Commercially, a bareboat charter transaction takes the form of a lease agreement for a fixed period by virtue of which the lessee acquires complete control and possession of the ship for the duration of the lease, and this transaction is legally formalised through bareboat charter registration. Such transactions are opted for a plethora of reasons which include subsidies or certain cargo reservations which are offered by a particular state at a particular time, and also to lower crewing costs. Bareboat charter registration is also advantageous for the jurisdictions allowing it, ensuring training and employment of local seafarers, acquisition and know-how and expansion of the national fleet without a drain on financial resources.
Bareboat charter registration describes a situation where a vessel is chartered and registered by one State in the name of the charterer or ship management company and is available for both the registration of foreign ships under the Malta flag and the registration of Maltese ships under a foreign flag. The charterer, which acts as the ‘temporary owner’ has the right and obligation to fly the flag of the charterer. During that period, the vessel loses the right to fly the flag of the owner’s State, but the latter becomes fully effective once again upon the termination of the charter-party. Maltese law stipulates that during the time a Maltese ship is bareboat-charter-registered in a foreign registry, such vessel shall not hoist the Maltese flag, and the home port of such ship shall be that of the bareboat charter registry.
The main principles of bareboat charter registration under Maltese law are the following:
- The compatibility of the Bareboat Charter Registry with the registry in which the owner of the ship is registered as owner (hereinafter referred to as the “Underlying Registry”).
- Matters in relation to title of the vessel, mortgages and encumbrances are vested in the Underlying Registry.
- The operation of the ship falls under the jurisdiction of the Bareboat Charter Registry.
Under Maltese law, a bareboat charter registered in Malta, shall be registered with the name under which it is registered in the Underlying Registry. Legal notice 210 of 2016 made it possible to give a different name to a bareboat charter registered in a foreign registry, from the one registered in Malta as the Underlying Registry. This helps differentiate the ship from its underlying register, not only from the different flag it flies but also by the name it uses in trading.
A bareboat charter must be registered in Malta for a period not exceeding the duration of the bareboat charter or the expiry date of the underlying registration, whichever is the shorter period, but in no case can this registration’s duration be longer than a two-year period. Nonetheless, Maltese law provides for the possibility to extend the registration for further periods of two years.
The procedure for the registration of bareboat charter vessels is similar to that for ordinary registrations but there are some differences which include the application for registration by the charterer as opposed to the owner, and the making of a declaration of bareboat charter accompanied by the charter agreement.
With the above in mind, have you got any questions related to bareboat charter registration? Our team is able to advise clients in all matters related to the registration of yachts and ships under the Maltese Flag, whether private or commercial. If you would like to know more, kindly get in touch on firstname.lastname@example.org.
The blog by E&S Group Legal Associate Jeanine Schembri. It has been published on the Malta Chamber of Commerce Official Portal on 14th June 2019. This article was also published on the Malta Independent on 23rd June 2019.