Bareboat Charter Party

Background

The bareboat charter is the dominant commercial structure for ship financing through leasing, with a substantial portion of the modern world fleet held by ship-finance lessors (banks, leasing companies, KS partnerships, Japanese KG funds) and bareboat-chartered to the operating shipowner or a major operator. Bareboat charters also dominate flag-of-convenience operations where the actual operator (a Greek, Korean, or American shipping company, for example) bareboat-charters its ship to a paper company in Liberia, Marshall Islands, or Panama, which is then flagged in that jurisdiction. The flag transfer simplifies regulatory burden and provides certain commercial advantages while the operating company controls the vessel through the bareboat charter. The legal and commercial complexity of bareboat charters reflects this dual role as both an operational charter and a financial lease, with substantial implications for tax, insurance, regulatory compliance, and asset management.

Historical Development

The bareboat charter has roots in the early industrial-era expansion of the merchant marine. Prior to the development of the modern shipping industry, ship operators typically owned their own vessels and managed both commercial and technical operations directly. The progressive specialisation of the industry through the 19th and early 20th centuries gave rise to operating shipping companies and asset-holding entities that financed and owned the vessels.

The post-World War II era saw substantial expansion of bareboat structures, particularly through the flag-of-convenience mechanism that emerged in the 1950s. American operators seeking to avoid US labour and tax laws established Liberian and Panamanian shell companies to own and register vessels, with bareboat charters back to the operating shipping company. This mechanism, while controversial, became the dominant ownership structure for international shipping and persists today.

The development of shipping finance as a distinct discipline in the 1960s-1970s, particularly the rise of bank-led syndicate financing for vessel acquisitions, drove the standardisation of bareboat charter terms. The need to provide secured financing while maintaining operational flexibility for shipowner-operators required clear allocation of responsibility between the asset-holding entity (which had financial obligations to the bank) and the operating entity (which managed the ship).

BIMCO (the Baltic and International Maritime Council) developed standardised forms of bareboat charter beginning in the 1960s, with progressive refinements through BARECON 1989, BARECON 2001, and the current BARECON 2017. These standard forms became the industry baseline against which negotiated terms are compared.

The 1990s and 2000s saw the rise of specialised non-operating owners (NOOs), companies that own ships and bareboat-charter them to operating shipping lines, providing essentially a fleet-financing service. Major NOOs include Costamare, Seaspan, Capital Maritime, Atlas Maritime, and various Japanese and Korean shipping companies. NOOs typically own container ships, bulk carriers, or specialised vessels and lease them via bareboat or time charter to liner operators.

The 2010s saw the emergence of Chinese leasing companies (CMB Financial Leasing, ICBC Leasing, Bank of Communications Leasing, etc.) as major providers of bareboat-charter capacity, particularly for bulk carriers, tankers, and offshore vessels. Chinese leasing represented a substantial expansion of available finance leasing capacity for international shipping.

Distinction from Other Charter Types

The bareboat charter is one of three principal charter party types, each with distinct allocations of responsibility.

Voyage charter party, the shipowner provides a vessel for the carriage of a specific cargo on a specific voyage. The shipowner provides crew, fuel, supplies, insurance, and operates the vessel; the charterer provides cargo and pays freight on a per-tonne or per-voyage basis. The shipowner retains operational control. Detailed coverage in Voyage Charter Party.

Time charter party, the shipowner provides a vessel and crew for a defined period, with the charterer paying daily hire and being entitled to direct the vessel’s commercial employment (cargoes, ports, voyages). The shipowner retains operational control of the vessel and crew while complying with the charterer’s commercial directions. Detailed coverage in Time Charter Party.

Bareboat charter party (demise), the shipowner provides only the vessel (without crew, supplies, or operational support); the charterer assumes full operational control, hires the crew, provides fuel and supplies, arranges insurance, and handles all operational matters. The shipowner retains only the financial interest and the right to receive hire. The charterer is in legal possession of the vessel for the charter period.

The progressive transfer of responsibility from voyage to time to bareboat charter mirrors the transfer of operational risk and control. The bareboat charterer is, for practical purposes, the operating shipowner during the charter period, with the underlying owner being a passive financial holder.

The legal characterisation of bareboat charters as “demise” charters is significant in admiralty law. Under English and US admiralty law, the demise charterer is in possession of the vessel and is thus the appropriate defendant in maritime claims arising from the ship’s operations. The shipowner is generally not liable for actions taken by the charterer during the demise period, except in specific circumstances (mortgagee liability, certain regulatory non-compliance, etc.).

BIMCO BARECON 2017

The BIMCO BARECON 2017 is the most widely used standard form bareboat charter party globally. The form, last revised in 2017 (replacing earlier BARECON 2001), provides a comprehensive framework with standard terms covering all aspects of bareboat operation. The form is divided into:

PART I, schedules of vessel particulars, hire rates, redelivery details, and other deal-specific items PART II, the standard terms and conditions PART III, Optional Protocol of Delivery and Redelivery PART IV, Optional Hire Purchase agreement PART V, Optional Newbuilding Provisions

The standard terms in PART II cover delivery, hire, off-hire, charterer’s obligations, redelivery, insurance, war risks, lien, breach, indemnity, salvage, dispute resolution, and various other matters. BARECON 2017 has become the industry baseline against which negotiated terms are compared.

Specific structural features include:

Subjects, conditions precedent to the charter taking effect (lender approval, insurance coverage, regulatory consents). Subjects must be lifted before the charter is binding. Common subjects include “subject to satisfactory class society inspection”, “subject to mortgagee approval”, “subject to charterer’s board approval”, and “subject to satisfactory vessel inspection by charterer’s surveyor”.

Box layout, the form’s distinctive box arrangement allows quick reference to specific deal terms during operation. The principal boxes cover:

• Box 1-7: Identification of parties, vessel, place and date
• Box 8-12: Vessel description, condition, and certifications
• Box 13-19: Charter period, hire, payment terms
• Box 20-25: Insurance, war risks, redelivery
• Box 26-30: Operations, cargo, and miscellaneous
• Box 31-36: Optional clauses (hire purchase, newbuilding, finance lease)

Optional clauses, including hire purchase (where the bareboat charter ultimately leads to ownership transfer at end of charter), newbuilding provisions (for charters of vessels under construction), and finance lease modifications.

The BARECON form is increasingly used in conjunction with separate financing documents (loan agreements, security trust deeds) when the bareboat charter is part of a financing structure. The financial lease aspect requires careful coordination between the bareboat charter terms, the underlying loan documents, and the assignment provisions.

Negotiated amendments to BARECON typically focus on:

• Hire rates and escalation provisions
• Specific maintenance obligations and survey arrangements
• Insurance limits and underwriter requirements
• Redelivery condition and survey procedures
• Termination triggers and cure periods
• Indemnity scope and exclusions
• Dispute resolution forum and governing law

Sophisticated commercial parties typically negotiate amendments running to 20-50 pages of additional terms beyond the standard BARECON form, particularly for complex finance lease transactions.

Charterer’s Obligations

Under a bareboat charter, the charterer assumes substantial obligations that would normally rest with the shipowner.

Crew provision, the charterer hires, employs, pays, trains, and is responsible for all crew. The crew are the charterer’s employees, not the shipowner’s. The charterer’s compliance with STCW Convention, MLC 2006, and other crew regulations is paramount. Any crew claims, employment disputes, or wage liabilities are the charterer’s responsibility. The crew’s compliance with regulatory requirements (STCW certificates, medical certificates, working time records) is similarly the charterer’s burden.

Fuel and supplies, the charterer provides all fuel oil, lubricating oil, fresh water, provisions, spare parts, lashings, dunnage, and other consumables. Fuel-oil quality and operational fuel costs are entirely the charterer’s responsibility. The charter typically requires that bunker quality meet ISO 8217 specifications and that the charterer be liable for any damage from off-spec fuel.

Insurance, the charterer is required by the charter to maintain hull and machinery insurance, P&I cover, war risks, and other appropriate coverages. The shipowner is typically named as an additional assured to protect their financial interest. Policy terms, limits, and underwriters must meet shipowner approval. Coverage typically includes:

• Hull and machinery (full insured value of vessel)
• Protection and indemnity (P&I)
• War risks (in war zones)
• Pollution liability
• Loss of hire (where applicable)
• Specific coverage for finance lease arrangements

Dry-docking and major maintenance, the charterer arranges and pays for dry-docking, surveys, repairs, and all maintenance. The vessel must be maintained in compliance with class society and flag state requirements, with continuous certification through the charter period. Specific obligations include:

• Annual class society surveys
• Intermediate surveys (typically every 2.5 years)
• Special periodical surveys (every 5 years)
• Underwater hull cleaning at appropriate intervals
• Mechanical maintenance per manufacturer’s recommendations
• Class-mandated steel renewals
• Coating renewals during dry-docking

Class and flag state compliance, the charterer maintains class society certification (or shifts class with shipowner consent) and flag state registration. The bareboat charterer typically becomes the registered “demise charterer” with responsibility for flag-state compliance. Specific obligations include:

• Maintaining valid Certificate of Class
• Annual surveys and confirmation of class
• Compliance with flag state regulations
• Ensuring all certificates are current
• Notifying shipowner of any class issues

Operating costs, port costs, pilotage, towage, agency fees, regulatory compliance, environmental fees, and all operational costs are the charterer’s responsibility. These include:

• Port charges and pilotage fees
• Tug fees and towage
• Stevedoring and cargo handling
• Customs and immigration fees
• Fuel taxes and environmental fees
• Communications and connectivity
• Various other operational expenses

Cargo operations, the charterer is the carrier under all bills of lading, with all consequent cargo liability. Cargo insurance, claims handling, and dispute resolution are the charterer’s responsibility. The charterer issues bills of lading, manages cargo claims, deals with port disputes, and handles all cargo-related commercial matters.

Indemnification of shipowner, the charterer typically indemnifies the shipowner against substantially all third-party claims arising from the vessel’s operation during the charter, except those arising from the shipowner’s own breach. The indemnity is usually back-to-back with the insurances, so insurance recovers most claims with the indemnity covering deductibles and uninsured losses.

Compliance with mortgages, where the vessel is mortgaged (typical for finance leases), the charterer must respect the mortgagee’s rights, provide notice of significant events to the mortgagee, and operate within the constraints of the loan documents. Defaults by the charterer that affect the mortgagee can trigger additional remedies.

Hire and Payment

Hire rate is typically expressed in USD per day, paid monthly in advance. Rates vary substantially with vessel type and market conditions.

Typical 2024 bareboat hire rates (broad market reference):

• Capesize bulker: $6,000-$10,000/day
• Panamax bulker: $5,000-$8,000/day
• Supramax bulker: $4,500-$6,500/day
• VLCC tanker: $10,000-$15,000/day
• Suezmax tanker: $8,000-$12,000/day
• Aframax tanker: $7,000-$11,000/day
• LR2 product tanker: $6,500-$10,000/day
• LNG carrier (modern): $40,000-$70,000/day
• Container ship 14,000 TEU: $25,000-$40,000/day
• Container ship 7,000 TEU: $12,000-$20,000/day
• AHTS (offshore): $3,500-$8,000/day

Hire commencement typically begins on delivery of the vessel and accrues continuously until redelivery. Hire is calculated by reference to the daily rate × number of days × time periods. Partial-month periods at start or end are pro-rata adjusted.

Hire payment is generally on the first day of each calendar month for that month, payable in cleared funds to the shipowner’s nominated bank account. The charter typically prescribes payment in USD or a specific currency. Late payment triggers shipowner remedies (late-payment interest, suspension of charter, eventual termination).

Hire suspension during off-hire periods (see below) is a key risk allocation issue.

Hire escalation in long-term bareboat charters may include CPI adjustments or other indexed escalations, particularly on charters of 10+ years. Common escalation mechanisms include:

• Annual CPI adjustment (typically capped at 3-5%)
• Reference to LIBOR or SOFR (for finance lease pricing)
• Specific re-pricing every 3-5 years based on market index
• Combination of fixed and floating components

Hire purchase option in BARECON Part IV converts cumulative hire payments into purchase price for the vessel at end of charter. This structure is common in finance lease arrangements where the bareboat charter is essentially a sale-by-instalments dressed as a charter. The hire purchase mechanism typically:

• Accumulates a portion of each monthly hire payment toward purchase price
• Provides the charterer the option to acquire the vessel at end of charter for a nominal residual amount (e.g., $1)
• Is structured to qualify as a finance lease for accounting purposes
• May be subject to specific tax structures depending on jurisdiction

Foreign exchange and currency considerations in bareboat charters have substantial implications. Hire is typically denominated in USD (the shipping industry’s reserve currency), but the charterer’s revenue may be in other currencies, creating FX risk. Some bareboat structures include FX hedging or currency adjustment mechanisms.

Off-Hire

Bareboat charter off-hire is more limited than time charter off-hire because the charterer (not shipowner) is responsible for vessel performance.

Permitted off-hire reasons under BARECON 2017 are typically restricted to:

• Total loss of vessel
• Constructive total loss of vessel
• Capture, seizure, or detention by foreign government
• Some war-risk events
• Specific events outside charterer’s control

Routine maintenance and repairs do NOT trigger off-hire, these are charterer responsibility under the charter, so the charterer continues paying hire even when the vessel is in dry-dock for routine maintenance. This is one of the principal differences from time charter, where dry-docking time IS off-hire.

Loss of vessel triggers complete charter termination (rather than just off-hire), the charter cannot continue without the vessel. The total-loss event is typically defined by reference to the underlying H&M policy total-loss provisions.

Off-hire calculation when applicable typically accrues from the start of the off-hire event until restoration of operability, with hire ceasing during this period. Insurance proceeds for loss-of-hire risks are typically structured to cover this.

Constructive total loss is a complex insurance concept. A vessel is constructively totally lost when the cost of repair exceeds the insured value (or another threshold per the policy). The vessel is not actually destroyed but is treated as totally lost for insurance purposes. The H&M policy pays the insured value, with the insurer typically taking title to the vessel (or salvage rights). The bareboat charter typically terminates on constructive total loss as well as actual total loss.

War-risk events, capture, seizure, detention by foreign government, war-risk damage are typical off-hire triggers. The geographical scope of war-risk coverage is important; vessels operating in JWC-listed war risk areas have specific war risk coverage with corresponding off-hire mechanics.

The narrow off-hire scope is one of the principal differences from time charter, under time charter, off-hire applies to broad categories of operational interruption; under bareboat, off-hire is limited to extraordinary events.

Redelivery Condition

Redelivery at the end of the charter is a substantial commercial event with significant consequences.

Redelivery condition typically requires the vessel to be in same or no worse condition than delivery, fair wear and tear excepted. The charter typically prescribes:

• Fully fuelled and equipped
• Free of defects beyond fair wear and tear
• All certificates current and valid
• Underwater hull cleaned (or paid clean)
• Internal cleanliness standard
• Spare parts and equipment as inventoried

Pre-redelivery survey by an independent surveyor at the charterer’s cost (or shared) documents condition. Disputes over wear-and-tear vs. damage are common at redelivery. The survey is typically conducted shortly before redelivery, with the report becoming the formal record of vessel condition.

Damage at redelivery beyond fair wear and tear is the charterer’s responsibility, with cost of repairs (or a financial settlement equivalent) paid to the shipowner. Major damage discoveries can trigger substantial commercial disputes. Common areas of dispute include:

• Hull plate corrosion (wear vs damage)
• Cargo equipment condition
• Interior accommodation condition
• Engine and machinery wear
• Coating condition
• Electronic equipment functionality

Continued employment after redelivery, the shipowner returns to operational control with their own crew (or arranges new charter). The transition is operationally complex, requiring:

• Crew change-over
• Insurance transition
• Class society notification
• Flag state notification
• Banking and account transitions

Pre-positioned crew is common: the shipowner arranges crew to join 1-2 weeks before redelivery to learn the vessel’s specifics from the outgoing crew. This handover period reduces operational disruption.

Pre-redelivery deficiency lists are negotiated and resolved before formal redelivery. Outstanding items become commercial settlement matters with cost negotiation.

Finance Lease Bareboat Charters

Finance lease bareboat charters are a major class of commercial bareboat structures where the underlying purpose is financing rather than operational.

Structure, typically a special purpose vehicle (SPV) owns the vessel, financed by bank debt. The SPV bareboat-charters the vessel to the operating shipowner. The bareboat hire payments service the bank debt over the lease term (typically 7-15 years). At the end, ownership transfers to the operating company through a hire-purchase mechanism or buyout.

Key documents in finance lease bareboat structures:

• Bareboat charter party
• Loan agreement between SPV and bank
• First-priority mortgage on vessel
• Assignment of bareboat hire to bank
• Assignment of insurances to bank
• Quiet enjoyment letter from bank to charterer
• Subordination agreements (if multiple lenders)
• Security trust deed (multi-lender structures)

Tax advantages in some jurisdictions allow lease structures to deliver preferential tax treatment to either lessor or lessee. UK tonnage tax, Greek shipping tax framework, Singapore Maritime Sector Incentive, and various others interact with bareboat lease structures. Specific tax considerations include:

• Capital allowances (depreciation), UK
• Tonnage tax election, UK, Greece, Cyprus, Norway, Netherlands
• Withholding tax on hire payments
• VAT and GST treatment
• Transfer pricing implications

Bank involvement in financing means the lender holds security over the vessel and the bareboat hire stream. Lender consents are typically required for material modifications, including:

• Significant amendments to the bareboat charter
• Subletting or assignment
• Changes to insurance arrangements
• Class or flag changes
• Sale of the vessel (mortgage release required)
• Bareboat charter termination

Sale and leaseback is a specific finance lease where an operating shipowner sells a vessel to a finance company and immediately leases it back as bareboat. The shipowner gets cash; the finance company gets the asset and the lease income. Sale-and-leaseback structures are particularly popular when the operating shipowner wants to:

• Free up balance-sheet capacity
• Convert long-term asset value to operating capital
• Take advantage of tax benefits in different jurisdictions
• Achieve specific accounting treatment

Japanese KG funds historically dominated as finance lessors, with substantial fleet ownership through KG (Kommanditgesellschaft) partnership structures. KG funds raised capital from individual investors (typically German and Dutch), purchased ships, and bareboat-chartered them to operating shipping companies. The structure provided tax advantages to investors while making capital available to the shipping industry. The KG model declined after the 2008-2009 financial crisis as investors moved away from these structures.

Modern Chinese leasing has emerged as a major source of bareboat-financing capacity. Major Chinese leasing companies including:

• ICBC Leasing
• Bank of Communications Leasing
• Bocomm Leasing
• CMB Financial Leasing
• China Development Bank Leasing
• Various others

These companies have built substantial fleets through bareboat structures with operating shipowners worldwide. Chinese leasing companies typically offer competitive financing and have driven volume in the international leasing market.

Class, Flag, and Registry

Class society maintenance, the bareboat charterer must maintain the vessel’s class certification continuously through the charter. Surveys are arranged at charterer expense, with class records maintained. The principal class societies include:

• DNV (Det Norske Veritas)
• Lloyd’s Register
• ABS (American Bureau of Shipping)
• Bureau Veritas (BV)
• ClassNK (Nippon Kaiji Kyokai)
• RINA
• Korean Register (KR)
• Russian Maritime Register of Shipping
• China Classification Society
• Croatian Register of Shipping
• Indian Register of Shipping

The choice of class society is typically specified in the charter. Class transfer requires shipowner consent and substantial coordination.

Flag state and registry, most flag states allow bareboat-out registration, where the actual operator’s flag is “the charterer’s flag” while the underlying ownership remains in the original registry. This is the principal mechanism for flag-of-convenience operations: a Greek shipping company owns the vessel under Greek registry, bareboats it to a Liberian SPV, which registers the vessel under Liberian flag for the duration of the charter.

Common flag-of-convenience flag states for bareboat operations:

• Liberia
• Marshall Islands
• Panama
• Cyprus
• Malta
• Bahamas
• Singapore
• Hong Kong (China)

Bareboat registration documents include the bareboat charter, the consent of the original registry, and the registration with the bareboat charter flag. These documents must remain current throughout the charter.

Mortgage maintenance, if the vessel is mortgaged (typical for finance leases), the mortgage typically has provisions for bareboat charter operation including notice to mortgagee, mortgagee consent, and protection of mortgagee rights. The mortgage typically includes:

• Restrictions on the bareboat charter terms
• Notification requirements
• Mortgagee’s right to receive bareboat hire on default
• Insurance assignment provisions
• Quiet enjoyment letter to charterer (recognising charterer’s rights)

Insurance Provisions

Bareboat charters have substantial insurance provisions reflecting the charterer’s operational responsibility.

Hull and machinery insurance, the charterer is required to maintain H&M insurance with the shipowner as an additional assured. Coverage typically equals the vessel’s market value or a contractual value, with deductibles reasonable for the trade. Specific provisions:

• Insured value adequate for vessel
• Deductibles aligned with charter party
• Underwriter approval by shipowner
• Loss-of-hire coverage where applicable
• War risks where applicable
• Pollution coverage

P&I insurance, entry with an International Group P&I Club is required, providing third-party liability cover. The shipowner is typically named as an additional assured. P&I covers:

• Cargo claims
• Collision liability (excess of H&M)
• Pollution liability
• Personal injury and death
• Wreck removal
• Stowaways
• Quarantine
• Various other liabilities

War risks insurance, required for vessels operating in war risk areas (typically with London H&M Underwriters War Risks Joint Hull Committee listed areas). The cost of war risks is sometimes a charterer’s account, sometimes shared depending on charter terms.

Loss of hire insurance, the shipowner typically arranges loss-of-hire cover (or requires the charterer to do so) protecting against the financial impact of off-hire periods. While bareboat off-hire is limited, the major loss events (total loss, war, seizure) can be insured against the financial consequences.

Minimum insurance limits are specified in the charter, typically referencing market standards. Underwriters and policy terms require shipowner approval before binding.

Risks and Disputes

Charter party disputes in bareboat charters often involve:

• Off-hire disputes, whether a particular event triggered off-hire (rare due to limited off-hire scope)
• Redelivery condition disputes, most common, particularly over fair wear and tear vs damage
• Hire payment disputes, late payment, deductions, set-off claims
• Insurance disputes, coverage, claims handling, recovery
• Indemnity disputes, third-party claims and indemnification scope
• Performance disputes, vessel condition, certificate validity, operational issues
• Termination disputes, whether grounds existed for termination

Resolution typically through arbitration:

• London Maritime Arbitrators Association (LMAA), most common for English-law bareboat charters
• Singapore Chamber of Maritime Arbitration (SCMA), Asia-Pacific
• Society of Maritime Arbitrators (SMA), North America
• HKIAC, Hong Kong International Arbitration Centre

The bareboat charter typically prescribes the dispute resolution forum and the governing law (usually English or New York law). Major bareboat disputes can be substantial, with arbitration awards in the tens of millions of dollars in some cases.

Common dispute scenarios include:

• Charterer hire non-payment due to financial distress
• Disputes over what constitutes “fair wear and tear”
• Insurance recovery disputes
• Redelivery condition arguments
• Crew claim disputes (charterer-employed crew with incidents)
• Pollution liability allocation
• Cross-default with related agreements

Termination

Charter termination scenarios include:

Expiration, natural end of charter period, triggering redelivery sequence.

Material breach by either party allowing the other to terminate, with consequent damages claims. Common breaches include hire non-payment, insurance lapse, charterer’s failure to maintain class, or unauthorised changes to the vessel. Termination procedures typically:

• Notice of breach with specified cure period (typically 14-30 days)
• Failure to cure leads to termination notice
• Termination effective on date specified
• Damages claim follows

Total loss of vessel triggers automatic termination, the charter cannot continue without the asset. Insurance proceeds are typically:

• H&M payout to mortgagee (if mortgaged)
• Excess to shipowner
• Lost-future-hire claim by shipowner against insurance (loss-of-hire cover)

Insolvency of charterer or shipowner can trigger termination depending on the specific clauses, jurisdiction’s insolvency law, and the relationship to the lender (in finance lease cases).

Sale of vessel during charter, the shipowner may sell the vessel subject to the existing bareboat charter (the new owner becomes lessor), or with charterer consent, terminate and sell free of the charter.

Force majeure, typically does not terminate the charter but may suspend specific obligations during the force majeure period. Detailed coverage in Force Majeure in Shipping.

Termination consequences typically include:

• Hire payable through termination date
• Vessel returned in the redelivery condition specified
• Insurance arrangements transitioned
• Crew arrangements terminated
• Outstanding obligations settled
• Damages claims pursued

Specific Vessel Types

Different vessel types have characteristic bareboat charter considerations.

Bulk carriers, substantial bareboat market, with finance lease structures dominating. Typical charters of 5-15 years. Bareboat hire 30-50% of equivalent time charter. Major NOO operators including Berge Bulk, Star Bulk, Pacific Basin operate substantial bareboat fleets.

Tankers, extensive bareboat finance leasing. VLCC and Suezmax bareboats are common. SPVs in Liberia or Marshall Islands hold ownership. Major operators include Frontline, Euronav, DHT Holdings, etc.

LNG carriers, heavily bareboat-financed due to high capital cost ($200M-$400M per ship). 15-25 year bareboats typical, often with hire purchase tail. Major LNG operators (BG, Shell, ExxonMobil) often charter through long-term bareboats.

Container ships, extensive bareboat market, with non-operating owners (NOOs) like Costamare, Seaspan, Capital Maritime providing tonnage to operating lines through bareboat or time charter.

Offshore vessels, substantial bareboat market for FPSOs, drillships, and OSVs. Major drilling companies (Transocean, Diamond Offshore, etc.) typically own and operate, while support vessel owners may bareboat-charter to operators.

Cruise ships, less common bareboat market; cruise lines typically own and operate their own vessels. Some specialised cruise operators do use bareboat structures.

Ferry operators, bareboat charters common for some operating models, particularly on short-route services.

Documentation

Beyond the bareboat charter itself, related documentation includes:

Loan agreement between the shipowner SPV and the bank (in finance lease structures).

Security documents, first-priority mortgage on vessel, assignment of insurances, assignment of bareboat hire, account control agreements.

Insurance policies, separate H&M, P&I, war risks, loss of hire policies.

Class society documents, certificates of class.

Flag state documents, registration certificate, bareboat-out registration paperwork.

Crew documents, STCW certificates, medical certificates, employment contracts.

Operational documents, Safety Management Certificate (ISM), International Ship Security Certificate (ISPS), various other compliance certificates.

Quiet enjoyment letter, when the vessel is mortgaged, the bank typically provides a quiet enjoyment letter to the bareboat charterer confirming that the bank will not interfere with the charterer’s possession during the charter, even on default by the SPV.

Future Trends

The bareboat charter market continues to evolve in response to industry trends.

Decarbonisation finance, bareboat structures are increasingly used to finance vessels designed for alternative fuels (LNG, methanol, ammonia, hydrogen). The longer life cycle and higher capital cost of decarbonisation vessels makes finance leasing particularly relevant.

Asset-light operating models, major shipping companies are increasingly moving toward asset-light models where they bareboat-charter much of their fleet from finance lessors. This frees up capital for other commercial purposes while maintaining operational control.

Chinese leasing continues to expand globally, taking market share from traditional western banks.

ESG considerations in bareboat structures include vessel emissions performance, governance of operations, and sustainability commitments. Modern bareboat charters increasingly include ESG-related clauses and reporting requirements.

Smart leasing with embedded data and analytics provides better visibility of operational performance to financiers, enabling more sophisticated risk assessment and pricing.

Conclusion

Bareboat charter parties are foundational to modern shipping commercial structures, supporting both operational flexibility and ship financing. The combination of the BIMCO BARECON 2017 standard form, the substantial body of common-law jurisprudence on demise charters, and the financial market for ship leasing produces the framework that the international shipping industry depends upon. Crew members, ship managers, and commercial parties involved in bareboat operations must understand the legal allocation of responsibility (charterer assuming substantially all operational obligations), the practical operational implications (charterer-employed crew, charterer-arranged insurance, charterer-paid maintenance), and the financial structure (hire payments servicing underlying debt or fleet investment). As the maritime industry evolves through decarbonisation, alternative fuels, and changing financial structures, bareboat charters continue to be the principal mechanism for separating ship ownership from ship operation.

Related Calculators

• Charter TCE Voyage Calculator
• Charter Demurrage Calculator
• Charter Freight Demurrage Deposit Calculator

Related Wiki Articles

• Voyage Charter Party
• Time Charter Party
• Bill of Lading
• Statement of Facts
• Notice of Readiness
• Laytime
• Demurrage
• STCW Convention
• MLC 2006
• Bunker Quality and ISO 8217

References

• BIMCO BARECON 2017 Standard Bareboat Charter Party
• INTERTANKO Bareboat Charter Party (similar variant)
• BIMCO Newbuilding Contract Special Provisions
• Maritime Law: Carriage by Sea, Stewart C. Boyd, Andrew S. Burrows, David Foxton (Stevens & Sons / Sweet & Maxwell, 2017)
• Cooke et al, Voyage Charters, 4th ed., Informa Law, 2014
• Wilford, Coghlin, Kimball, Time Charters, 7th ed., Informa Law, 2014
• BIMCO Bunker Terms 2018
• Goldrein and Hannaford, Ship Sale and Purchase, 6th ed., Informa Law, 2012
• Mandaraka-Sheppard, Modern Maritime Law, 3rd ed., Routledge, 2013