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| 1 minute read

CII charter clauses - a square peg in a round hole?

A reminder, if one were needed six months after the launch of the IMO's carbon intensity indicator (CII) regulations, that the shipping market is still grappling with how to deal with CII in time charters. 

The basic challenge lies in pushing the square peg of the regulations through the round hole of the traditional time charter model in which, in return for hire and the promise of an indemnity in certain circumstances, the charterer is free to use the vessel as it wishes for its own commercial gain.

But when the charterer's employment of the ship negatively impacts the ship's CII rating, perhaps hard won by the owner before delivery, who is to pay for the consequences, including the potentially lower trading value of the ship following a rating downgrade? And can a voyage charterer at the bottom of the chain be made to pick up the tab?

Across my desk, bespoke clauses are now becoming a major part of the solution for large and small players alike. These are usually, but not always, based on BIMCO's CII Operations Clause for Time Charter Parties 2022, but with significant changes aimed at achieving the right balance for the parties in each case. 

But reconciling, on the one hand, a carbon metric which affects the ship with, on the other, the time charterer's direct impact on that metric through its commercial use, remains a structural problem which a clause can only go so far to tackle. 

Whether the IMO's much discussed review of CII in 2026 will lead to change remains to be seen. For now, owners and charterers will need to do the best they can with the contractual tools available to them, including suitable bespoke clauses, to try and fit the square peg into the round hole.

Shipowners want a ship, when returned, to have a rating similar to that upon delivery, but charterers will not commit to this aim, citing commercial reasons or factors beyond their control, he said.


transportation, esg, shipping, decarbonisation