The devastating effects of global warming and climate change have increased the efforts of the international community to protect the environment; in this context, the maritime transportation sector has been subjected to various regulations in line with the goal of reducing carbon emissions. In this context, the maritime transportation sector, which accounts for approximately 3.3% of global carbon emissions, has been excluded from environmental regulations for many years, but has recently become subject to stricter regulations within the framework of sustainability goals. This situation brings transformation in the sector not only in environmental but also in commercial and legal aspects. All these developments significantly affect the way the carrier fulfills its obligations arising from transportation contracts, the scope of obligations and areas of responsibility. The carrier, as the ship owner or operator, is becoming responsible not only for the transportation of cargo, but also for the compliance processes arising from the environmental impacts of transportation.
As of 2023, technical and operational regulations such as the Energy Efficient Existing Ship Index (“EEXI”) and Carbon Intensity Indicator (“CII”) introduced by the International Maritime Organization (“IMO”) directly affect the environmental performance of ships. In addition, the inclusion of the maritime sector in the scope of the European Union Emissions Trading System (“EU ETS”) has further increased the obligation to align transportation activities with environmental obligations. In particular, the obligation to purchase emission allowances for the carbon emissions of ships entering and exiting EU ports has led to a reshaping of cost calculations and contractual relations in the sector.
In this article, the impact of international and regional regulations aimed at limiting carbon emissions on the maritime transportation sector; in particular, the consequences on the contractual obligations of the carrier will be evaluated.
Ⅰ. General Framework of Carbon Emission Regulations
A. International Maritime Organization Regulations: EEXI and CII
The first concrete steps to reduce carbon emissions in the maritime transport sector were taken by the International Maritime Organization. IMO has implemented the goal of measuring and reducing emissions from ships with the Energy Efficiency Existing Ship Index and Carbon Intensity Indicator regulations, which entered into force as of 2023 under the International Convention for the Prevention of Pollution of the Seas by Ships (“MARPOL”).
EEXI is a technical regulation that aims to measure the energy efficiency of existing ships. In this context, the energy efficiency coefficient is calculated according to the design features of the ships and this value is required to be below a certain threshold value. Compliance is verified at the ship's first periodic International Air Pollution Prevention Certificate (“IAPP”) inspection and a new International Energy Efficiency Certificate (“IEEC”) is issued to the ship.
CII is an indicator that measures a ship's carbon intensity based on its annual operational performance. Ships are subjected to a grading system from A to E, and for grades C and below, it is mandatory to submit improvement plans in case of continuous underperformance. With this regulation, the carrier's obligations started to include not only safe and timely carriage but also compliance with environmental sustainability requirements. In terms of contract law, this leads to an expansion of the scope of the performance obligation.
In this context, ship operators are obliged to prepare and implement a Ship Energy Efficiency Management Plan (“SEEMP”), which is a three-year plan to reduce the carbon intensity of the ship. These regulations were implemented with the amendments to MARPOL Annex VI adopted in 2021 and form part of IMO's strategy to reduce greenhouse gas emissions in 2018.
B. European Union Emissions Trading System
The European Union (“EU”) aims to internalize sectoral carbon costs by including the maritime sector in the Emissions Trading System. This system, which entered into force as of January 1, 2024, covers CO₂ emissions of ships over 5,000 gross tons entering and exiting European Union ports, and it is foreseen that methane and diazot monoxide emissions will also be covered by 2026. Under the system:
- 100% of emissions from intra-EU trips and 50% from extra-EU trips are covered.
- To ensure a smooth transition, 40% of emission permits must be surrendered from 2024 to 2025, 70% from 2025 to 2026 and 100% from 2027 onwards.
- As of 2024, only CO₂ emissions are covered and it is planned to include methane (CH₄) and diazot monoxide (N₂O) emissions from 2026.
- Companies must report emissions data by March 31st of each year and submit permits by September 30th.
The entry into force of the EU ETS brings a new dimension to the contractual obligations of the carrier. Especially in “time charter” contracts, the issue of how to share the cost obligation of emission allowances between the parties may cause disputes. In this framework, the Baltic and International Maritime Council (“BIMCO”) has published contract clauses for time charter contracts within the scope of emission trading under the name of “ETS – Emission Trading Scheme Allowances Clause for Time Charter Parties 2022” and offers a solution by regulating the imposition of emission costs on the charterer.
ⅠⅠ. The Impact of Carbon Emission Regulations on the Contractual Obligations of the Carrier
International maritime transportation contracts mainly regulate the obligations of the carrier and the performance of these obligations. Technical and financial regulations on carbon emissions affect these contractual obligations in direct and indirect ways. Especially in charter parties, bills of lading and other freight contracts, these effects have important consequences in terms of the distribution of responsibilities between the parties and the conditions of performance.
A. Scope of Performance Obligation and Technical Compliance
Pursuant to technical regulations such as EEXI and CII, it has become a pre-performance obligation for the carrier to bring its ship into compliance with these criteria. If the ship does not comply with MARPOL Annex VI, legally:
- Whether the ship can be considered “seaworthy”, in other words “seaworthy”,
- Whether this technical non-compliance will result in termination of the contract, delay compensation or freight refund
is a matter of debate. Another point is the case of a voyage ban imposed by the port authorities for a ship that does not comply with IMO regulations. In this case, a breach of the contract of carriage will occur since the ship will not be able to make the planned voyage. Since this is a situation that can be foreseen and prevented by the carrier, there is a strong possibility that it will not be considered as force majeure and this situation will directly bring to mind the responsibility of the carrier.
B. Delay and Freight Disputes
This may affect the timeliness of the carriage and may lead to a violation of the laytime and demurrage provisions. Moreover, since the carrier's obligation includes not only delivery but also the principle of “due dispatch” (transportation with reasonable speed), low speed policies implemented for the purpose of carbon reduction may constitute a breach of contract, which may put the carrier in a difficult situation. Therefore, it is obvious that it has become essential to include emission-oriented clauses in freight contracts. For example, similar to the above mentioned ETS – Emission Trading Scheme Allowances Clause for Time Charter Parties 2022 published by BIMCO, it is important to include regulations on who will purchase emission allowances for the ship, how they will be reported and how payments will be made in order to anticipate and protect against many unexpected violations.
C. Cost Allocation and Contract Adjustment
There is disagreement between the parties on who should bear the emission costs incurred under the EU ETS. These costs may necessitate an increase in the freight rate. However, if there is no explicit provision in the contract, although it may be considered as “undue hardship”, the fact that this is only possible in cases where “the debtor could not and could not be expected to foresee” and the IMO and EU regulations have been publicly available for a long time does not make it possible to meet these conditions.
ⅠⅠⅠ. Assessment and Conclusion: The Transformative Impact of Carbon Emission Regulations on Transportation Law
The environmental crisis is reshaping the basic building blocks of maritime law. This transformation extends to many areas ranging from the nature of contracts of carriage to the balance of obligations of the parties, performance periods, arbitration practices and even legal interpretation methods.
Regulations such as Compliance with International Law and Risk of Dispute, CII and EEXI, and the EU ETS regime add an environmental compliance dimension to transport contracts; freight calculations, liabilities and penalty terms are also revised accordingly. However, the existence of different standards at the international level and varying sanctions between regions creates legal uncertainty and unpredictability for carriers.
In terms of Turkish Law, there is no specific norm directly regulating carbon emission-based obligations for transportation contracts. However, this area can be shaped through general provisions.
- Pursuant to Articles 1141 et seq. of the Turkish Commercial Code (“TCC”), the carrier's obligation to transport by the most suitable means and means must now be interpreted in conjunction with compliance with environmental standards. Although there is no direct reference to such technical regulations in the TCC, the vessel must be legally and technically suitable for carriage.
- The concept of seaworthiness should be measured not only by structural fitness but also by compliance with legislation and international standards. In this context, non-compliance with MARPOL Annex VI or EU ETS rules may render a ship unseaworthy.
- Within the framework of Article 138 of the Turkish Code of Obligations (“TCO”), excessive difficulty of performance adaptation or termination of the contract may come to the agenda if the financial burden of compliance obligations regarding carbon emissions increases excessively. However, at this point, predictability and the date of the public announcement of the regulation will be taken into consideration. For example, the fact that the ETS regime was announced in 2020, even though it will enter into force in 2023, will prevent adaptation requests.
- Turkish courts are increasingly taking into account international conventions and customs in disputes on this issue, and it is observed that the Court of Cassation decisions refer to MARPOL provisions. This shows that national transportation law will evolve in parallel with international law with a green law perspective.
Ⅳ. CONCLUSION
As a result, maritime transportation is no longer just the transportation of cargo from one point to another, but also the responsible management of carbon footprint. In this new era, the carrier has assumed a multi-layered burden in terms of technical compliance, environmental auditing, legal reporting and contractual clarity. In this context; (i) inclusion of emission compliance clauses in carriage contracts, (ii) clarification of cost sharing and adaptation mechanisms in contracts, (iii) making special regulations on carbon emission obligations in Turkish Law are now inevitable in terms of maritime law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
