BIMCO publishes the “Biofuel Clause for Time Charter Parties 2026”

The sustained industry focus on decarbonisation, alternative fuels and the evolving regulatory regimes, including FuelEU Maritime and Emissions Trading System (ETS) schemes, has increased interest in biofuels as a key transitional option for meeting decarbonisation objectives

Where sourced from sustainable feedstocks, biofuels can deliver substantial reductions in lifecycle carbon emissions without requiring major modifications to existing vessels. This makes them an increasingly important tool in meeting both regulatory and commercial decarbonisation targets.

BIMCO has published the Biofuel Clause for Time Charter Parties 2026 (the "Clause"), which provides a contractual framework for allocating responsibilities, risks and costs between owners and charterers where biofuels are used. It addresses key operational and commercial considerations, including fuel compatibility, performance implications and the limited shelf life of biofuels.¹ 

Quality and Specification 

The Clause is designed to provide a clear framework for the specification and quality of biofuels supplied by charterers during the charter period. 

Charterers must either supply biofuels that comply with the ISO 8217 standards identified in subclause (a) of the Clause or obtain the owners’ prior written consent before supplying biofuel that is of a different specification, grade or blend to subclause (a). In such case, owners may require that the biofuel be quality tested by a jointly appointed laboratory at the charterers’ expense for compliance with regulatory, class and original engine manufacturer requirements.

The Clause also places responsibility on charterers to ensure that the biofuel supplied is stable, homogeneous and suitable for use by the vessel’s engines or auxiliaries (subclause (c)). As a result, the risk associated with the quality of the biofuel largely rests with the charterers. 

Where supplied biofuel fails to meet the agreed requirements and this results in loss or damage to owners or the vessel, the charterers will generally be responsible for the consequences of that non-compliance. In such circumstances, the non-conforming biofuel may be offloaded from the vessel at charterers’ cost, and owners are not liable for time lost or reduction in performance. 

However, recognising that debunkering can be both costly and operationally disruptive, the Clause requires the parties to use reasonable efforts to explore whether corrective measures can be implemented to render the fuel suitable for consumption (subclause (f)). 

In doing so, the Clause promotes a practical and collaborative approach to resolving fuel quality issues before more costly remedial steps are taken. Nonetheless, it should be noted that owners will not be obliged to consume biofuel that fails to comply with subclause (c).

Operational Considerations

Both owners and charterers are subject to obligations under the Clause designed to promote effective operational planning and the safe use of biofuels. 

Owners warrant that the vessel is capable of consuming the relevant biofuel allowed to be supplied under the terms of the charterparty and that the crew are suitably trained to handle and manage it safely (subclause (g)). 

Recognising the practical steps required to prepare a vessel’s fuel tanks for the use of biofuels, the Clause requires charterers to provide reasonable notice of the intended grade(s), blend(s) and quantity before supplying biofuel, although no specific notice period is prescribed (subclause (d)).  

Additionally, whilst the Clause envisages that owners may need to take certain steps to prepare the vessel, where tank cleaning is reasonably required by the owners, the associated costs and any time lost fall to charterers’ account (subclause (g)). The owners may only request such cleaning where it is supported by industry standards and is required as a direct result of the biofuel supplied by the charterers.

Charterers must also give written instructions specifying when the vessel is to commence using the biofuel, enabling owners to manage fuel segregation and consumption effectively.

More broadly, the Clause adopts a collaborative approach, requiring owners and charterers to work together to ensure that biofuels can be used safely and efficiently on board the vessel. In doing so, it seeks to minimise operational risks and facilitate the practical use of biofuels during the charter period.

Performance Warranties

Vessel speed and consumption warranties under charterparties are typically based on conventional fuels, which generally have a higher energy content than biofuels, as reflected in their respective Lower Calorific Values (LCVs). 

Recognising this, the Clause provides parties with two alternative mechanisms for addressing the impact of biofuels on vessel performance: (i) they may either agree to apply a percentage adjustment to the speed and/or consumption warranties, or (ii) they may apply an LCV Adjustment Factor to the consumption figures that were agreed under the charterparty (subclause (j)(i) and (ii)).

The Clause seeks, thereby, to reduce the scope for disputes over vessel performance and consumption by offering a practical mechanism for accommodating the different performance characteristics of biofuels.

Storage and Use 

Biofuels present a number of unique storage and fuel management challenges due to issues with degradation. As a result, the Clause provides that biofuels of different grades, specifications or batches must be stored in separate tanks within the vessel’s natural segregation. 

The Clause, therefore, requires the segregation of biofuel batches, regardless of source, reflecting the operational reality that variations between batches may affect fuel quality and performance (subclause (h)). 

Responsibility for such segregation rests with the owners, although owners are not liable for any resulting reduction in available fuel tank capacity.

The Clause also recognises that due to the risk of degradation, biofuels are less suited to long-term storage than conventional marine fuels. To address this, the parties may agree a specific period within which the biofuel must be consumed, failing which a default period of 90 days will apply (subclause (k)). 

If the biofuel remains unconsumed at the end of that period, owners have the option to require it be tested by a jointly appointed laboratory at the charterer’s cost (unless the failure to consume has arisen from  the owners’ fault). Following testing, if the fuel remains compliant with subclause (c), the Clause provides that the biofuel shall be consumed as soon as practicable, but no later than a pre-agreed period for consumption of the fuel, with a default period of 30 days applying in the absence of agreement. Alternatively, if the fuel is non-compliant, then the charterers are liable for any loss or damage, including the time and costs of debunkering, unless the failure to consume the biofuel has arisen from the owners’ fault.

Comment

The BIMCO Clause represents a further step in facilitating the shipping industry’s decarbonisation efforts by providing a clear framework for allocating the risks and costs associated with the use of biofuels under charterparties. By addressing issues such as fuel quality, vessel performance and practical challenges associated with the use and storage of biofuels, the Clause provides greater contractual certainty for the owners and charterers whilst seeking to minimise potential areas of contention. 

However, it is worth owners and charterers considering whether the allocation of risks and costs in the Clause align with their commercial objectives. Furthermore, where biofuels are being used to obtain favourable treatment under decarbonisation regimes, parties should consider supplementing the clause to address applicable certification requirements, including in relation to sustainability.

¹BIMCO - Biofuel clause now available to support transition to low-carbon fuels