Bareboat Charter Party: Possession, Liability and Finance

A bareboat charter party, also called a demise charter, is a contract under which a shipowner transfers possession and full operational control of a ship to a charterer for an agreed period, against payment of hire. The charterer mans, maintains, insures and operates the ship at its own cost. The owner keeps title, the right to hire, and the ship back at redelivery.

That single transfer of possession separates the bareboat charter from every other way of hiring a ship. Almost everything a practitioner needs to know follows from it: who employs the crew, who holds the certificates, who surrenders emission allowances, whose debts can get the ship arrested, and which party a pollution convention names. The chartering and charter parties overview sets the demise charter alongside the voyage charter , the time charter and the contract of affreightment ; this article is the demise structure in full.

What a bareboat charter transfers

Possession is the whole of the difference. Under a voyage or time charter the owner keeps the ship, mans it and runs it, and sells the charterer a service: a cargo moved, or a period of the ship’s earning capacity. Under a bareboat charter the owner hands over the ship itself and keeps a financial interest in an asset it no longer controls.

Everything else follows. The charterer appoints the master and crew, and they answer to the charterer rather than to the registered owner. It buys the bunkers, the lubricating oil, the stores and the spares, and carries the bunker quality risk that goes with them. It arranges the hull and machinery cover and the P&I entry, books the dry dockings, pays for the steel renewals and the coating work, and keeps the ship in class and in statutory certification. It is normally the carrier under the bills of lading its master signs, and it answers for the cargo claims that follow.

The registered owner, out of possession for years at a time, is left holding an asset it cannot operate and cannot inspect at will. Almost every operative provision in a bareboat form exists to protect that position: the maintenance and class covenants, the insurance and joint-names requirements, the restrictions on liens, mortgages and sub-chartering, the inspection right, and the redelivery condition.

Bareboat, time and voyage charters compared

The three structures allocate cost, control and risk in a fixed pattern, and the pattern is what a fixture is chosen on.

A trip time charter sits inside the time charter column, and a slot or space charter buys carrying capacity without any of the three. Only the bareboat charter moves possession.

How a court decides a charter is a demise

A charter is a demise only where the owner has completely and exclusively relinquished possession, command and navigation of the ship. That is the test the United States Supreme Court applied in Guzman v Pichirilo, 369 US 698 (1962), decided 21 May 1962. The Court described a demise as tantamount to, though just short of, an outright transfer of ownership, and held that anything short of such a complete transfer is a time or voyage charter party or not a charter party at all. English law arrives at the same place through The Giuseppe di Vittorio [1998] 1 Lloyd’s Rep 136 (CA), where the demise charterer was described as obtaining possession and control with the master and crew employed by and answerable to it.

The burden sits on the party asserting the demise, and Guzman v Pichirilo called it heavy, because courts are reluctant to find a demise where the dealings between the parties are consistent with any lesser relationship. An owner arguing that it is not liable because somebody else had the ship has to prove the transfer.

Two crude tests fail. The label on the document does not decide it, and neither does the payroll: the Supreme Court held in the same case that the master being employed by the owner is not fatal to the creation of a demise. A charter that leaves the owner with a right to direct the ship’s operation is not a demise however it is titled.

A bareboat charterer is also not, by that fact alone, a disponent owner. That term describes an intermediate party holding a ship on a head charter and chartering it out further down the chain, which is the subject of charter chains and sub-chartering , so a bareboat charterer becomes a disponent owner only when it sub-charters.

BARECON 2017: the standard form

BIMCO’s BARECON 2017 is the current standard bareboat charter party and the form most negotiated bareboat charters start from. Its lineage runs from BARECON A and BARECON B, first published in 1974, amalgamated and revised as BARECON 89, revised again in 2001 and then in 2017.

The form is built in five parts so that one document can serve both a straight bareboat hire and a financing structure:

Where Part III, IV or V applies, Parts I and II prevail over them on any conflict.

Five changes from BARECON 2001 are worth knowing before working from an older draft. Part IV became a purchase option, giving the charterer several opportunities to buy during the term at a pre-agreed price, replacing the 2001 hire-purchase arrangement under which title transferred on final payment of hire where that option had been elected. The insurance provisions were amended after The Ocean Victory to clarify that loss-insurance proceeds cover the owner’s loss without shutting out claims against the charterer or a third party. An anti-corruption clause was added, and a sanctions provision drawn from BIMCO’s Designated Entities Clause, with a termination right on breach; the wider clause set is covered in BIMCO sanctions clauses . The charter period became extendable at the charterers’ option rather than fixed at a single term, and in the newbuilding part the right to terminate the building contract moved to the owner.

This article cites no BARECON 2017 clause numbers. The clause text and BIMCO explanatory notes sit behind a members-only wall, and the numbering changed between the 2001 and 2017 editions, so a number taken from a briefing on the earlier form does not carry across. A wrong clause number in a contractual argument is worse than none.

The charterer’s operating obligations

The charterer takes on the full operating burden of a shipowner for the charter period, and the charter converts that burden into covenants the owner can enforce and a lender can rely on.

Crew and manning. The charterer hires, employs, pays, trains and repatriates the crew, and answers for their certification under the STCW Convention and for the labour standards in MLC 2006 . Wage claims, employment disputes and repatriation costs are the charterer’s, with the caveat set out below that unpaid wages become the ship’s problem through the lien route.

Maintenance and class. The charterer maintains the ship, arranges and pays for surveys and dry dockings, and keeps class and statutory certification current. Maintaining class is the measurable proxy for maintaining the asset, which is why bareboat maintenance covenants are drafted around it and why conditions of class and outstanding recommendations feature in the redelivery standard. Ships on a continuous survey of hull and machinery cycle carry that cycle through the charter.

Insurance. The charterer places and pays for the hull and machinery cover, the P&I entry and war risks cover, normally in joint names with the owner and normally with the owner holding approval rights over the underwriters, the values and the deductibles. The insurance section below explains why the joint-names point is the most consequential drafting decision in the document.

Operating costs and compliance. Port charges, pilotage, towage, agency, stores, bunkers, communications and every regulatory cost fall to the charterer. So does the compliance work: the safety management system, the security plan, the SEEMP and the emissions reporting.

Restrictions. The owner’s protection sits in the negative covenants: no liens created against the ship, no mortgage or encumbrance granted by the charterer, no structural alteration without consent, no change of class or flag without consent, and sub-chartering permitted only within stated limits. A lien clause in a bareboat charter typically requires the charterer to keep the ship free of liens and to display a notice disclaiming the charterer’s authority to create them.

Hire, and why there is no off-hire

Bareboat hire is a daily rate, normally quoted in US dollars per day and paid in advance for the period ahead, running from delivery to redelivery with partial periods pro-rated. That much it shares with a time charter. What it does not share is the off-hire clause.

A time charter carries an off-hire regime because the owner promises a working ship, so hire stops when the ship fails to deliver the service the owner undertook to provide, and dry-docking time is off-hire for the same reason. Under a bareboat charter there is no such promise to protect. The charterer mans and maintains the ship, so a breakdown, a survey overrun or a dry docking is the charterer’s own cost and its own lost time, and hire keeps running throughout. This is the single most expensive misunderstanding available to a party that has fixed on a bareboat form while pricing a time charter’s risk.

The events that stop the bargain are the extraordinary ones. An actual or constructive total loss ends the charter, because there is no ship left to charter, and requisition of the ship is dealt with by its own provisions rather than by an off-hire clause. Insurance, not off-hire, stands behind those, and where the parties want cover for the earnings consequence they buy loss of hire cover rather than rely on the charter.

Hire in a finance structure is priced on a different basis entirely. A commercial bareboat hire is priced to the charter market for that ship type over the period. A finance-lease rental is priced to amortise the lessor’s cost of the asset plus a financing margin over the lease term, referenced to a funding benchmark rather than to charter-market levels, because the lessor’s return is contractual and not asset-market driven. Two charters on the same printed form, for the same ship, can carry rentals that have nothing to say to each other.

Who is the Company: the ISM, ISPS and MLC allocation

The bareboat charterer is not automatically the Company for regulatory purposes, and the assumption that it is has cost parties certificates on delivery day.

ISM Code paragraph 1.1.2 sets a two-limb test. The Company is the owner of the ship or any other organization or person, such as the manager or the bareboat charterer, who has assumed responsibility for operation of the ship from the owner and who, on assuming that responsibility, has agreed to take over all the duties and responsibilities imposed by the Code. The bareboat charterer appears in that definition as a worked example, not as the answer. Where the charterer appoints a third-party manager that assumes operation and takes over the Code duties, the manager is the Company and holds the Document of Compliance. The charter should say which it is, because the certificates follow that answer.

Whoever is the Company owes a standing supervisory duty over anyone it delegates to. Paragraph 12.2, inserted by resolution MSC.353(92), adopted 21 June 2013 and in force from 1 January 2015, requires the Company to verify periodically that those to whom it has delegated act in conformity with its responsibilities under the Code. A charterer-Company that hands everything to a manager and looks away is not compliant, however competent the manager.

ISPS follows ISM by definition. SOLAS Regulation XI-2/1.1.7 defines Company for chapter XI-2 by reference to regulation IX/1, so the ISPS Company is the ISM Company, and the Company Security Officer under ISPS Part A/2.1.7 is appointed by that entity.

MLC 2006 works differently, and the difference matters. Article II(1)(j) names the bareboat charterer expressly among the parties that can be the shipowner, and then closes the escape route: the definition applies regardless of whether any other organization or person fulfils certain of the duties or responsibilities on behalf of the shipowner. Under the ISM Code a charterer can put a manager in as the Company. Under the MLC the party that assumed the shipowner’s responsibilities keeps them, with the wage, repatriation and financial-security obligations attached, and the Maritime Labour Certificate and DMLC reflect that allocation. Unpaid wages then generate maritime liens that follow the ship, which is how a crewing failure by the charterer becomes the registered owner’s asset problem.

What happens to the certificates on delivery

Delivery into a bareboat charter, particularly one with a change of flag, invalidates a specific set of certificates and leaves others untouched. The interim certificates that bridge the gap have hard limits.

The ISSC is the tight one. A bareboat delivery to a new operator under a new flag invalidates it twice on the same day, and its interim certificate cannot be extended, so the full certificate has to be earned inside six months or the ship is detainable at the first port State control inspection.

The IMO company number goes with the ISM Company, not with the charterer as such. The identification number scheme was adopted as resolution MSC.160(78) on 20 May 2004 and made mandatory by SOLAS Regulation XI-1/3-1, added by MSC.194(80), adopted 20 May 2005 and in force from 1 January 2009. The registered owner keeps its own separate number, and there is no bareboat charterer number.

The Continuous Synopsis Record is where the arrangement becomes visible to a port state. SOLAS Regulation XI-1/5 has required the CSR since 1 July 2004, and the form is prescribed by resolution A.959(23) of 5 December 2003 as amended by MSC.198(80) of 20 May 2005, whose amended form took effect on 1 January 2009. Box 8 records the registered bareboat charterer where the Administration requires bareboat charterers to be registered, boxes 6 and 7 keep the registered owner and its identification number, and boxes 9 and 10 name the ISM Company and its number. MSC.198(80) also added a Remarks box for the difficulties that arise on bareboat registration and change of flag.

Emissions compliance: who surrenders, and who pays

A bareboat charter puts the operating party in the compliance seat for the EU regimes and for CII, because all three route their defined company back to the ISM Code. Who ultimately pays is settled separately, by contract.

EU ETS. Directive 2003/87/EC as amended defines the shipping company in Article 3(w) as the shipowner or any other organization or person that has assumed responsibility for the ship’s operation from the owner, by reference to the ISM Code through Regulation (EC) No 336/2006. Being the ISM company is necessary and not sufficient. Commission Implementing Regulation (EU) 2023/2599 of 22 November 2023 requires a mandate document signed by both the shipowner and the ISM entity, carrying both parties’ IMO company numbers and each ship’s IMO number, and Article 1(4) provides that without it the shipowner is considered the entity responsible for the ETS obligations. A bareboat charterer that assumes it holds the obligation because it holds the DOC, and never files the mandate, has left the liability with its owner. Surrender obligations phase in under Article 3gb: 40% of verified 2024 emissions, 70% of 2025, and 100% from 2026. The scope threshold is 5,000 GT through Regulation (EU) 2015/757, with methane and nitrous oxide added from 1 January 2026 and offshore ships of 5,000 GT and above from 1 January 2027. Article 3gc gives the shipping company a right of reimbursement against the entity that assumed responsibility for the fuel purchase or the operation of the ship, with operation meaning determining the cargo carried or the route and speed.

FuelEU Maritime. Regulation (EU) 2023/1805 uses the same ISM-based definition in Article 3(13), and provides no mandate mechanism and no fallback to the owner: the FuelEU company is the ISM company. It applies from 1 January 2025, with Articles 8 and 9 from 31 August 2024, to ships above 5,000 GT. Article 4(2) sets the greenhouse-gas intensity limit against a 91.16 gCO2e/MJ baseline, reduced by 2% from 2025, 6% from 2030, 14.5% from 2035, 31% from 2040, 62% from 2045 and 80% from 2050. The penalty is EUR 2,400 per tonne of VLSFO-equivalent energy, that is per 41,000 MJ of compliance deficit, and Article 23(8) leaves that payment on the company while allowing contractual reimbursement from the commercial operator.

CII. MARPOL Annex VI Regulation 28, introduced by resolution MEPC.328(76) and in force from 1 November 2022, applies to ships of 5,000 GT and above in the listed categories, and its Company is the ISM Company through Regulation 2.2.8. The 400 GT figure that circulates is the EEDI and EEXI trigger, not the CII trigger. The rating attaches to the ship under Regulation 28.6 and follows it into and out of the charter, so a redelivery clause that says nothing about the rating leaves the owner holding whatever the charterer’s trading pattern produced. On a mid-year change, Regulation 27.5 requires a part-year data report on the day the company change completes, Regulation 27.6 applies Regulation 27.4 where flag and company change together, and Regulation 28.3 still requires a full 12-month attained CII for the transfer year.

The contractual answer is thinner here than for time charters. BIMCO has published one bareboat-specific emissions clause, the ETS - BARECON Emission Trading Scheme Allowances Clause 2026, drafted for incorporation into BARECON 2017. It has the parties elect a Responsible Entity, defaults to the charterers or their nominee, and requires the owners to provide the mandate letter that Implementing Regulation (EU) 2023/2599 needs. There is no BIMCO CII clause and no BIMCO FuelEU clause for bareboat charters, so those allocations are drafted from scratch or adapted from the BIMCO CII clauses written for time charters.

Class under a bareboat charter

The class client is normally the registered owner, not the charterer. The class contract, the mortgage that classification supports and the hull cover all run to the owner, and the charter allocates the cost of surveys and the duty to present the ship for them rather than the identity of the party the society contracts with.

Changing society mid-charter is a coordinated exercise rather than a notification. IACS PR 1A, Procedure for Transfer of Class, at Rev.11 of November 2024 with Rev.12 taking effect on 1 January 2027, governs transfer between members, including survey status, outstanding recommendations and the gaining society’s entitlement to the losing society’s records. A change of flag on bareboat registration usually forces a change of recognized organization too, and three further procedures then engage. PR 18 Rev.2 of December 2024 covers the transfer of ISM and ISPS certification. PR 36 Rev.1 of December 2024 covers MLC certification. Rec 117 Rev.2 of May 2020 covers the exchange of statutory documentation.

Bareboat charter registration and dual flagging

Bareboat charter registration lets a ship fly the charterer’s chosen flag for the duration of the charter while title and the mortgages stay on the underlying register. The underlying registry suspends the ship’s right to fly its flag; the bareboat registry grants that right and takes over the flag-State functions, issuing the statutory certificates and exercising jurisdiction over the ship for the charter period. On termination the entry is closed and the underlying flag resumes.

The mechanism is lawful because at every moment the ship sails under one flag only, which is what UNCLOS Article 92(1) requires. A ship genuinely flying two flags at once falls under Article 92(2) and may be assimilated to a ship without nationality, which is the opposite of what the structure is for. The commercial drivers, and the registries that compete for the business, are covered in flag State and flag of convenience .

The only operative multilateral rule on the point is MLM 1993 Article 16. It requires three things. The law of the underlying State of registration governs the recognition of registered mortgages, hypotheques and charges. Both registers must carry cross-reference entries naming the other State. And no State Party may permit a ship to fly another State’s flag temporarily unless all registered mortgages, hypotheques or charges have been satisfied or the written consent of every holder has been obtained. Article 16(g) then confirms that no State is obliged to permit bareboat registration in either direction, which is why the answer is registry-specific rather than general.

The United Nations Convention on Conditions for Registration of Ships, adopted at Geneva on 7 February 1986, would have set conditions for registration including the genuine link. It is not in force and binds nobody: Article 19(1) requires 40 States representing at least 25 per cent of world tonnage, and it stood at 15 parties on 1 September 2026.

Arrest and maritime liens: the owner’s asset secures the charterer’s debt

A ship can be arrested for its bareboat charterer’s liabilities, and the registered owner’s other ships cannot. The 1952 Arrest Convention was adopted at Brussels on 10 May 1952 and has been in force since 24 February 1956. Article 3(4) deals with the demise case: where the demise charterer and not the registered owner is liable for a maritime claim, the claimant may arrest that ship or any other ship in the ownership of the charterer by demise, but no other ship in the ownership of the registered owner is liable to arrest for that claim. The owner’s fleet drops out. The charterer’s fleet comes in.

The 1999 Arrest Convention, adopted at Geneva on 12 March 1999 and in force since 14 September 2011, reaches the same result through Article 3(1)(b), which permits arrest where the demise charterer at the time the claim arose is liable and is demise charterer or owner of the ship when the arrest is effected. Its sister-ship rule in Article 3(2) requires the other ship to be owned by the person liable, so a ship the charterer merely charters is out of reach under either convention. Article 8(1) applies the 1999 Convention to any ship within a State Party’s jurisdiction whatever flag it flies, which is the main scope difference from the 1952 Convention’s flag-based limitation, and Article 6 is headed “Protection of owners and demise charterers of arrested ships”. As at 1 September 2026 the 1999 Convention has 13 parties, and neither the United Kingdom nor the United States is one, so the practical framework in most forums is the 1952 Convention reinforced by national arrest legislation, as set out in maritime lien and ship arrest .

Maritime liens run further, because they are proprietary. The 1993 Maritime Liens and Mortgages Convention has been in force since 5 September 2004. Article 4(1) secures by a lien on the vessel each of its listed claims against the owner, demise charterer, manager or operator, and Article 8 provides that maritime liens follow the vessel notwithstanding any change of ownership, of registration or of flag. The listed claims are crew wages and associated sums, loss of life or personal injury connected with the operation of the vessel, salvage reward, port, canal and waterway dues and pilotage, and tort claims for physical damage caused by the operation of the vessel other than to cargo, containers and passengers’ effects.

So the crew the charterer hired, and did not pay, hold a lien that follows the ship back to an owner that never employed them. The owner is not liable in personam for the charterer’s debt; its asset secures it. With 21 parties as at 1 September 2026 the 1993 Convention governs few forums directly, and the national lien lists differ sharply: United States law recognises a necessaries lien for supplies ordered by a charterer entrusted with the vessel, and English law recognises no necessaries lien at all.

Limitation of liability

A bareboat charterer can limit. LLMC 1976 Article 1(2) brings the charterer, manager and operator within the word shipowner for limitation purposes, and a bareboat charterer is all three at once. The Convention has been in force since 1 December 1986 with 55 Contracting States, and its 1996 Protocol since 13 May 2004 with 64 Contracting States, on the IMO status list as consulted on 1 September 2026. The Protocol limits were raised by IMO Legal Committee resolution LEG.5(99), adopted 19 April 2012 and in force from 8 June 2015, so the forum decides which set of figures applies. The LLMC Convention article carries the tonnage bands.

One boundary matters more to a bareboat charterer than to anyone else. Limitation under Article 2(1)(a) covers loss of or damage to property occurring on board or in direct connection with the operation of the ship, and that does not include the chartered ship herself, as the Supreme Court confirmed in The Ocean Victory, agreeing with The CMA Djakarta. A charterer that loses the ship it chartered faces the owner’s claim for the hull with no limitation fund behind it, which is exactly why the insurance arrangements are written the way they are.

Pollution: channelled out of one regime, named in the other

The two pollution conventions treat a bareboat charterer in opposite ways, and a charterer reasoning from the wrong one is exposed on the spill it is most likely to cause.

Under CLC 1992 , in force since 30 May 1996 with 146 Contracting States, owner in Article I(3) means the registered owner. Article III(4)(c) then provides that no claim for compensation for pollution damage may be made against any charterer, howsoever described and including a bareboat charterer, or against the manager or operator, unless the damage resulted from that party’s personal act or omission committed with intent to cause damage, or recklessly and with knowledge that damage would probably result. The registered owner is strictly liable and carries the compulsory insurance under Article VII(1). For a cargo oil spill the bareboat charterer is channelled out.

The Bunkers Convention 2001 , in force since 21 November 2008 with 106 Contracting States, does the reverse. Article 1(3) defines shipowner as the owner, including the registered owner, bareboat charterer, manager and operator of the ship, and Article 3(2) makes the liability of those persons joint and several. The bareboat charterer is strictly liable for bunker pollution damage, and it still cannot hold the certificate: the compulsory insurance under Article 7(1) runs to the registered owner of a ship over 1,000 gross tonnage.

The HNS Convention 2010 copies the CLC channelling in Article 7(5)(c). It has been adopted and is not in force.

Insurance, co-insurance and The Ocean Victory

The insurance provisions do more work than any other clause in a bareboat charter, because the owner’s entire economic position during the charter is an insurance recovery against a ship it does not control.

Cover is normally taken in joint names, and joint names is not a drafting nicety. In The Ocean Victory [2017] UKSC 35, decided 10 May 2017, clause 12 of an amended BARECON 89 required the demise charterer to insure marine, war and P&I risks for the joint interest of themselves and the owners. A majority of Lord Toulson, Lord Mance and Lord Hodge held that the joint insurance regime precluded any claim by the owners against the demise charterer for an insured loss, and therefore any claim passed down the charter chain. Lord Clarke and Lord Sumption differed on the mechanism rather than on the proposition that co-insureds cannot claim against each other for an insured loss. The holding was reached on an assumed breach, the appeal having been dismissed unanimously on the safe port issue.

The practical consequence is that joint-names cover bars the underwriters’ subrogated claim against the charterer, so the loss stops with the policy. Naming the owner as an additional assured or as loss payee does not necessarily achieve that. Whether a contract allocates a risk to insurance rather than to a party is a question of construction with a demanding threshold, as the Supreme Court held in Herculito Maritime Ltd v Gunvor International BV [2024] UKSC 2. Two forms of words that look similar produce opposite subrogation outcomes.

Two further covers sit around the charter rather than in it. Mortgagee interest insurance protects the lender against the risk that the owner’s or the charterer’s own policy does not respond, which is the lender’s exposure to somebody else’s disclosure and compliance. A quiet enjoyment letter is the mortgagee’s undertaking to the charterer that it will not disturb possession or terminate the charter on an owner default, for as long as the charterer performs. It exists because a charter is a contract that does not run with the ship. Without it, enforcement of the mortgage would strip the charterer of the ship it is paying for.

Sub-chartering, bills of lading and who is the carrier

A bareboat charterer that trades the ship is doing what a shipowner does, and it faces the cargo regime accordingly. It fixes the ship out on voyage or time charters, and it becomes a disponent owner in that chain, so the sub-chartering analysis applies to it in exactly the same way it applies to a registered owner.

Identity of the carrier is decided by the bill of lading, not by the charter. A demise clause or an identity-of-carrier clause on the reverse does not override what the front of the bill says, and where the front identifies the charterer as carrier the charterer is the carrier. The cargo liability regime then comes in through the Hague-Visby Rules , by force of law or through a clause paramount, and the standard CONGENBILL form is one common route. General average contributions and deviation exposures follow the same allocation.

The registered owner’s protection against all of this is contractual and negative: the charter restricts the charterer’s authority to bind the ship, requires notices disclaiming that authority, and puts the indemnity and the insurances behind the risk.

Bareboat as a financing structure

A large share of bareboat charters are not chartering transactions at all. They are ship finance wearing a charter party, and the commercial substance sits in the documents around the form rather than in the form itself.

The standard shape: a special purpose vehicle owns the ship and is funded by bank debt or by a leasing house’s own balance sheet. The SPV bareboat-charters the ship to the operating company, and the hire stream services the debt. Around that sit a loan agreement, a first-priority mortgage over the ship, an assignment of the earnings and insurances to the lender, and a quiet enjoyment letter.

Sale and leaseback is the same structure entered from the other end. An operating owner sells its ship to a lessor and charters it straight back on a long bareboat or finance lease, often with an option or an obligation to buy it back at the end. The owner converts the asset into cash; the lessor holds title, which is a stronger security position than a mortgagee’s charge over somebody else’s asset. Ship finance and asset valuation sets the lessor’s economics against the mortgage lender’s, and ship sale and purchase covers the sale leg itself.

Four vehicle families recur, and trade writing confuses two of them routinely:

• A JOLCO , a Japanese Operating Lease with Call Option, is a Japanese lessor-owned lease under which Japanese investors take tax depreciation over the lease term and the shipping company holds a call option to buy the ship at a pre-agreed price at or before lease end.
• A KG fund is German. Kommanditgesellschaft is a German limited partnership, a general partner with unlimited liability alongside limited partners whose exposure is capped at their contribution, and KG ship funds pooled German retail investor capital into ship-owning partnerships that chartered the ships out. The model contracted sharply after the 2008 to 2009 financial crisis.
• A KS fund, Kommandittselskap, is the Norwegian equivalent partnership vehicle, distinct from the German KG and separately named.
• Chinese leasing houses , among them ICBC Leasing, Bank of Communications Leasing, CMB Financial Leasing and China Development Bank Leasing, entered the sector during the 2010s and write sale-and-leaseback business across the main cargo trades.

IFRS 16 Leases changed how the charterer’s side looks in the accounts. Issued by the IASB in January 2016 and effective for annual reporting periods beginning on or after 1 January 2019, it replaced IAS 17 and requires a lessee to recognise a right-of-use asset and a matching lease liability for essentially every lease longer than 12 months. The off-balance-sheet operating lease, which was part of the point of chartering in tonnage rather than owning it, is gone on the lessee side. Lessor accounting substantially retained the finance-lease and operating-lease split inherited from IAS 17, so the lessor’s treatment still turns on which category the lease falls into.

Tax is the other driver, and it is jurisdictional. Tonnage tax regimes in the United Kingdom, Greece, Cyprus, the Netherlands and Norway, and the United States coastwise citizenship rules that govern Jones Act eligibility , all interact with bareboat structures, and each turns on statutory detail rather than on a general principle.

Default, withdrawal and getting the ship back

The right to withdraw the ship for non-payment of hire comes from the express clause, not from the general law. In a time charter, punctual payment of hire is an innominate term rather than a condition. Late payment therefore gives a right to withdraw under the clause, but supports a damages claim for the balance of the charter only where renunciation or repudiatory breach is proved: Spar Shipping AS v Grand China Logistics Holding (Group) Co Ltd [2016] EWCA Civ 982. No reported authority extends that holding to a bareboat charter, and a bareboat charter’s capital-recovery structure gives an owner a real argument that it should not apply, which is why finance leases write payment as an express condition or provide for a termination sum rather than rely on the general law.

The mechanics follow the time-charter case law, covered in withdrawal of the vessel for non-payment of hire . The right accrues on the first late payment (The Laconia [1977] AC 850), and an anti-technicality notice served before midnight on the due date is premature (The Afovos [1983] 1 WLR 195). An anti-technicality clause buys the charterer a grace period; it does not convert the payment obligation into a condition. Where performance becomes impossible rather than merely late, frustration and the force majeure provisions do their separate work.

Termination ends the charterer’s right to possession and does not deliver the ship. A ship in a foreign port, manned by the charterer’s crew and perhaps under arrest for the charterer’s debts, comes back through the local court, and a possession claim is within Article 3(1)(d) of the 1999 Arrest Convention. Where the ship was bareboat-registered, the registration has to be closed and the underlying flag resumed, with the MLM 1993 Article 16(c) cross-references reversed. The crew were the charterer’s employees, and their unpaid wages carry liens that follow the ship into the owner’s hands under Article 4(1)(a) and Article 8. Disputes that survive all this go to arbitration under the clause the parties chose, and the forums are set out in maritime arbitration .

Redelivery

Redelivery generates the most frequent bareboat disputes, and the reason is structural: the owner has not seen its own ship work for several years, and the charterer has been paying for every repair it chose to make or defer.

The condition standard is contractual. The usual market formulation is redelivery in the same or no worse condition than at delivery, fair wear and tear excepted, with class maintained and free of outstanding recommendations, certificates valid, and the ship’s inventory made good. What counts as fair wear and tear against what counts as damage is the question that produces the arbitration, and it is the same boundary the redelivery analysis draws in a time charter, argued over a much longer period of deferred maintenance.

A pre-redelivery condition survey by an independent surveyor is the standard protection on both sides, and its report becomes the record against which the delivery condition is compared. Items agreed as deficiencies are settled in cash or made good before redelivery. Bunkers on redelivery are handled the same way as on a time charter, by quantity and price at named ports.

The other half of the handover is operational rather than contractual: the incoming crew, the insurance transition, the class and flag notifications, the closure of any bareboat registry entry, and the reissue of the certificate set the section above lists.

Where bareboat structures are used

Bareboat chartering concentrates where the transaction is about the asset rather than about the voyage.

Finance-led ownership is the largest use. A lessor or an SPV holds title and the operator runs the ship, across bulk carriers , tankers , container ships and LNG carriers alike. The higher the capital cost and the longer the payback, the more the structure suits the trade.

Flagging-out is the second. An operator bareboat-charters its ship to a company that registers it under another flag for the charter period, which is the mechanism behind much of what is loosely called flag-of-convenience operation and is covered in the flag State article rather than repeated here.

Offshore and specialised tonnage uses bareboat charters at the ownership layer and time charters at the operating layer. SUPPLYTIME 2017 is a time charter form, not a bareboat form, and the two sit in the same transaction rather than competing.

Cabotage and public-service trades use bareboat charters to place foreign-built or foreign-owned tonnage into a national trade where the national rules permit it, which is where the citizenship and tonnage-tax questions bite hardest.

Rates, fleet shares and lessor rankings are not stated here. Bareboat rates are privately negotiated and are not published on any index comparable to the Baltic Exchange assessments a shipbroker works from, and the market-scale figures that circulate could not be traced to a named source with a date.

Limitations

This article states the international baseline and names each national rule as an overlay, but a bareboat charter is the point in shipping where national law bites hardest. Whether a charter transfers possession at all, whether the ship can be arrested for the charterer’s debt, whether a lien created during the charter binds the owner, and whether the arrangement is a lease or a financing for tax are answered by the law of the forum and of the flag, and the answers differ. Both arrest conventions and the 1993 liens convention bind a minority of States, so in most forums the applicable rule is national legislation that may or may not follow them.

No BARECON 2017 clause numbers are cited. The form’s clause text and BIMCO’s explanatory notes sit behind a members-only wall, and the numbering changed between the 2001 and 2017 editions, so a number taken from a briefing on the earlier form does not carry across. Anyone arguing a point on the form should work from the printed text of the edition actually incorporated.

No hire rates, market shares or fleet figures are given, for the reason stated above.

Tax treatment is named but not stated. The tonnage tax regimes and the coastwise citizenship rules named here turn on statutory detail that changes with each finance act, and they should be taken from the regime’s own legislation and current guidance.

The national bareboat registration regimes are described by mechanism rather than by statute. Registry rules on maximum term, consent, mortgage treatment and eligibility differ, and several administrations publish them only in circulars, so the enabling provision for any given registry should be read before a structure is committed to it.

Related Articles

• Chartering and Charter Parties: How Ships Are Hired
• Time Charter Party
• Voyage Charter Party
• BARECON 2017
• Flag State and Flag of Convenience
• Maritime Lien and Ship Arrest
• LLMC Convention on Limitation of Maritime Claims
• Bunkers Convention 2001
• ISM Code
• MLC 2006
• Ship Finance and Asset Valuation
• Hull and Machinery Insurance