Partner London
"FuelEU Maritime is no longer a regulatory horizon issue — it is an operating condition."
FuelEU is a balance sheet issue
FuelEU Maritime is no longer a regulatory horizon issue — it is an operating condition. As of 1 January 2025, vessels calling at EU ports are subject to binding GHG intensity requirements, with enforceable financial penalties for non-compliance. Unlike EU ETS, FuelEU Maritime does not rely on market-based trading of EUAs to manage legal exposure. Compliance outcomes now depend on carefully crafted and collaborative fuel strategies, contractual alignment and accurate emissions reporting. As the first reporting deadline of 31 January 2026 passes, FuelEU remains only partially implemented. The FuelEU Database, for example, is not yet fully operational and implementing acts on onshore power supply, zero-emission technology acceptance criteria and on neighbouring container transhipment ports are yet to be published. Under the FuelEU Maritime regulation, when a vessel is sold or changes the company responsible for its operation (ISM DoC holder) partway through a reporting year, the seller must ensure that the vessel’s GHG intensity data for the period of their ownership is verified and recorded in the FuelEU Database no later than 30 days after the completion of the transfer of responsibility. In the absence of the FuelEU Database, this legal requirement is impossible to complete. Nonetheless, there are ways around this and whilst this creates uncertainty, maritime stakeholders are building their own market standards for compliance through commercial and contractual means. As ever, the maritime sector is filling in the regulatory and systemic gaps left by rushed or poorly implemented regulation.
Drafting points
Over the last 12-18 months, common areas of friction and potential grounds for future disputes have started to become visible.
- Surplus. The ‘split incentive’ issue creates friction in that owners strive to retain some benefit of the surplus, particularly where they have specifically invested in dual fuel/low carbon fuel vessels, whereas charterers who pay for the fuel, choose the speed and the route, believe that the surplus is for their account only, particularly where they specifically source FuelEU compliant fuel. The regulation itself is silent on who owns the ‘surplus’. It is therefore a commercial decision for the parties but a commonly accepted rule is that if a charterer purchases the fuel and it is compliant with FuelEU, the charterer should reap the benefit of the surplus. Only in certain circumstances will the owner have a right to the surplus, for example where the owner purchased a dual fuel newbuilt vessel which specifically caters for low carbon fuels. Parties should agree early on who will own the ‘surplus’, whether it will be shared and how costs will be calculated. Establishing a market price/value for surplus will also be crucial (currently €230/tonne).
- Procurement of compliant fuel. This ties in with the discussion above but is one of the most heavily contested clauses in FuelEU agreements. Some owners seek to place an obligation on the charterers to source biofuels or other types of low carbon fuels that ensure FuelEU GHG intensity targets are met, whilst others prohibit the use of biofuels entirely. Charterers resist being tied into legal obligations to procure compliant fuel because of concerns regarding compliant fuel availability, price and quality; where the use of biofuels is prohibited many charterers have refused to contribute towards the cost of compliance. Again, the outcome will always depend on individual circumstances of the parties and whether charterers have pre-existing fuel supply contracts/off take agreements with low carbon fuel suppliers that owners may also be party to if an arrangement is tripartite. Where the charterer has the option to use biofuels they are generally liable for compensating owners for any negative compliance balance. Some owners have reserved the right to stop the vessel from sailing into the EU if compliant fuel is not procured or available.
- Technical managers’ financial incentive. Technical managers have received little guidance or support from the European Commission on how to juggle multiple and oft competing interests of different vessels in multiple pools. It remains to be seen whether they will be able to adequately discharge the regulatory burden that has been placed on them by the Regulation. This is where a sufficiently reasonable management fee for technical managers coupled with a detailed FuelEU management agreement is critical to protect owners by ensuring clarity when handling and sharing FuelEU data. Owners and charterers must ensure they are not overly reliant on managers to secure compliance via pooling and should be careful to maintain visibility over the compliance strategy.
- Pooling agreements. When entering pooling agreements with pool providers it is important to ensure that robust remedies are in place in the event of non-delivery of accurate data or in the event of non-delivery of a compliance balance. Given there is little guidance from the European Commission on how FuelEU pools are to function it is advisable to proceed with caution before entering pools and to ensure that there is sufficient guarantee afforded for the delivery of a compliance balance before singing up to the pooling arrangement. It also helps to ensure that pool providers are reputable and have arrangements with a sufficient amount of surplus generating vessels. It is also important to consider bespoke pooling arrangements for incomplete years whereby the owner will retain the right to pool a vessel if it is chartered or returned from charter partway through a compliance year.
- FuelEU penalty. Given that, on average, a FuelEU penalty is €645/tonne, the compensation payable by charterers is heavily (and understandably) negotiated, as they are keen to exclude any aspects of FuelEU penalty matters that they do not deem themselves to be liable for. This could include periods of off-hire, owners acting contrary to charterer instructions, underperformance of the vessel, the 10% multiplier uplift on the penalty that may have been inherited from a previous charterer, or pooling decisions that may have impacted the compliance balance. Accurate data and meticulous calculations, therefore, will be essential when agreeing any level of compensation between the parties.
"Key FuelEU deadlines are no longer ‘a year away’ and there is no time left for ‘coasting’."
FuelEU Compliance Diary for 2026
Key FuelEU deadlines are no longer ‘a year away’ and there is no time left for ‘coasting’ (see our insight on this here).
By 31 January 2026: first FuelEU report is due
By 31 January 2026, and in each subsequent year, ship owners and/or the ISM document holder, are required to submit to their verifier their FuelEU report for each vessel that is in scope. If a ship transfers from one owner to another part-way through a reporting year, the owner operating the ship at the end of the reporting period will assume compliance responsibility for the entire reporting period. The responsibility follows the ship and any GHG intensity surplus or deficit will stay with that ship.
Upon transfer, the transferring company must send all relevant FuelEU information to their verifier, who should verify the data and record it in the FuelEU Database within one month and as close as possible to the completion date of transfer. It is advisable to record the mechanics of the transfer of FuelEU information and liabilities in any sale and purchase agreements (i.e. Memoranda of Agreement (“MOAs”) ). BIMCO recently adopted a FuelEU Maritime Clause for Memoranda of Agreement (see here) which is a helpful starting point albeit perhaps too long and too complex to fit all transactions. Bespoke variations to the BIMCO clause are already starting to emerge and a tailored approach is recommended.
By 31 March 2026: notification of compliance balance
By 31 March 2026, and in each subsequent year, the verifier will have completed its annual assessment of each FuelEU report and must notify the shipping company of the vessel’s compliance balance.
By 30 April 2026: deadline to select compliance pathway/pay penalties
By 30 April 2026, and in each subsequent year, companies will need to decide whether to bank, borrow or pool any GHG intensity surplus or deficit to minimise financial exposures or whether to pay penalty. Any pooling, banking or borrowing will then be recorded with the verifier’s approval, in the FuelEU Database.
From 1 May 2026: penalties
The FuelEU regulation provides that a penalty must be paid between 1 May 2026 and 30 June 2026. Despite the ‘two consecutive periods’ rule, penalties will be payable in 2026. Whilst single-year non-compliance triggers immediate financial penalties, failure to comply for two consecutive reporting periods triggers more severe consequences. In 2026 if a vessel is in deficit, a penalty must be paid to become compliant. This is estimated to be around €645/tonne or 10% of annual fuel costs. Whereas if a vessel fails to hold a valid Document of Compliance for two or more consecutive reporting periods, the penalty amount itself is multiplied by 1+(n-1)/10 (where n is consecutive years). Furthermore, this can lead to expulsion orders from EU and EEA ports. We note that despite the delayed implementation in EEA, and Norwegian and Icelandic ports being temporarily treated as third-country ports, it is expected that by 2027, the FuelEU will be fully incorporated into the EEA Agreement, bringing Norway, Iceland and Liechtenstein into full scope, making them subject to the same compliance and expulsion rules as EU Member States
"2026 will determine where the shipping companies are on their decarbonisation journey – ahead of the curve, somewhere in the middle or lagging behind."
By 30 June 2026: FuelEU document of compliance
From 30 June 2026, ships subject to FuelEU must carry a valid DoC when entering an EU port. FuelEU DoCs are valid until 30 June the following year. If a ship fails to present a FuelEU DoC for two or more consecutive reporting periods, they could face expulsion orders and any penalty would carry a 10% uplift.
Conclusion
2026 will determine where the shipping companies are on their decarbonisation journey – ahead of the curve, somewhere in the middle or lagging behind. Thus, facing not only hefty penalties but also tough decisions on how to minimise exposure going forward and still remain attractive and competitive to future charterers. It is this moment of reckoning that will likely define where investments should flow, where cuts may need to be made and what changes will need to be affected when entering into fuel offtake agreements and/or new charterparties in the coming years. Disputes are inevitable, because the speedy development and implementation of FuelEU has left many gaps, which won’t be resolved until further regulatory changes are made.
Key contacts
Partner London
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