30 October 2023 (Lloyd's List) - THE International Maritime Organization may need a new convention if it wants to impose fiscal measures to decarbonise shipping, a senior maritime lawyer told the International Bar Association annual conference in Paris today.
London-based Stephenson Harwood partner Haris Zografakis said it would be difficult for market-based measures that raised funds to sit alongside the convention under which greenhouse gas reduction regulatory targets were set.
Achieving greater energy efficiency on ships to comply with these targets right now was a contractual challenge, according to Zografakis, speaking at the Maritime and Transport Law Committee session.
“Carbon efficiency is about the rethinking our contracts, nothing to do with the IMO. It’s everything to do with contracts and operational, commercial and contractual practices,” he said.
How the IMO would impose a market-based measure and whether that would be in the form of a global carbon tax or emissions trading scheme was also uncertain as these were commercial considerations too, he said.
An expert group at the IMO is undertaking a feasibility study into a basket of market-based measures which incorporate both technical and economic proposals. A decision is expected by 2025.
“We should not expect the IMO to do things for which it has no jurisdiction... in hard legal terms to impose a fiscal measure,” Zografakis said.
“The IMO is a body that is tasked with regulating certain technical aspects of ships. It is not a body set up, or with jurisdiction, to introduce fiscal measures.
“If you want to do that you need to have a different convention.”
He said it would be difficult to introduce a market-based measure via Marpol Annex VI, where the greenhouse gas reduction strategy is incorporated.
The IMO might need to look at how it dealt with oil pollution liability: with a new convention that formed the basis of the International Oil Pollution Compensation Funds.
Zografakis described the carbon intensity indicator — designed by the IMO and introduced this year to grade ships from A to E, as a “mess”.
It was not just a technical measure but had operational and commercial aspects, he said.
“The IMO was never designed to regulate that trade,” he said.
“It is often forgotten that maritime trade is unregulated.
“No one regulates the flow and the purchase and sale and transportation of commodities worldwide. It is unregulated. It is a jungle, which is why we (lawyers) all exist.”
Zografakis chairs the decarbonisation working group for the Comité Maritime International, and is also working on the Blue Visby initiative, which aims to prevent ‘sail fast and wait’ operational practices.
He said the biggest priority right now was not the energy transition.
Some 20% of shipping’s carbon footprint was unrelated to technology and linked to operational practices underpinned by contracts, he said.
“That (technology) will take care of itself when the engineers and chemists and the big industrials will figure out a way to create and use a new energy source,” he said.
“What matters today is making ships more efficient today, limiting the carbon footprint."
Optimising ships to reduce emissions meant overcoming contractual hurdles. Shipping had to reimagine charterparties so laycan — the period in which a vessel must arrive at the port of loading — was no longer “sacred”.
“We will need to rethink speed warranties in charterparties; there's no room for those anymore if we want to optimise for carbon," Zografakis said.
“We need to rethink delivery periods and sell contracts. We need to kill demurrage.”
Lawyers now appreciated they needed to be in the room when decarbonisation conversations were happening, he said.
“It is emphatically not something only for the technical people, regulators and policy makers. We, the maritime law community, have a big role in this because maritime trade is fundamentally a question of contract.”
