Bareboat Charter

A bareboat charter is the form of ship hire that transfers the most control from owner to charterer. Unlike a voyage or time charter, where the owner keeps the ship manned and runs it, in a bareboat or demise charter the owner hands over the bare ship (hull, machinery and equipment) and the charterer takes it over completely for the agreed period. The charterer appoints and pays the master and crew, stores and maintains the vessel, arranges its insurance, and directs its employment, effectively stepping into the shoes of the owner for the duration of the charter while the actual owner simply receives hire for the use of the asset.

Because the charterer assumes possession and operational control, it also assumes most of the responsibilities and risks that normally rest with an owner. The bareboat charterer is generally treated as the operator for regulatory and liability purposes during the charter, responsible for the ship's compliance, its crewing standards and its day-to-day running. The charter party sets out the condition in which the ship is delivered and must be redelivered, the maintenance obligations, insurance arrangements and how the vessel may be traded.

Bareboat chartering is used in several distinct situations. It is common as a financing structure: a bareboat charter with a purchase option, or a hire-purchase arrangement, lets a company effectively acquire the use of a ship over time without buying it outright, which is attractive for financing new tonnage. It is also used where a charterer wants full operational control, for instance to place the ship under its own management and flag, and it appears in some government and offshore arrangements. Because it so closely resembles ownership, the bareboat charter is legally and commercially distinct from the time and voyage charters that dominate the trading markets, and its terms are drafted with corresponding care.