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June 2017

Qatar - Trading Prohibitions

The European Union’s Emissions Trading System (EU ETS) was extended to cover emissions from shipping as of 1st January 2024.

The EU ETS is limited by a 'cap' on the number of emission allowances. Within the cap, companies receive or buy emission allowances, which they can trade as needed. The cap decreases every year, ensuring that total emissions fall.

Each allowance gives the holder the right to emit:

  • One tonne of carbon dioxide (CO2), or;
  • The equivalent amount of other powerful greenhouse gases, nitrous oxide (N2O) and perfluorocarbons (PFCs).
  • The price of one ton of CO2 allowance under the EU ETS has fluctuated between EUR 60 and almost EUR 100 in the past two years. The total cost of emissions will vary based on the cost of the allowance at the time of purchase, the vessel’s emissions profile and the total volume of voyages performed within the EU ETS area. The below is for illustration purposes:
  • ~A 30.000 GT passenger ship has total emissions of 20.000 tonnes in a reporting year, of which 9.000 are within the EU, 7.000 at berth within the EU and 4.000 are between the EU and an outside port. The average price of the allowance is EUR 75 per tonne. The total cost would be as follows:
  • ~~9.000 * EUR 75 = EUR 675.000
  • ~~7.000 * EUR 75 = EUR 525.000
  • ~~4.000 * EUR 75 * 50% = EUR 150.000
  • ~~Total = EUR 1.350.000 (of which 40% is payable in 2024)
  • For 2024, a 60% rebate is admitted to the vessels involved. However, this is reduced to 30% in 2025, before payment is due for 100% with effect from 2026.
  • Emissions reporting is done for each individual ship, where the ship submits their data to a verifier (such as a class society) which in turns allows the shipowner to issue a verified company emissions report. This report is then submitted to the administering authority, and it is this data that informs what emission allowances need to be surrendered to the authority.
  • The sanctions for non- compliance are severe, and in the case of a ship that has failed to comply with the monitoring and reporting obligations for two or more consecutive reporting periods, and where other enforcement measures have failed to ensure compliance, the competent authority of an EEA port of entry may issue an expulsion order. Where such a ship flies the flag of an EEA country and enters or is found in one of its ports, the country concerned will, after giving the opportunity to the company concerned to submit its observations, detain the ship until the company fulfils its monitoring and reporting obligations.
  • Per the EU’s Implementing Regulation, it is the Shipowner who remains ultimately responsible for complying with the EU ETS system.

There are a number of great resources on the regulatory and practical aspects of the system – none better than the EU’s own:

‍https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02003L0087-20230605

‍https://climate.ec.europa.eu/eu-action/transport/reducing-emissions-shipping-sector_en

‍https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets/what-eu-ets_en‍

Please kindly find a circular from the London P&I Club, a member of the International Group Clubs explaining the position of the four countries (UAE, Saudi Arabia, Bahrein, Egypt) trading prohibitions against Qatar. The importance is placed on prohibition of vessels coming from a Qatar port not allowed into those countries. Restrictions vary from country to country.

Qatar - Trading Prohibition

Members will be aware from international news reports that various Gulf nations -  including the UAE, Saudi Arabia, Bahrain and Egypt - announced on 5 June 2017 that they will halt diplomatic and trading ties with Qatar. This includes the suspension of land, air and sea traffic with Qatar, and with Qatari citizens and diplomats given two weeks' notice to leave.

The Club has received updates from our local correspondents in the Gulf, which can be summarised as follows:

UAE

The Club Correspondent in Dubai, Gulf Agency Company (Dubai) LLC, reports that:"Jebel Ali immigration has announced that no vessels that are coming from Qatar will be permitted into the port and no clearance will be given to any port calling Qatar from Jebel Ali."

The Port of Fujairah issued a Notice to Mariners no. 224 dated 5 June 2017 advising that vessels flying flags of Qatar or vessels destined to or arrival from Qatar ports are not allowed to call Port of Fujairah and Fujairah Offshore Anchorage regardless their nature of call till further notice.

Additional information has been provided by One Maritime, including more detailed UAE port information from 5/6/2017 (click here to access a copy) and updated information on Ports in UAE, Bahrain, Saudi Arabia and Qatar as of  6/6/2017 (click here to access a copy).

SAUDI ARABIA

The General Organization of Saudi Sea Ports Authority announced this evening to all shipping agents not to receive any vessels hosting Qatari flag or owned by Qatari companies or individuals as well as to unload any goods of Qatari origin in Saudi ports.

BAHRAIN

The Ministry of Transportation and Telecommunications has issued a notice advising that marine navigation from Bahrain Ports and territorial waters to State of Qatar shall be suspended from 6th June 2017. Click here to access a copy of the Notice.

EGYPT

The correspondent in Alexandria, Middle East Survey & Control Office, has provided the following information:

"There has been no action taken concerning the ports till this moment. However, it is expected that any vessels flying the Qatari flag will not be permitted to enter Egyptian PORTS.

There has been no indication that any vessel calling from/ to Qatar after Egypt will be problematic.

We are also advised that flights between the two countries will be temporarily suspended.

There will be difficulties for any Qatari Nationals entering Egypt - but this has yet to be made clearer.

In regards to the crossing of the Suez Canal please note that as Egypt & Qatar are not at war then all canal crossing vessels will not be affected in any way; but Qatari crew may be affected if requiring to change in Egypt while crossing the canal. Please refer to:

http://www.suezcanal.gov.eg/English/About/CanalTreatiesAndDecrees/Pages/ConstantinopleConvention.aspx"

Members who already have existing contracts which require a call at Qatari ports should give careful consideration as to whether they will be able to fulfill the contract and/or whether they are legally obligated to proceed, if possible before loading any cargo. Further, whilst the current prohibitions are directed towards blocking Qatari flagged vessels from entering the Middle Eastern ports, there is a concern that the UAE may block foreign flagged vessels that have/will call in Qatar. Should this be implemented and/or if other states follow suit the trading pattern of the ship could be a potential problem.  Hence, those considering calling at Qatari ports in the future are recommended to fully analyse the implications of calling Qatar before agreeing to do so and should be duly diligent in implementing suitable contractual provisions in charterparties and other contracts to try to either avoid such a call or deal with the consequences.

Best regards

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