What is Bareboat Charterparty?

What is Bareboat Charterparty?

In Bareboat Ship Charter, the charterer both manages and operates the ship. The shipowner, possibly a financial institution, virtually gives up control for a fixed period of time.

The charterer is the disponent owner responsible for both crewing and managing, as well as employing, the ship.

The Actual Shipowner will receive the fixed rate of hire at regular intervals during the period of the charter. There will also be agreements regarding drydocking and surveys in order for the owner to ensure that the ship is being properly maintained.

Bareboat Charter and Demise Charter is frequently used in Ship Finance where it may suit a bank to own the ship, frequently because of tax advantages, but they do not want to get involved in running her. They may also have re-possessed a ship, but in any case, because they do not have the necessary knowledge or experience, they need to find an owner to run the ship.

At the same time, the Disponent Owner can manage the ship profitably but the current market rates will not repay the full capital costs of the ship within the period of a bank loan, so by Bareboat Ship Chartering it may well be possible for both the bank and the Disponent Owner to make a profit from the ship.

There is frequently an option to purchase at the end of the Bareboat Ship Charter. Bareboat charters are often used within a ship owning group for fiscal purposes.

Bareboat Charter Charterparty Forms:
  • BARECON A (short-term 3–8 years)
  • BARECON B (longer term 8–15 or 20 years)

These are Bareboat Charterparties produced by BIMCO (Baltic and International Maritime Council) and are still used today, despite BIMCO’s revised version BARECON 2001.

What does Bareboat Ship Charter mean?

Bareboat Ship Charter although lawyers prefer the expression Demise Charter because that word is more akin to such words as ‘transfer’ or even ‘abdicate’. As the name suggests, a bareboat charter transfers the entire job of operating the ship to the charterer so that it is fair to equate this to the original owner ‘abdicating’ from his responsibility.

In Bareboat Charter, it is quite usual for the charterer even to change the ship’s port of registry and flag for the period of the charter. Bareboat Charter contract can best be compared to a long-term lease of a house or an office block. To all intents and purposes the bareboat charterer acts as the owner and the outside world looks upon him as such.

In most cases a Bareboat Charter, is, in effect an alternative way of financing where the charterer finds it more convenient or beneficial to pay a monthly hire out of revenue rather than raise the capital to buy a ship himself.

Bareboat Charter parties are something of a rarity in the life of the average chartering person and, paradoxically, when a broker does encounter one it is probably more likely to be in the Sale & Purchase department where some sort of sale-and-lease-back deal is involved.

What is the difference between Bareboat Charter and Demise Charter?

If a Shipowner lease a ship with shipowner’s crew members it is called Demise Charter. If a Shipowner lease a ship without crew members it is called Bareboat Charter.