ship (i.e. it is a cumulative value of fuel
consumption and distance travelled on voyages performed to date). As
such, in the absence of any future voyage information, the “Projected
Attained CII” is likely to be the same value as the C/P Attained CII, but it is
the closest thing to an objective standard available to the parties to
demonstrate the impact of the C/P Attained CII –as projected into the
future. However, when future voyage(s) information becomes available
(such as, for example, by virtue of a written plan provided by the
charterers), this should be considered as it should provide a clearer picture
of the likely future impact of the “Projected Attained CII” on the current
C/P Attained CII going forward and this is a possibility envisaged at
subclause (g)(ii).

“Required CII” means, for each relevant calendar year of the charter
period, the middle point of CII rating level C equivalent to the required
annual operational CII set out in Regulation 28.6 of the MARPOL Carbon
Intensity Regulations (i.e. the "Required annual operational CII") or as
otherwise specified in the Guidelines for the MARPOL Carbon Intensity
Regulations.

“CII Rating” means the Vessel’s attained operational carbon intensity

rating, expressed as a rating from A-E, in a calendar year, as calculated in
accordance with the MARPOL Carbon Intensity Regulations.

The parties are, nonetheless, invited to consider all definitions carefully.

This includes populating information, where appropriate.

Subclause (a) – MARPOL Carbon Intensity Regulations

Unlike most MARPOL legislation which simply requires the owners to meet
and then maintain an agreed technical standard, the CII regime is very
different in nature. It is an operational tool used to measure the carbon
intensity of the commercial activities of ships on an annual basis, whereby
ships will need to comply with ever stricter, year to year, carbon intensity
standards. Both the owners and the charterers are strongly encouraged to
familiarise themselves with the requirements of the new CII regime as
provided for in the MARPOL Carbon Intensity Regulations as this is likely to
have a significant impact on the ship operation and trade in the coming
years.

“MARPOL Carbon Intensity Regulations” includes the Ship Energy

Efficiency Management Plan (SEEMP). It is mandatory for most ships to
have and follow a SEEMP to comply with the MARPOL Carbon Intensity
Regulations. Furthermore, since the SEEMP may include operational
measures which the owners should follow, the charterers should seek sight
of the ship’s SEEMP.

Subclause (b) – Working together and sharing best

practices and data
As explained, ongoing carbon intensity reduction is inevitably a shared
responsibility for the owners and the charterers in a time charter party
context and requires the parties to collaborate and cooperate. Subclause
(b) conveys that fundamental principle. The parties need to operate
transparently, share data and work together to optimise the commercial
use of the vessel.

Subclause (c) – Charterers’ obligations

Subclause (c) sets out the principal obligations of the charterers.

Subclause (c)(i)(2) provides that the charterers shall be obliged to operate

the ship so that the C/P Attained CII does not exceed the Agreed CII by the
end of the relevant calendar year or upon redelivery. Therefore, the
Agreed CII is the key factor for the charterers to consider as this is the
principal yardstick against which their obligations will be measured. As
stated above, the Agreed CII is a fixed figure to be agreed between the
Parties for the relevant year(s) of the charter. The C/P Attained CII is
calculated for the year against the Agreed CII, or if the charter party is only
for part of a calendar year then the C/P Attained CII is measured against
the yardstick of the Agreed CII only for the period the ship is on charter in
the relevant calendar year. Therefore, the starting point for this clause is
that the impact of the ship’s operation on the Required CII during any part
of the year when the charterer does not have the ship on charter is a risk
that sits with the owners.

In practice, to achieve this subclause (c)(i)(2) obligation, it can no longer

mean business as usual for the commercial parties because employment
orders (i.e. voyage / speed orders and sailing directions) are likely to
directly and significantly impact a ship's carbon intensity. So, it is expected
that employment orders – in particular, speed orders – will need to be
adjusted by the charterers –it is hoped on their own initiative as part of
their given employment orders - in order to meet this obligation. This
flexibility to adjust a ship's speed is also provided for in subclause (e).

This is primarily what subclause (c)(i)(1) tries to capture: that adjusted or

alternative voyage or employment orders, instructions or sailing directions
may (but not always will) be required during the charter period, depending
on the particular facts and circumstances and how the parties apply the
subclause (g) regime (see comments below). These adjusted orders have
to be consistent with the subclause (c)(i) obligations.
With the view to safeguard their obligations under subclause (c), it is
recommended that the charterers closely follow a ship's C/P Attained CII
and other data provided by the owners on a daily basis during the relevant
calendar year or charter party period (see comments on subclause (f)).

The obligation not to permit the C/P Attained CII to exceed the Agreed CII
is not measured voyage by voyage, but by the end of the calendar year or
at the time of redelivery. However, to safeguard the charterers’ compliance
with their obligation under subclause (c)(i), the parties are required to
engage in constructive dialogue when planning voyages throughout the
charter party and, if required, undertake “corrective” actions such as
speed reduction or other means to bring the C/P Attained CII in line with
the Agreed CII in accordance with subclause (g) (see comments on
subclause (g)).
Subclause (c)(ii) further stipulates that any existing warranties as to
despatch, speed and consumption or to maintain the ship’s description
under the charter party continue to apply and can still be relied upon by
the charterers. However, if the owners are in breach of any such warranty,
the charterers cannot use such breach to avoid meeting their obligations
as set out in this clause, in particular where subclause (g) is in operation.
Instead, the charterers are entitled to pursue a separate claim against the
owners, for example if the vessel does not perform in accordance with the
speed and consumption warranties given by the owners set out in the
charter party.

Subclause (d) – Agreed CII

Owners and charterers should discuss and agree the CII values to apply for
each calendar year of the charter party or for the charter party period, if
shorter than a calendar year. The values are expressed in grams of CO2
emitted per cargo-carrying capacity and nautical miles travelled. The value
corresponds to an equivalent CII rating, which can also be reflected in the
table, but it is not the CII rating that the parties should agree upon. It is the
grams of CO2 per DWT.nautical mile as this will give the most accurate
principal yardstick to which the parties’ rights and obligations relate and
operate under the clause.

The Agreed CII values should be inserted in the table set out in subclause
(d). This clause includes a recommendation to agree to CII values which are
the Required CII or better, consistent with the MARPOL Carbon Intensity
Regulations.

The MARPOL Carbon Intensity Regulations require improvements in a

ship’s carbon intensity year by year equivalent to a 2% annual reduction
from the original base line of 2019. As such, the range of values contained
in each CII Rating of A-E will become more stringent through to 2026, after
which new targets will be set by the IMO. Both the owners and charterers
should therefore take this into account when discussing and agreeing the
values to be attributed to the Agreed CII. Equally, in a short-term time
charter party, one Agreed CII value is likely to be required depending on
the duration. If the short time charter party runs from one calendar year
into the next, then two Agreed CII values are likely to be required.

Furthermore, when setting the Agreed CII, it is recommended that the

parties incorporate a suitable margin to account for unexpected events,
such as unpredicted port stays and delays, off hire and adverse weather. To
that end, it is not recommended to agree to an Agreed CII value at the
lower limit of a CII Rating range (e.g. at a C CII Rating bordering a D CII
Rating).
The table only has space to enter values up to and including 2026. The
IMO has not yet set emission targets beyond 2026, so parties using this
clause on long-term charter parties extending beyond 2026 must discuss
and agree new Agreed CII values once these new targets are established.

As a safeguard, subclause (d) contains a fallback default value equivalent

to the Required CII.

Upon delivery the owners shall provide the charterers with the Delivery
Attained CII. See comments above under “Definition”.

Subclause (e) – Just in time arrivals and slow steaming

The intention behind this subclause (e) is to provide the charterers with
the flexibility they require to meet their obligations during the charter
party period or by calendar year if the time charter party is long-term. The
charterers will have to carefully follow and monitor a ship’s C/P Attained
CII based on the data provided by the owners. The charterers can give
orders to the Master to adjust the ship’s speed or to meet a certain specific
time of arrival. Subclause (e) provides the charterers with flexibility to
manage their obligations under this clause, in particular to have the C/P
Attained CII not exceeding the Agreed CII by the end of the relevant
calendar year or upon redelivery.

The commercial activities of a ship – in particular, the operating speed –

are likely to directly and significantly contribute to the carbon intensity of a
ship. Sensible and efficient reduction in speed lowers fuel consumption
which, in turn, reduces emissions. Routing efficiency is also an important
factor. If a shorter route can be found it means that a ship will use less fuel
because not only is the distance shorter, but the ship can also reduce
speed to arrive at the same time. Furthermore, due to the nature of the
AER metric (applied by MARPOL to calculate CII) longer trips can, in certain
circumstances, be more favourable to CII than shorter trips. It is to be
noted also that “the most fuel-efficient route” may not always be the most
favourable CII route in the relevant circumstances.

At present there are no exceptions from CII calculations and/or correction

factors which apply to time spent in port and at anchor or time spent in
yards or laid-up etc. However, it is expected that the amount of fuel
consumed while a ship is stationary (“hotel load”) is likely, in most cases, to
be minimal in the scheme of the CII regime. Other than for significant
extended periods lasting for many days or weeks, an idle ship’s emissions
are unlikely to adversely impact the C/P Attained CII over a year, unless the
vessel’s C/P Attained CII is already very near the outer limit of the
equivalent CII Rating. For short-term time charter parties, where the ship is
idle, the impact will however naturally be greater for shorter periods, and
this needs to be borne in mind when negotiating the applicable Agreed CII
value.

Subclause (f) – Owners’ obligations

Subclause (f) sets out the owners’ obligations pursuant to the clause.
These are important obligations insofar as minimising fuel consumption
and maintaining a ship's energy efficiency are concerned.

The owners are obliged to exercise due diligence to ensure that the ship is
operated in a manner which minimises fuel consumption.

This includes the owners’ responsibility for maintaining the ship, its
engines, hull and equipment relevant to the ship’s energy efficiency in
accordance with the charter party terms and the MARPOL Carbon Intensity
Regulations and the SEEMP (subclause (f)(i)(1)). The only qualification to
this obligation is where the charter party already allocates responsibility
for certain types of maintenance (for example, for hull cleaning). Any
deficiencies related to the maintenance, or the energy efficiency of the
ship, are to be shared with the charterers.

Focus on minimised fuel consumption is also linked to a variety of aspects

from passage planning to making optimal use of the ship’s navigation
equipment, as specified in subclauses (f)(i)(2) and (3). Furthermore, the
Master is also expected to proceed by the most fuel-efficient route unless
safety and/or safe navigation dictates otherwise, see subclause (f)(i)(4).

The owners are responsible for the continuous monitoring and calculation
of the actual fuel consumption and distance travelled by the ship and
sharing the relevant data on a daily basis with the charterers. This is of
utmost importance to the ongoing dialogue between the parties and to
ensure the parties are on the same page when it comes to calculating the
C/P Attained CII. For this reason, subclause (f)(ii) stipulates an undertaking
by the owners that the data provided to the charterers is accurate and
complete to the best of their knowledge.

The owners retain the responsibility for complying with the SEEMP, but
subclause (f)(iii) recognises the fact that such compliance is closely linked
to the way in which the charterers employ the ship and thus the
charterers' obligations under the clause. Ultimately, this reflects the nature
of the CII regime which requires cooperation between the parties to
reduce a ship's carbon intensity under the MARPOL Carbon Intensity
Regulations.
Subclause (g) – Ongoing dialogue and cooperation
towards the C/P Attained CII meeting the Agreed CII
The underlying objective of subclause (g) is to promote ongoing and
constructive dialogue between the parties and to get them to work
together and collaborate to ensure that the ship is operated in such a way
which reduces carbon intensity in accordance with the MARPOL Carbon
Intensity Regulations. While the owners are required to continuously
monitor and report the C/P Attained CII to the charterers together with
relevant data, the charterers are obliged to provide employment orders
which keep the C/P Attained CII in line with the Agreed CII by the end of
the relevant calendar year and by redelivery. There may be occasions
during the course of a relevant calendar year when there is a realistic
prospect of the C/P Attained CII exceeding the Agreed CII by the end of the
relevant calendar year or upon redelivery. Subclause (g) seeks to cater for
this by encouraging constructive dialogue between the parties whenever
appropriate, and, ultimately, providing for a workable solution in
circumstances where agreement as to employment orders and instructions
consistent with the Agreed CII cannot be mutually agreed in a timely
manner.

Under subclause (g), not following an employment order or written plan is

a final recourse and can only be reached if several intervening
safeguarding mechanisms have been applied validly but failed to generate
agreement. All of these intermediate steps are set out to provide a
mechanism to get the charterers’ employment of the vessel back on track
and in line with the Agreed CII. The clause therefore provides the
charterers with as much flexibility as possible in the circumstances and
every opportunity to determine how they, themselves, comply with their
obligations under the clause.

It further sets out a “roadmap” for the parties to follow if the C/P Attained
CII deviates from the Agreed CII. If the data shared between the parties
shows that the trajectory of the C/P Attained CII consistently deviates from
the Agreed CII, the owners shall give the charterers a warning about this.
Such warning gives the charterers the option to think differently about
how they are trading the ship or discuss such plans with the owners to
change this trajectory.

If the trajectory of the C/P Attained CII continues to deviate despite such
warning, the next step for the owners to take is to ask the charterers for a
written plan, where the charterers set out the proposed commercial trade
of the vessel at least for the next voyage. Such written plan must be
provided by the charterers within two (2) working days after the owners’
request in accordance with subclause (g)(i). When this written plan is
received by the owners, the owners shall review this and if satisfactory, no
further steps need to be taken pursuant to subclause (g).
If, however, the owners can reasonably show that following the written
plan provided by the charterers will still result in the charterers failing to
meet their obligations under this clause, and that, based on the Projected
Attained CII, the C/P Attained CII would exceed the Agreed CII, the owners
shall communicate this in writing to the charterers within two (2) working
days of having received the written plan in accordance with subclause (g)
(ii). In practice, it may be possible for the owners to factor in details
concerning future prospective employments and apply them to the
Projected Attained CII to demonstrate why the written plan will not be
sufficient to change the ship's CII trajectory, but this will depend on the
content of the written plan (if any) received.

Within two (2) working days of receipt of the owners' communication, the
parties are obliged under subclause (g)(ii) to work together in good faith to
agree an adjusted written plan for the next voyage or voyages, which will
bring the C/P Attained CII in line with the Agreed CII.

Until such time as, an adjusted written plan is agreed (or where the
charterers fail to provide the owners with a written plan), the owners shall
be entitled not to follow the charterers’ orders or written plan or adjusted
written plan without being in breach of the charter party and the ship
remaining on hire. Instead, the owners shall be entitled to either reduce
the ship’s speed, or where such speed reduction is anticipated by the
owners to be insufficient, to require the charterers to give instructions,
orders and sailing directions to the ship which will bring the C/P Attained
CII in line with the Agreed CII.

Subclause (h) – Compliance with Charterers’ orders under

subclause (g)
Subclause (h) clarifies that steps taken to comply with the charterers'
orders, a written plan or an (agreed) adjusted written plan under subclause
(g) shall not place the owners in breach of any of their obligations under
the charter party. The intention behind this subclause (h) is to avoid
disputes or create doubt between the parties about whether acting in
accordance with subclause (g) could be regarded as a breach by the
owners.

Subclause (i) – Contracts of carriage

Pursuant to subclause (e) the charterers may at their discretion give orders
or instructions to the Master to adjust the ship’s speed or RPM. Likewise,
steps may need to be taken to reduce the speed of the ship or provide
alternative orders to bring the C/P Attained CII in line with the Agreed CII
under subclause (g). The charterers are obliged to ensure that bills of
lading, waybills or other documents evidencing the contract of carriage
issued for and/or on the owners' behalf contain terms which protect both
parties against a claim raised by a third party for not proceeding with due
despatch or for deviating in compliance with this clause, failing which the
Charterers shall be liable to indemnify the owners for the consequences.
Subclause (i) mirrors a similar provision in the BIMCO Slow Steaming
Clause.

It should be noted that because liner terms normally give the carrier a
right to slow steam, this subclause does not apply when the clause is used
in scheduled liner trades.

Subclause (j) - Claims

Subclause (j) entitles the owners to claim for general damages for breach
of contract and sets out the type of damages and losses the owners may
be able to recover from the charterers. The quantum of such losses and
damages still needs to be substantiated and be shown to have been
caused by a charterers' breach of their obligations under this clause. It is
hoped that, through effective cooperation and planning between the
parties under the clause and, where appropriate, subclause (g), this
subclause (j) will only need to be invoked on limited occasions.

BACK TO: CII CLAUSE FOR VOYAGE

CHARTER PARTIES 2023

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