Emissions regulations for shipping impact not only the ship but also the entire ecosystem of contracts surrounding the ship, including when the ship is sold. 

Following the proliferation of emissions regulations over the last 4 years, with FuelEU being the most significant development, the importance of the environmental qualities of the ship have increased. Resulting in a need to normalise consideration of, and contractual provision for, emissions liabilities in S&P transactions. 

From a Buyers' perspective, historical compliance with regulations, mitigating the risk of ship-specific enforcement action or penalty exposure and pricing a negative compliance balance will be of primary concern.  From a Sellers' perspective, the focus will be on protection from post-delivery liabilities, and the pricing of a positive compliance balance. Of importance to both parties, will be smooth execution of the administrative processes necessary to effect ongoing compliance and handover under the regulations in alignment with delivery. 

As explored in OceanOpt's article, if not provided for contractually in S&P transactions, emissions liabilities can result in significant hidden costs. While industry clauses have recently been published, and can provide a helpful starting point for negotiations, our experience is that drafting solutions typically need to go further: covering wider territory, both conceptually and temporally; interfacing with the regulations more precisely, and integrating cut of points and remedies with the wider terms of the MOA. 

Although the risks of failing to address emissions liabilities are significant, tackling them early, with specialist technical and legal support, will empower the parties to better understand what is being bought and sold (besides the hull). This enables agreement on pricing and terms, and avoids transaction disruptions, compliance surprises and post-delivery disputes, whilst ensuring the intended transaction value (and the ship) is smoothly delivered.