Bareboat Chartering
Bareboat Charter is a leasing arrangement between the charterer and the actual owner in which the charterer operates the ship as if it is his own for an agreed period.
Bareboat chartering is also called ‘demise’ chartering. The charterer in this case runs the ship as though he is the owner. He therefore has greater responsibilities in running the vessel, including looking after a vessel’s commercial and manning responsibilities. The ship owner receives lower hire payment, because of lower exposure to risk.
In a ‘demise’ charter the ship owner provides the crew of the vessel, while in a bareboat charter, crew is provided by the charterer.
Demise and bareboat chartering are financial tools, designed to help investors purchase ships. These investors then leave the operation and management of their ships to the experts in the shipping business.
- The master and crew are employed by the charterer and they are responsible to him as if he were the owner.
- Most often it is in the form of the BARECON standard charter party form. Please see the appendix.
- May have a purchase option at the end of the contract.
- Only capital cost are for the owners account. The charterer has a commercial and technical responsibility of the vessel and all costs, except capital cost.
This is also called a “demise charter”, particularly by the legal experts. Basically, it is a contract, for the hiring of a vessel, for an agreed period of time, during which the charterers acquire, most of the rights of the owners (i.e. for all practical purposes the temporary owner of the ship, except for registration). The duties and rights of the ship owner are performed and exercised, respectively by the demise charterer. He is entitled to a salvage award and it is on his behalf that the Master signs the Bill of Lading, since the Master and crew are his, and not the servants of the owner (at times difficulties arise since certain ship owners, considering the vulnerability of the property, often insist on retaining a certain control of the ship, e.g. by the appointment of senior officers. This may give rise to controversies, as to whether the management has ever passed on to the charterer). During the duration of a demise charter, the ship owner’s right is to be paid the “hire”. The ship owner is not allowed to interfere in any way with the management of the ship, unless some provision of the charter party so permits. To sum-up, the ship owners, give out the vessel, with no crew, at the complete disposal of the charterers and pay the capital costs, and usually no other costs. The charterers have commercial and technical responsibility for the ship, and pay all involved costs, except capital costs.Various forms are known for this type of charter.
BARECON A: Under this form, the owner bears the responsibility for insurance premiums, was designed by the BIMCO for short-period chartering, e.g. seasonal hire of a passenger vessel.
BARECON B: Under this form, the charterers are responsible for insurance premiums. The form was designed as a long-period, financial type of contract, mainly for new-buildings. However, it can be modified for second-hand tonnage.
BARECON 89: Is basically a combination of the two forms, i.e. BARECON A and BARECON B, designed to show the increasing use of bareboat charter registration. There are basically 5 parts of the form.
Part I: Contains the basic detailsPart II: Contains the standard clausesPart III: Provisions applicable to new-building shipsPast IV: Contains a hire-purchase agreementPart V: Contains provisions to apply for ships registered in a bareboat charter registry
The contract is normally used by banks and financial institutions, who do not have the expertise to operate or manage ships, themselves.
Please Click here to see the pdf version of a standard Barecon
Please Note: A charterer of a bare-boat charter party if he has the infrastructure to commercially and technically operate the ship but does not have the capital necessary to actually own the ship.