Who Pays for FuelEU Maritime? Owners, Charterers and the Contractual Gap Behind Decarbonisation

Key takeaways

FuelEU Maritime creates not only a regulatory compliance obligation, but also a commercial allocation problem between owners, charterers, managers and operators.
The party responsible to the regulator may not be the same party that controls fuel choice, voyage routing and day-to-day commercial decisions.
Charterparties should address both sides of the FuelEU equation: who pays for deficits and who receives the value of any surplus.
Pricing mechanisms matter because FuelEU exposure may be valued by reference to the statutory penalty, biofuel cost, pooling market price or another agreed benchmark.
Pooling rights can be commercially valuable, but they also create timing, counterparty, data-quality and back-to-back chartering risks.
FuelEU clauses should not be treated as boilerplate; they should clearly allocate costs, benefits, data obligations, pooling rights, certification risks, redelivery true-ups and ownership-transfer issues.

As the first compliance cycle under FuelEU Maritime concludes on 30 June 2026, with the first Documents of Compliance now being issued, it is timely to examine the contractual arrangements and commercial practices that have emerged and to consider the challenges that remain with the benefit of initial real-world experience.

FuelEU Maritime does not simply create a new regulatory obligation. It creates a commercial question: when one party controls the fuel and the voyage, but another party is responsible to the regulator, who should bear the cost and who should receive the benefit?

FuelEU Maritime is now part of the operating reality for ships trading to, from and within the European Union. The Regulation (EU) 2023/1805 (the “regulation”) has applied fully from 1 January 2025 for monitoring and recording purposes, with monitoring-plan obligations having applied earlier from August 2024 for ships calling at an EU port for the first time after 31 August 2024. The first reporting period was the calendar year 2025. Verification and compliance actions for that period (including submission of the FuelEU report, verification, application of flexibility mechanisms such as banking/borrowing/pooling, penalty payment where required, and issuance of the FuelEU Document of Compliance) have taken place during the first half of 2026, with the DoC required by 30 June 2026. As of the date of this article, the first compliance cycle is concluding.

The main difference between FuelEU Maritime and the EU Emissions Trading System is this:

The EU ETS prices emissions, while FuelEU Maritime evaluates the quality of the fuel and energy used by the ship. FuelEU looks at greenhouse gas intensity on a well-to-wake basis, meaning that it considers not only emissions from combustion on board, but also emissions linked to the production, transport and distribution of the fuel. (Mobility and Transport)

That distinction matters commercially. A fuel may look attractive at the ship’s exhaust but still perform poorly if its production is carbon-intensive. Ammonia is a good example for this as ammonia may produce no carbon dioxide at the exhaust, but “brown” ammonia produced from fossil sources can still carry a high lifecycle greenhouse gas intensity, whereas green ammonia produced from renewable sources performs very differently under a well-to-wake system.

Interaction with the EU ETS and the dual compliance burden

Ships calling at EU/EEA ports are subject to both FuelEU Maritime and the EU Emissions Trading System (extended to maritime transport from 2024). This creates a dual regulatory and financial burden that was not explored in detail during the webinar. Under the EU ETS the “company” must monitor, report and surrender allowances for actual CO₂ emissions (primarily tank-to-wake). FuelEU instead regulates the well-to-wake GHG intensity of the energy used and allows flexibility through banking, borrowing and pooling.

Fuel-type and operational decisions therefore have different — sometimes opposing — effects under the two regimes. Using a biofuel blend may significantly improve FuelEU compliance balance while still generating full or partial ETS liability. Conversely, certain low-carbon fuels or OPS usage can reduce exposure under both. Because the commercial decision-maker (often the time charterer) controls fuel purchasing and voyage routing, contracts must now allocate responsibility for both sets of costs and benefits. Many existing or template FuelEU clauses are silent on ETS coordination, creating a clear risk of future disputes over which regime’s economics should prevail or how true-ups should be calculated when one regime’s compliance actions affect the other.

The legal starting point: the “company” is responsible

Under FuelEU Maritime, the primary regulatory responsibility sits with the “company”. The regulation defines this as the shipowner or another organisation or person, such as the manager or bareboat charterer, that has assumed responsibility for the operation of the ship from the owner and has agreed to take over the duties and responsibilities imposed by the ISM Code. (EUR-Lex)

In practical shipping operations, this will often mean the ISM company or document of compliance holder. It may be the owner, a bareboat charterer or a technical manager, depending on the structure. That party is the one facing the regulatory process: monitoring, reporting, verification, use of the FuelEU database, and ultimately the need for the vessel to hold a FuelEU Document of Compliance. The Commission’s guidance and the regulation establish that the first reporting period covered the calendar year 2025, with verification and compliance actions (including issuance of the FuelEU Document of Compliance or payment of penalties to obtain it) taking place in 2026 and required by 30 June 2026.

Under the penalties provisions (Article 23) of the regulation, the company remains responsible for payment of FuelEU penalties, but this is without prejudice to contractual agreements with commercial operators of the ship, including where responsibility for purchasing fuel or operating the ship has been assumed by that commercial operator. (EUR-Lex)

That sentence is central. It means FuelEU does not automatically solve the economic allocation between owners, charterers, managers and operators. It leaves the commercial answer to the contract.

The practical problem: the decision-maker and the liable party may be different

In many time charter arrangements, the charterer purchases the bunkers and directs the vessel’s employment. Those decisions determine whether the vessel generates a FuelEU deficit or surplus.

A deficit arises where the vessel’s fuel and energy use exceed the permitted greenhouse gas intensity limit. A surplus arises where the vessel performs better than the required limit. Surplus may have economic value because it can, subject to the regulatory rules, be banked for later use or pooled with other vessels. The Commission guidance describes pooling as a mechanism that may be used, following private agreements, either to cover a deficit or to sell a surplus to another ship or company.

This is a core commercial mismatch. The “contractual nexus” involves a technical manager, owner, bareboat charterer and time charterer, with the time charterer often buying the fuel that creates the surplus or deficit. Contracts must say who is responsible for what, because silence creates risk.

The technical manager may be the compliance entity, but it is not deciding what fuel to burn or where the ship should sail. In other words, the party facing the regulator may not be the party making the commercial decisions that determine the FuelEU result.

Deficits are only half the issue

At first sight, the question “who pays?” sounds like a penalty question. If the vessel creates a deficit, should the owner or manager pay the authority and recover from the charterer? Should the charterer pay in advance? Should security be provided? Should the price be based on the statutory penalty or on a cheaper compliance alternative?

Those are important questions, but they are only half of the issue.

FuelEU also creates possible benefits. If the charterer buys a more expensive low-GHG fuel and the vessel generates a surplus, who receives the value of that surplus? The owner may say that it invested in a modern or dual-fuel vessel and should receive the benefit of that capability. The charterer may say that it paid for the more expensive fuel and should receive the benefit generated by that fuel choice. However, it seems that there is not yet a consistent market practice on this point.

This is why a FuelEU clause should not be drafted only as a penalty-recovery clause. It should deal with both directions: deficit allocation and surplus allocation.

The pricing problem: penalty, biofuel cost or pooling price?

A major source of future disputes is likely to be valuation.

There may be three possible price references for owner-charterer settlement : the FuelEU penalty price; the cost difference between conventional fuel and compliant biofuel; and finally the market price for buying (or selling) surplus through pooling.

The commercial problem is that these can produce different numbers. An owner may prefer recovery by reference to the penalty. A charterer may argue that the owner could have complied more cheaply through biofuel use or by acquiring surplus. If the vessel generates a surplus, the same pricing issue appears in reverse: how should that surplus be valued when compensating the party that created it? Choosing the price reference is “extremely important” and it appears that no single agreed market approach has yet emerged.

For that reason, a well-drafted charterparty should not simply say that the charterer is responsible for “FuelEU costs”. It should define the calculation method. It should also state whether the relevant price is fixed, index-linked, based on a quoted pooling market, based on actual costs incurred, or based on an agreed formula.

Pooling rights are valuable, but they are also risky

Pooling is one of the most discussed FuelEU compliance tools. It allows the compliance balances of two or more ships to be pooled, but the regulation imposes important limits. A ship’s compliance balance may not be included in more than one pool in the same reporting period, and a pool is valid only if the total pooled compliance is positive. (EUR-Lex)

Those rules matter in ordinary chartering practice. A ship may have more than one charterer in a year. A charter may start in March and end in October. A sub-charter may sit beneath a head charter. If one charterer has already been given the vessel’s pooling rights for the year, a later charterer may be unable to use those same rights even if it operates the vessel for most of the remaining year. Pooling rights can be difficult to back-to-back through successive charters and sub-charters. Large pools also introduce counterparty risk and data-quality risk (a single erroneous or fraudulent certification can affect the entire pool), which is why some market participants prefer smaller, more controllable pools.

The EU has recently adopted technical rules for the FuelEU database, including functions for managing compliance balances, banking, borrowing and pooling. That helps the regulatory process, but it does not answer the private-law question of who receives the economic value of the surplus or who bears the commercial burden of the deficit. (EUR-Lex)

The practical conclusion is simple: a party should not give or accept pooling rights without also agreeing the consequences. The contract should address who may pool, when consent is required, who chooses the verifier, who bears counterparty risk, what happens if pool data is wrong, and what happens if the vessel changes charterers or is redelivered before the end of the reporting period.

Silence is dangerous

Some parties may be tempted to rely on general charterparty principles or implied indemnities. That is risky.

There are several reasons why an implied indemnity may be difficult in the FuelEU context:

First, the vessel must hold the FuelEU Document of Compliance as part of its documentary compliance, which may point back toward the owner’s ordinary obligation to provide a legally tradeable vessel.
Secondly, causation may be complex: a penalty paid after the charter ends may be affected by fuel choices, certification, pooling decisions, borrowing decisions and actions by other parties.
Thirdly, implied indemnity is awkward where a charterer has created a surplus rather than a deficit, because it does not naturally work in reverse to require the owner to pay the charterer for a benefit.

That does not mean owners must always bear FuelEU costs. Nor does it mean charterers must always bear them. It means the parties should not leave the answer to implication.

FuelEU is precisely the sort of regime where the contract should speak clearly.

The BIMCO clause is a starting point, not a complete answer

BIMCO has published a FuelEU Maritime Clause for Time Charter Parties 2024. BIMCO describes the clause as designed for incorporation into time charter parties and expressly warns that parties may need to amend the charterparty to reflect the use of alternative fuels, including biofuels. (bimco.org)

The BIMCO clause is valuable because it gives parties a structured starting point. It introduces concepts such as compliance balance, reporting between owners and charterers, and surcharge mechanisms. The clause could be summarised as translating the regulation’s responsibilities into the time charterparty structure, including notification obligations and a mechanism for compensating owners where the vessel’s compliance balance is negative. (westpandi.com)

However, it should not be treated as a “copy and forget” clause. It is stronger in dealing with deficits than surpluses. Parties should pay particular attention to surplus benefit allocation, borrowing restrictions, reimbursement mechanics and survival wording.

Borrowing is a good example. Under the regulation, borrowing is limited: it may not exceed a specified 2% threshold and may not be used for two consecutive reporting periods. (EUR-Lex) A charterparty clause that gives a charterer a broad right to instruct borrowing should therefore be checked carefully against the regulatory limits.

What a FuelEU clause should cover?

A practical FuelEU clause should deal with more than penalties. It should cover the full economic chain. At minimum, parties should consider the following points:

Identify the compliance entity The contract should state who is the FuelEU “company” or ISM responsible party for the vessel and how information will flow between owner, manager, charterer and verifier.
Allocate deficits clearly The clause should say whether the charterer reimburses the owner or manager for deficits created during the charter period, how the deficit is calculated, when payment is due, and whether security is required.
Allocate surpluses just as clearly If the charterer pays for low-GHG fuel that creates a surplus, the clause should say whether the charterer receives that surplus value, whether the owner retains it, or whether the benefit is shared.
Choose the price reference The parties should specify whether settlement is based on the FuelEU penalty, actual cost of compliance, biofuel price differential, pooling market price, or another agreed index or formula.
Control pooling rights The clause should state who may include the vessel in a pool, whether consent is required, how the one-pool-per-year rule is managed, and what happens where there are successive charters in the same year.
Deal with fuel certification Where biofuels, RFNBOs or other low-GHG fuels are used, the regulation requires reliable certification and data. Article 10 provides that non-compliant biofuels, biogas, RFNBOs and recycled carbon fuels may be treated by reference to the least favourable fossil fuel pathway if they do not meet the relevant sustainability or GHG-saving criteria. (EUR-Lex) The European Commission guidance also explains that FuelEU relies heavily on RED certification rules and recognised certification schemes.
Provide for redelivery and post-charter true-up Because FuelEU compliance is assessed annually, a charter may end before the final verified balance is known. The contract should include a true-up mechanism after verification and should state which obligations survive redelivery.
Address transfers of ownership and changes of company (MOAs). Regulatory guidance provides that the company operating the ship at the end of a reporting period assumes responsibility for the compliance balance for the entire reporting period, even if it acquired the vessel part-way through the year. Contracts for the sale of a ship should therefore allocate historical compliance balances (including any deficit or surplus), provide for handover of relevant data and partial reports, and address any resulting financial adjustments between seller and buyer.
Preserve evidence and audit rights FuelEU disputes will be document-heavy. The parties should preserve bunker delivery notes, proof of sustainability documents, voyage data, verifier correspondence, FuelEU database records and pooling confirmations.

Early observations from the first compliance cycle (as of June 2026)

It is worth noting some early practical insights that are now emerging regarding compliance. Data quality and consistency of verifier interpretations proved more challenging than many anticipated in the first reporting year. The pooling market has developed quickly, with platforms reporting strong volumes, yet concerns about counterparty risk, transparency in large pools, and the difficulty of back-to-back pooling rights across multiple charterers remain live issues. Many owners and charterers are still defaulting to ad-hoc financial settlements rather than using detailed contractual mechanisms, resulting in inconsistent pricing benchmarks. These early experiences reinforce the importance of clear, comprehensive clauses and suggest that market practice will continue to mature rapidly over the next two reporting periods.

Conclusion

FuelEU Maritime is not only an environmental regulation. It is also a contractual allocation problem.

The regulation places responsibility on the “company”, but commercial reality is more complicated. In a time charter, the charterer may buy the fuel and direct the vessel’s employment. The owner may have invested in the ship. The manager may be the party facing the regulator. A deficit may create a penalty. A surplus may create value. Pooling may reduce cost, but it also creates rights, timing problems and counterparty risk.

The safest position is therefore not to ask, after the event, “who should pay?”. The safer approach is to answer the question beforehand.

For owners, charterers and managers, FuelEU clauses should now be treated as core commercial provisions, not boilerplate environmental wording. A good clause should allocate both costs and benefits, define the price mechanism, control pooling rights, address ownership changes, and make sure the party making the commercial decision also bears (or receives) the agreed commercial consequence.

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