Bareboat Chartering

Bareboat chartering, or ‘chartering by demise’ as lawyers call it, is the contracting for the lease of a vessel, whereby the owner charters away the ship to another party who, in turn, assumes more the role of owner than charterer, the vessel coming under the complete control of the bareboat charterer, who has to supply everything including Master, officers and crew. The true owner assigns to the bareboat charterer all responsibility for operating the vessel, and thus entitlement to any profits (or losses!) the ship may make, in return for an agreed and regular payment of hire. Naturally, such a method of period employment is designed for years rather than for months, and bareboating serves the admirable purpose of allowing persons who are not experienced in shipping to invest in a ship without the responsibility of organising its day to day affairs, at the same time permitting those with experience and an entrepreneurial spirit to assume the role of an owner without the necessity of raising finance to purchase a vessel. Indeed bareboat chartering is in effect a way of financing shipowning. The bareboat charterer can register the ship under the flag of his own country, even if that is different to the actual owners. To the outside world the bareboat charterer of a vessel is seen as the owner. BIMCO designed two bareboat charterparties in the 1970’s to meet increased demand for suitably worded contract forms; one intended for the bareboating of existing vessels (with or without mortgages) – the BARECON A – the other for newbuildings financed by a mortgage – the BARECON B. Recently reflecting changes in bareboat practice with particular regard to ‘flagging out’ and the registration of mortgages under ‘off-shore’ ship registries, a BIMCO documentary sub-committee designed a new bareboat charterparty, incorporating the updated BARECON A and BARECON B provisions into one form – the BARECON 89 – together with optional sections.