FuelEU Maritime is now transitioning from a phase of preparation into one of execution. Over the first compliance year, market participants have developed compliance strategies based on assumptions. Surplus positions were modelled, pooling arrangements were structured, and commercial transactions were entered into on the expectation that these structures would translate into regulatory outcomes once the FuelEU Database and its operational framework became operational.
With the first reporting cycle, this assumption is being tested. The question is now whether traded surplus can be operationalised within the new framework in a manner that produces the intended compliance result.
In this context, a central issue that is beginning to emerge is the disconnect between contractual entitlement to surplus and the ability to realise that entitlement within the official FuelEU Database recently released by the European Maritime Safety Agency (EMSA) .
FuelEU surplus as a regulatory construct
A persistent misconception in the market is the treatment of surplus as a freely transferable asset. In many discussions, surplus is implicitly compared to certificates or allowances in other regulatory systems such as EU ETS, where transfer of ownership can be effected through contractual arrangements alone. Under FuelEU Maritime, this analogy does not hold.
Surplus is not an abstract, detachable asset. It is intrinsically linked to the compliance balance of a vessel and is therefore vessel-specific. Its existence, allocation, and usability are defined not by contractual arrangements, but by how it is recorded within the system. In practical terms, this means that a surplus position only becomes relevant for compliance once it has been properly allocated and reflected in the official FuelEU Database.
Commercial agreements can establish the intention to transfer surplus, but they do not, in themselves, create regulatory recognition. They create a dependency on subsequent actions that must be taken by the parties who have the authority to record and validate that allocation.
The separation between FuelEU surplus trading and control
This leads to a structural characteristic of the FuelEU system that is often underestimated. The parties that negotiate and agree surplus transactions are frequently not the parties that have the ability to execute those transactions within the applicable system.
Access to, and control over, the FuelEU Database is tied to the entity responsible for the vessel under the FuelEU Maritime Regulation, the ISM company. As a result, the execution of any surplus transaction depends on whether the responsible entity, take the necessary steps to reflect the agreed allocation in the FuelEU Database.
This creates a separation between economic arrangements and operational control. A trader may intermediate a transaction and a charterer may rely on it for compliance, but neither party may have the authority to ensure that the allocation is actually executed. That authority rests with the ISM company through which the database is accessed.
Operational complexity in multi-party structures
In practice, this separation becomes particularly relevant in multi-party arrangements, which are increasingly common in the market.
A charterer operating a fleet of vessels across multiple owners may enter into a surplus transaction that, from a commercial perspective, appears straightforward. However, to execute such a transactions,, a series of coordinated actions is required. The charterer must communicate the agreed allocation to each relevant owner. The owners must in turn instruct their respective ISM companies (if different). The ISM companies must then free the vessel for pooling with the applicable seller based on the seller’s ISM company’s IMO number, approve the pool once finalised by the seller’s ISM company based on the agreed allocation and potentially subsequently execute any surplus banking as instructed by the charterer.
Where a charterer is dealing with a large and heterogeneous fleet, this process can involve numerous owners and multiple ISM managers, each with their own internal procedures, timelines, and approval requirements. The successful implementation of the transaction therefore depends not only on the agreement between buyer and seller, but on the timely and accurate cooperation of all parties in this chain. The party that has traded the surplus does not control this process. The party that relies on the surplus for compliance may not fully control it either. It can further be assumed that the likelyhood of intermediaries understanding shipping’s responsibility structures, the underlying data, or at all the reporting procedure, is low.
Timing and execution risk
The complexity of these structures is compounded by the limited timeframe within which allocations must be recorded. What may appear manageable when considered abstractly becomes significantly more fragile when execution must take place within a defined reporting window of a month.
A delay in communication, an internal approval process that takes longer than anticipated, or an incorrect entry in the database may prevent the allocation from being approved and verified in time. In such circumstances, the intended transfer of surplus does not materialise, regardless of the underlying commercial arrangements.
This introduces a form of execution risk that is distinct from traditional counterparty risk. Even where all parties intend to perform, the structure itself may fail to deliver the expected outcome within the required timeframe.
Implications for FuelEU surplus transactions
The increasing role of intermediaries in the market further amplifies this issue. Surplus is frequently traded through chains of parties that are progressively further removed from the original surplus-generating vessel and from the entities that have FuelEU Database access.
In such cases, what is being traded is not direct control over surplus, but rather a series of contractual commitments that depend on upstream performance and downstream execution. Each additional layer introduces further uncertainty as to whether the agreed allocation can ultimately be realised within the FuelEU Database. The consequence is that a transaction which appears complete from a commercial perspective may remain incomplete from a regulatory perspective.
When contractual expectations meet the FuelEU Database realities
This misalignment becomes critical when compliance positions are finalised. A buyer may have secured surplus and incorporated it into its compliance strategy. A seller may consider its obligations fulfilled. However, if the allocation has not been correctly recorded in the FuelEU Database, the regulatory position remains unchanged. The buyer continues to face a compliance deficit, and the anticipated mitigation does not materialise.
At that stage, the issue cannot be resolved by reference to the commercial agreement alone. The regulatory framework recognises recorded and verified allocations, not contractual intentions. Any discrepancy between the two may give rise to disputes, but it does not alter the compliance outcome.
Conclusion
The first operational phase of FuelEU Maritime is revealing a fundamental characteristic of the system. Compliance is not determined solely by what parties agree, but by what can be effectively implemented within the regulatory infrastructure and ultimately the FuelEU Database. Surplus transactions that rely on multiple intermediaries, fragmented ownership structures, or indirect access to the database carry a level of execution risk that is not always fully appreciated.
In this context, the relevant question is not simply whether surplus has been secured, but whether it can be reliably translated into a recognised compliance position within the required timeframe. Only where that alignment exists does surplus fulfil its intended function.
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Source: BetterSea LDA.
