Skip to main content
SpringerLink
Log in

Legal Aspects of Green Shipping Finance: Insights from the European Investment Bank’s Schemes

  • Chapter
  • First Online:
Maritime Law in Motion

Part of the book series: WMU Studies in Maritime Affairs ((WMUSTUD,volume 8))

Abstract

This chapter maps the scope of the green principles which underpin the EU Green Shipping Finance facility and links them to wider issues of legal and contractual competencies. It is premised on the proposition that the concept of green shipping finance should be construed widely because the impact of greening extends far beyond mere ship design and build but to the longer global supply chain. The challenge is that a finance facility, however green, will always have contractual constrictions, policy constraints and finance prudential limits. The wider theoretical framework thus entails a questioning of the concept of “green finance” itself. Broadly speaking, should not all financing be “green”? This paper makes two contributions. The first is to link the concept of “green” to the legal competencies of the EIB using the green shipping finance facility example. That stresses the importance of integrating green principles in the legal infrastructure of the finance provider. Secondly, the research problem is, in the main, how could a traditionally conservative and contractually closed ended finance facility accommodate, more flexibly, the risks of green shipping for finance providers, whether public or private. The paper evaluates how these arrangements might be better structured and assesses the model commonly used to promote green shipping finance, the so-called blending of public-private financing. This research is therefore intended to be relevant for green shipping financing initiatives beyond European shores.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 149.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 199.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 199.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    http://www.eib.org/en/infocentre/press/releases/all/2018/2018-036-ing-and-eib-provide-eur-300m-to-finance-green-shipping.htm.

  2. 2.

    Ibid.

  3. 3.

    As arranger, that entails bringing together various investors/financers.

  4. 4.

    See Societe Generale’s press release at https://www.societegenerale.com/en/newsroom/The-European-Investment-Bank-Societe-Generale-and-Brittany-Ferries-successfully-sign-first-green-financing-in-the-maritime-transport-sector.

  5. 5.

    See regulations introduced under the auspices of Annex VI to the International Convention for the Prevention of Pollution from Ships (MARPOL Convention); Until 31 December 2019, for ships operating outside Emission Control Areas, the limit for sulphur content of ships’ fuel oil is 3.50% m/m (mass by mass). The 0.50% m/m limit will apply on and after 1 January 2020, as decided by the IMO’s Marine Environment Protection Committee (MEPC 70) in October 2016. The IMO advises that “an increasing number of ships are also using gas as a fuel as when ignited it leads to negligible sulphur oxide emissions. This has been recognised in the development by IMO of the International Code for Ships using Gases and other Low Flashpoint Fuels (the IGF Code), which was adopted in 2015. Another alternative fuel is methanol which is being used on some short sea services. Ships may also meet the SOx emission requirements by using approved equivalent methods, such as exhaust gas cleaning systems or “scrubbers”, which “clean” the emissions before they are released into the atmosphere. In this case, the equivalent arrangement must be approved by the ship’s Administration (the flag State).” (page 2, IMO FAQ on the 2020 Global Sulphur Limit at http://www.imo.org/en/MediaCentre/HotTopics/GHG/Documents/2020%20sulphur%20limit%20FAQ%202018.pdf). Both options require extensive works to be carried out on vessels.

  6. 6.

    Green Investment Bank (2014a). Green Investment Principles http://www.greeninvestmentbank.com/media/44647/green_investment_principles_01_1114.pdf.

  7. 7.

    GIB (2014b). Green Investment Policy. http://www.greeninvestmentbank.com/media/44648/gib_green-investment-policy_1114.pdf.

  8. 8.

    This issue is addressed below.

  9. 9.

    UNEP Briefing Paper at http://unepinquiry.org/wp-content/uploads/2017/11/Greening_the_Financial_System_Exploring_the_Ways_Forward.pdf; consider too the UNEP Task Force on Climate-related Financial Disclosures (TCFD) Recommendations of June 2017 at https://www.fsb-tcfd.org/.

  10. 10.

    Höhne et al. (2012).

  11. 11.

    Zadek and Flynn (2013); Bloomberg New Energy Finance referred to in the quotation is a research organisation on energy finance (https://about.bnef.com/about/).

  12. 12.

    http://www.g20.utoronto.ca/2016/green-finance-synthesis.pdf at p. 3.

  13. 13.

    Ibid, at 3–5.

  14. 14.

    That was a practice which originated at ports in California, USA.

  15. 15.

    http://www.eib.org/attachments/documents/eib_standard_contractual_clauses_on_environmental_information_en.pdf.

  16. 16.

    This principle stems from the public international law principles on the subject; see for example Colin and Sinkondo (1992), Schneider (1993), Mann (1959), Delaume (1962), Jenks (1962). See also Sauter and Schepel (2009).

  17. 17.

    Information is derived from the EIB website http://www.eib.org/en/projects/sectors/transport/index.htm.

  18. 18.

    See for example the development of the Dublin port which secured EUR 100 million from the EIB in 2015 to deepen the navigation channel to allow for bigger container and cruise ships. The project was estimated to cost EUR 230 million—as can thus be seen, the EIB’s contribution there is less than 50%.

  19. 19.

    In 2015 the EIB provided financing to intermediaries in France who provided financial assistance to home owners to retrofit their homes to meet better environmental standards. The total being financed was approximately EUR 400 million.

  20. 20.

    The EIB for instance provided EUR 85m—the initial tranche of a EUR 200m loan to cover 50% of Metro de Madrid’s investments until 2019 to upgrade and modernise its infrastructure. Source: EU Monitor (https://www.eumonitor.nl/9353000/1/j9vvik7m1c3gyxp/vkp8g3e84xls?ctx=vg9pk3qd26zl).

  21. 21.

    In 2015, the EIB invested in a fund, the Copenhagen Infrastructure II, which targets investments primarily in newly established (greenfield) energy-related projects mainly in Northern and Western Europe. The EIB’s involvement and the European Fund for Strategic Investment (EFSI) guarantee are intended to help attract private investors and other international financiers to participate in the fund. The fund has a target size close to EUR 2bn. (https://ec.europa.eu/commission/sites/beta-political/files/examples-efsi-financed-projects-overview_en.pdf).

  22. 22.

    Blending public and private finance.

  23. 23.

    The EIB considers the following to fall within “infrastructure investment”:

    • Essential services for the majority of the population and businesses, either relating to physical flows in the real economy (i.e. transport, energy, broadband) or to social goods (education, healthcare);

    • Government either as a direct client (via fixed term concession) or highly proximate to the transaction (through economic regulation);

    • Long term in nature (thus requiring long term finance);

    • Stable cash flows, particularly where payments are based on availability rather than demand (which is often beyond the control of a given project); charges may be linked fully or partially to inflation;

    • Natural monopolies, either due to network characteristics/capital intensity or government policy;

    • Generally low technological risk. (EIB, An outline guide to Project Bonds Credit Enhancement and the Project Bond Initiative 2012 at p. 4).

  24. 24.

    In finance terminology, a subordinated instrument.

  25. 25.

    An example is the financing of the A11 Brugge motorway in Belgium.

  26. 26.

    For the 2013 version see http://www.eib.org/attachments/general/statute/eib_statute_2013_07_01_en.pdf.

  27. 27.

    Notably art 309, TFEU.

  28. 28.

    On July 31, 2018, S&P Global Ratings affirmed its ‘AAA’ long-term and ‘A-1+’ short-term issuer credit ratings on the European Investment Bank (EIB), despite the withdrawal of the UK from the EU. See S&P Global, Research Update (July 2018) at www.spratings.com.

  29. 29.

    Art 309, TFEU makes this characteristic of the bank clear.

  30. 30.

    Art 20(1) Statute of the EIB.

  31. 31.

    Art 16, Statute of the EIB.

  32. 32.

    Per Advocate General Miguel Poiares Maduro writing in a personal capacity (see Interpreting European Law: Judicial Adjudication in a Context of Constitutional Pluralism, Article 8 (2007) Vol. 1, Issue 2 European Journal of Legal Studies 5).

  33. 33.

    The matter of extra territorial reach of EU competition law has been extremely controversial for obvious reasons—see generally C-89/85 A. Ahlström Osakeyhtiö and others v Commission [1988] ECR 1-5913 (Woodpulp); T-102/96 Gencor Ltd v. Commission [1999] ECR II-753 (Gencor); and more recently C-413/14 P Intel Corporation Inc v. Commission (Intel) ECLI:EU:C:2017:632. Indeed, the CJEU has made it plain that, as regards the application of Article 101 TFEU, that the fact that an undertaking participating in an agreement is situated in a third country does not prevent the application of that provision if that agreement is operative on the territory of the internal market (judgment of 25 November 1971, Béguelin Import, 22/71, EU:C:1971:113, para 11).

  34. 34.

    Decision No 1080/2011/EU of the European Parliament and of the Council of 25 October 2011 granting an EU guarantee to the European Investment Bank against losses under loans and loan guarantees for projects outside the Union.

  35. 35.

    Annex I to Decision No 633/2009/EC.

  36. 36.

    Recital 15.

  37. 37.

    Art 4 of the Decision.

  38. 38.

    See, for example, EIB “Transport Lending Policy” (2011) para 4 at p. 3 available at http://www.eib.org/attachments/strategies/transport_lending_policy_en.pdf.

  39. 39.

    ibid.

  40. 40.

    The TEN-T project aim to: “establish and develop the key links and interconnections needed to eliminate existing bottlenecks to mobility; fill in missing sections and complete the main routes - especially their cross-border sections; cross natural barriers; and improve interoperability on major routes”. As at 2014, €6.95 billion has been committed to 662 projects which covers all modes of transport and transport infrastructure. (source: https://ec.europa.eu/inea/en/ten-t/ten-t-projects).

  41. 41.

    Supra n. [38] at p. 3.

  42. 42.

    Ibid, at p. 4.

  43. 43.

    Art12, Decision No 884/2004/EC of the European Parliament and of the Council of 29 April 2004 amending Decision No 1692/96/EC on Community guidelines for the development of the trans-European transport network: Official Journal L 167, 30 April 2004 P.0001 – 0038, COM(2004)0884); see too EC Commission White paper European transport policy for 2010: time to decide (2001).

  44. 44.

    Note the deliberate use of the term “inter-modal” rather than “multimodal”, suggesting that conceptually it envisages the involvement of several contracting carriers and several transport documents, rather than just a single transport document and one primary carrier for the carriage.

  45. 45.

    Usually expected to be around 50% of the total project budget.

  46. 46.

    Which came into force on 1 January 2015.

  47. 47.

    2008-EU-21015-P (one of the first projects under the MoS scheme).

  48. 48.

    https://ec.europa.eu/inea/en/connecting-europe-facility/cef-transport/cef-transport-motorways-sea#2016%20mos; indirect access at https://ec.europa.eu/inea/en/connecting-europe-facility/cef-transport.

  49. 49.

    Vessel Traffic Management Information System.

  50. 50.

    Supran. [48].

  51. 51.

    Ibid.

  52. 52.

    See reports of the projects funded since 2006 at https://ec.europa.eu/inea/en/connecting-europe-facility/cef-transport/cef-transport-motorways-sea#2016%20mos.

  53. 53.

    For a list of the core ports and comprehensive ports, please see https://ec.europa.eu/transport/sites/transport/files/modes/maritime/ports/doc/2014_list_of_329_ports_june.pdf.

  54. 54.

    Ibid; hence, letters of support from the industry and user groups would be viewed positively.

  55. 55.

    Art 18, TFEU generally.

  56. 56.

    The project of which must be infrastructure related, see above.

  57. 57.

    See M. Clintworth’s presentation of the EGSG in September 2018 (https://www.marinemoney.com/system/files/media/2018-09/2.Mr_.%20Mark%20Clintworth.pdf); a similar presentation was given by another EIB official, Francois Gaudet at https://ec.europa.eu/inea/sites/inea/files/4.green_shipping_presentation.pdf.

  58. 58.

    Powers to be exercised in pursuant to art 7(3)(b), EIB Statute.

  59. 59.

    Supra n. 27; art 309 provides: “The task of the European Investment Bank shall be to contribute, by having recourse to the capital market and utilising its own resources, to the balanced and steady development of the internal market in the interest of the Union. For this purpose the Bank shall, operating on a non-profit-making basis, grant loans and give guarantees which facilitate the financing of the following projects in all sectors of the economy:

    (a) projects for developing less-developed regions; (b) projects for modernising or converting undertakings or for developing fresh activities called for by the establishment or functioning of the internal market, where these projects are of such a size or nature that they cannot be entirely financed by the various means available in the individual Member States; (c) projects of common interest to several Member States which are of such a size or nature that they cannot be entirely financed by the various means available in the individual Member States.

    In carrying out its task, the Bank shall facilitate the financing of investment programmes in conjunction with assistance from the Structural Funds and other Union Financial Instruments.”

  60. 60.

    Second paragraph to art 18(2).

  61. 61.

    See above, at Part 5.

  62. 62.

    Sectoral is used here to refer to specific sectors of industry or economy.

  63. 63.

    http://www.eib.org/en/products/index.htm.

  64. 64.

    Cooley (1977), Hoffmann et al. (2015), Hoffmann and Post (2017), Froot et al. (1993), and Weber et al. (2005).

  65. 65.

    See article in City AM (5 November 2018) reporting that London-based CargoMate has developed a platform that helps containerships minimise delays in port, allowing them to sail slower and save fuel. A company based in Hull, England, called Relmar is developing an AI-powered maintenance platform for vessels that maximises uptime while minimising risk and cost. A new report by think tank PUBLIC examines which technologies will transform the maritime trade sector, and highlights 65 of the most promising maritime startups around the world. One of the key findings of the report is that there is an opportunity to make the UK a hub for digital innovation in maritime that will not only drive greater green efficiencies across the industry. (https://view.publitas.com/public-1/frictionless-trade-report/page/1). However, these start ups are not always clear as to the availability of public sector financing (such as that from the EIB, Brexit notwithstanding).

  66. 66.

    Supra n. 27.

  67. 67.

    Ibid.

  68. 68.

    Supra n. 15.

References

Download references

Author information

Authors and Affiliations

  1. City, University of London, London, UK

    Jason Chuah

Authors
  1. Jason Chuah
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Jason Chuah .

Editor information

Editors and Affiliations

  1. Faculty of Law, Dalian Maritime University, Dalian, China

    Proshanto K. Mukherjee

  2. Maritime Law and Policy, World Maritime University, Malmö, Sweden

    Maximo Q. Mejia Jr.

  3. Plymouth Business School, University of Plymouth, Plymouth, UK

    Jingjing Xu

Rights and permissions

Reprints and permissions

Copyright information

© 2020 Springer Nature Switzerland AG

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Chuah, J. (2020). Legal Aspects of Green Shipping Finance: Insights from the European Investment Bank’s Schemes. In: Mukherjee, P.K., Mejia, M.Q., Xu, J. (eds) Maritime Law in Motion. WMU Studies in Maritime Affairs, vol 8. Springer, Cham. https://doi.org/10.1007/978-3-030-31749-2_8

Download citation

  • DOI: https://doi.org/10.1007/978-3-030-31749-2_8

  • Published:

  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-030-31748-5

  • Online ISBN: 978-3-030-31749-2

  • eBook Packages: Law and CriminologyLaw and Criminology (R0)

Publish with us

Policies and ethics

Search

Navigation