Can Owners Slow Down—Without Breach?
Eco-Measures, CII, EU ETS and FuelEU Compliance, and BIMCO Clauses

The Carbon Compliance Paradox: Can Owners Lawfully Slow Down? As IMO CII, EU ETS, and FuelEU Maritime drive the industry toward lower emissions, shipowners face a legal dilemma: regulatory pressure vs. the contractual duty of “utmost despatch”, employment orders and performance warranty. Under English law, owners generally cannot unilaterally slow down without risking a breach of charterer orders. This article explores the narrow legal gateways for eco-measures and explains how BIMCO’s specialised clauses protect owners from deviation claims and shift the financial burden of compliance to commercial operators.

1.          Why Eco‑Measures Matter More Than Ever

Three regulatory forces have converged:

• IMO CII (in force since 2023) introduces annual carbon‑intensity bands (from ‘A’ to ‘E’), pushing owners to adopt slower, more efficient profiles to avoid rating deterioration. A rating of ‘D’ (for three consecutive years) or ‘E’ mandates the development of a Corrective Action Plan (CAP) within the Ship Energy Efficiency Management Plan (SEEMP Part III).

• EU ETS (shipping covered since 2024) puts a direct price on carbon emissions from shipping. Slower steaming reduces fuel burn and thus reduces the required allowances. While the legal duty to surrender allowances is on the shipowner, bareboat charterer (or DoC holder, in practice), it is commonly passed on contractually to the time charterer.

• FuelEU Maritime (applying from 2025) limits the annual average well‑to‑wake (WtW) greenhouse gas (GHG) intensity of energy used on board a ship. Provisions are made for banking, borrowing and pooling, which can reward ships trading below the limit.

From an owner’s perspective, eco‑measures can reduce bunker consumption and consequently emissions, and thereby:

• Improve CII ratings, and protect asset value;

• Reduce exposure to EU ETS allowance shortages, and penalties; and

• Support FuelEU compliance.

Each of the regulatory requirements is ramping up in phases.

Yet time charters traditionally give charterers control over speed, route, and timing. Eco‑measures therefore often clash directly with charterer employment instructions.

2.          The Contractual Conflict: Utmost Despatch, Employment Orders and Performance Warranty vs. Carbon Efficiency

Under English law, the starting point is well‑established:

• The charterer directs the commercial employment of the vessel (ports, routes, speed).

• The owner remains responsible for navigation, but navigation does not permit unilateral eco‑speed decisions.

• Owners must obey lawful employment orders unless compliance would endanger the vessel, violate public law, or fall outside the contractual trading limits.

In The Hill Harmony [2001] 1 AC 638, the House of Lords held that, absent an overriding factor (e.g., safety), the choice of route is a matter of employment and within the charterer’s orders, not an insulated question of “navigation”. The owners’ duty of utmost despatch requires the vessel to take the “shortest and therefore quickest” usual route unless there is a good maritime reason to do otherwise; a preference to avoid heavy weather was insufficient on the facts.

By an analogy, just as an owner cannot unilaterally choose a longer route for weather, they cannot unilaterally implement slow steaming for carbon efficiency without risking a breach of the duty of utmost despatch, the obligation to comply with the charterer’s employment orders, and the performance warranty. Under a standard NYPE form, the owner is normally obliged to:

• Proceed with utmost despatch;

• Comply with charterer orders as to course and speed;

• Maintain warranted speed/consumption (subject to weather and conditions).

Eco‑measures therefore create immediate breach risk unless the charter expressly permits them.

3.          Owners’ Emerging Carbon-Era Arguments

Owners sometimes argue an implied right in favour of eco-measures:

• CII compliance justifies slow steaming;

• EU ETS costs, where not expressly allocated to the charterer under the charterparty, justify emission-efficiency measures;

• Environmental obligations under public law, particularly FuelEU, justify operational measures, including speed reduction.

None of these arguments is persuasive under English law. Regulatory obligations borne by the owner do not entitle them to unilaterally depart from the charterer’s contractual right to the vessel’s agreed speed and employment absent clear contractual authority. While carbon intensity affects long‑term asset value, it does not create immediate public law illegality.

Accordingly, carbon-driven slow steaming is not an implied right under English law.

4.          Legal Safe Harbors: When Can Owners Lawfully Slow Down?

Without bespoke drafting, owners may justify slowing down in limited circumstances, such as:

• Safety requires it – this is a safety measure and not an eco-measure;

• Charterparty expressly allows eco-measures including slow steaming, usually specifying a maximum reduction in speed and agreed terms;

• Charterparty modified the owner’s traditional duty of “utmost despatch” to a duty of due despatch, taking into account specific decarbonisation objectives;

• Speed warranty capped at a lower level for trading in emissions-sensitive regions, such as the EU – but this alone may not protect an owner absent modification to the traditional utmost despatch duty;

• Charterer instructs “slow steaming,” for example under a slow steaming clause such as the BIMCO Slow Steaming Clause for Time Charter Parties 2011. While this allows the owner to implement the requested speed reduction without breach, it does not create an implied right for the owner to slow-steam for regulatory or eco purposes. It may also occur where the charterer benefits from reduced emissions and bears the EU ETS allowance costs.

Eco-measures can benefit both parties. Owners gain improved CII ratings and FuelEU compliance, while time charterers benefit from lower ETS allowance or bunker costs. However, without appropriate contractual safeguards, owners may still face claims for breach of despatch, off-hire, deviation, or cargo delays.

The above measures alone might not always achieve the desired result. Where appropriate, parties may need to include:

•        an agreement confirming that taking eco-measures will not render the vessel off-hire for the time lost to the charterer,

•        provisions to address cargo delay claims;

•      a deeming provision that taking eco-measures will not constitute a deviation;

•        similar protective clauses.

This discussion is not intended to exhaustively cover what the parties should do to achieve these objectives, which will depend on the context of the entire agreement between them.

5.          The BIMCO Solution 1: CII Clause

The CII Operations Clause for Time Charter Parties 2022 creates a framework for owners and charterers to cooperate on carbon intensity without triggering breaches of the underlying charterparty.

• Operational Mandate: The parties agree on a specific “Agreed CII” value annually. Charterers must then issue orders—such as adjusted sailing directions—consistent with meeting this rating.

• Data & Maintenance: Owners must maintain the vessel’s technical efficiency and provide real-time consumption data to monitor the “C/P Attained CII”.

• Corrective Recourse: If the vessel’s trajectory deviates from the target, the owner can request a written plan from the charterer and, as a final resort, may refuse orders or reduce speed if no viable plan is agreed upon.

• Legal Safe Harbors: The clause preserves existing speed warranties but protects owners from due despatch or deviation claims when complying with CII measures.

6.          The BIMCO Solution 2: EU ETS Clause

The BIMCO ETS Allowances Clause for Time Charter Parties 2022 allocates the financial burden of emissions trading schemes (like the EU ETS) to the party responsible for the vessel’s commercial operation—the charterer.

• Financial Liability: Charterers are explicitly required to provide and pay for emission allowances for the vessel’s emissions during the charter period.

• The Transfer Cycle: Owners notify charterers of the previous month’s emissions within seven days; charterers must transfer the required allowances within a further seven days.

• Enforcement: If charterers fail to transfer allowances, owners have the right to suspend performance after five days’ notice while the vessel remains on hire.

• Off-Hire & Redelivery: Mechanisms exist to adjust allowances for off-hire periods and to “true-up” final calculations upon redelivery.

7.          The BIMCO Solution 3: FuelEU

Designed to manage the EU’s GHG intensity limits, the BIMCO FuelEU Maritime Clause 2024 balances the owner’s technical monitoring with the charterer’s responsibility for fuel choice and penalties.

• Surcharge Mechanism: If charterers supply high-intensity fuels resulting in a negative “Compliance Balance,” they must pay a surcharge to owners equal to the expected FuelEU penalty.

• Flexibility & Pooling: Charterers can direct compliance strategies, including banking, pooling, or “borrowing” compliance from future years, provided the timing aligns with the charter period.

• Multiplier Risk: To protect owners from the EU’s “penalty multiplier” for consecutive years of non-compliance, the clause mandates liquidated damages if the vessel is redelivered with a negative balance.

• Onshore Power: Specifically for container and passenger vessels, charterers are responsible for the cost of electricity used at berth.

8.          Tailoring Standard BIMCO Clauses

These standard forms are frameworks, not final answers. To achieve the intended outcome, parties should tailor, for example:

•        Re‑calibrate despatch (or expressly permit eco‑measures) and protect against deviation claims.

•        Clarify off‑hire treatment for time lost to eco‑measures and allocate delay risk.

•        Define data/telemetry obligations and access rights (for CII calculations and monitoring).

•        Align EU ETS allowance timing mechanics with hire cycles and suspension rights.

•        Manage FuelEU pooling/banking across redelivery and state liquidated damages if a negative balance persists.

9.          Conclusion

Carbon regulation has outpaced legacy charterparty language. Under English law, owners cannot unilaterally slow down for eco‑reasons without breaching the charterer’s employment rights, the duty of utmost despatch, and performance warranties. The path forward is contractual, not implied: parties should adopt targeted drafting that (i) calibrates despatch (or recasts it as due despatch), (ii) builds eco‑measures into the employment framework, (iii) allocates EU ETS/FuelEU costs and penalties to the commercial operator, and (iv) protects owners from deviation, off‑hire and delay claims when executing agreed measures.

BIMCO’s CII, ETS and FuelEU clauses create a workable baseline, but they are not plug‑and‑play; they require context‑specific tailoring. In short, eco‑measures are lawful and workable—when the charterparty is engineered for them. That is the decisive change the market must now make.