Bareboat Charter Registration in shipping and maritime law

An important development in recent years has been the increasingly widespread
practice whereby a vessel registered in one State is permitted to fly the flag of
a second State for a fixed period. This situation generally arises as a result of a
bareboat charter whereby a vessel registered in State A is chartered to nationals
of State B who, during the charter period, operate the vessel under the flag of the
latter State. During the period of the charter the primary registration in State
A is cancelled or suspended—at least for certain purposes—but becomes fully
effective once again upon termination of the charter. This situation depends upon
the compatibility of the legal systems of State A—the ‘flagging-out’ State—and
State B where the vessel is ‘flagged-in’. Certain aspects of bareboat registration
are addressed in Articles 11 and 12 of the 1986 United Nations Convention on
Conditions for Registration of Ships, which, as we have seen, is not yet in force.
However, the 1993 United Nations International Convention on Maritime Liens
and Mortgages, which came into force in 2004, contains detailed provisions concerning
‘temporary change of flag’ intended primarily to protect the position of
The bareboat charter registration system (sometimes termed ‘parallel registration’
or, more controversially, ‘dual registration’) has been adopted with enthusiasm,
both by ship operators (principally in order to take advantage of lower crewing
costs in developing countries) and by the governments of the increasing number
of emergent maritime countries which permit the ‘flagging-in’ of vessels, thereby
ensuring, among other benefits, training and employment for local seafarers and
receipt of foreign exchange.
This enthusiasm was initially tempered by reservations on the part of the financial
community which feared that the registration of a vessel in more than one State
would detract from the security afforded by a naval mortgage recorded in the
registers of a single State whose flag the vessel flies. Furthermore, UNCLOS provides
that: ‘[a] ship which sails under the flags of two or more States, using them
according to convenience, may not claim any of the nationalities in question with
respect to any other State, and may be assimilated to a ship without nationality.’
The nationality of a vessel is one of the guarantees offered by international law
to ensure freedom of navigation and provide the basis for State jurisdiction,
protection, and intervention; furthermore, it provides the legal bedrock for the
effective creation of mortgages and other rights in rem on the vessel. The absence
of a single nationality leads to the obvious danger that a port State might ignore
a vessel’s ostensible nationality and apply its own laws to any dispute submitted
to its jurisdiction. A mortgagee is concerned to avoid a situation where the enforcement
of his security is left entirely to the lex fori of a port of call without
reference to the law of the flag which otherwise would determine the existence,
nature, and extent of his rights over the vessel; also, there is the need to ensure
that, where the vessel is documented in a State other than that where title to the
vessel, and encumbrances against her, are recorded, third parties dealing with
the vessel have notice of the legal ownership of the vessel and the existence of
those encumbrances.
The 1986 United Nations Convention on Conditions for Registration of Ships
represents the first recognition in international treaty law of the distinction
between the ‘State of Registration’, meaning the State in whose register of ships a
ship has been entered, and the ‘Flag State’, meaning the State whose flag a ship flies
and is entitled to fly. However, the Convention does not seek to address the question
of how mortgages and liens are affected in these circumstances.
On the other hand, Article 16 of the 1993 United Nations Convention on
Maritime Liens and Mortgages contains detailed provisions for the protection of
mortgagees in cases where ‘a seagoing vessel registered in one State is permitted
to fly temporarily the flag of another State’. The Convention provides that the
‘law of the State of registration shall be determinative for the purpose of recognition
of registered mortgages, “hypothèques” and charges’. Furthermore, it
is provided that no State Party shall permit a vessel registered in that State to fly
temporarily the flag of another State unless all registered mortgages, ‘hypothèques’,
and charges have been previously satisfied or the written consent of the holders
of the security obtained; cross-reference entries are required between the register
of the State of registration of the vessel and the records of the State whose flag
she is temporarily permitted to fly. The Convention thus applies the distinction
between the public law and private law functions of vessel registration discussed
earlier in this Chapter.