MarIus

3.4.1 What is a bare boat agreement?

As mentioned in 2.4 above, the borderline between a time charter and a bare boat charter may be difficult to draw. MC gives no definition or indication, but in the travaux preparatoires it says that a bare boat charter is a contract whereby

“a lessee (a bare boat charterer) assumes the total responsibility for the operation of the vessel, its equipment and manning from the owner, and operates the vessel for his own account and at his own risk. The bare boat charter gives the charterer both commercial and technical command over the vessel, and thus the charterer is considered to be the owner [Norwegian “reder”(2) In the translation of the MC into English in MarIus No. 435 (2014), the preface explains that there is no equivalent English term: “The ‘reder’ is the person (or company) that runs the vessel for his or her own account, typically the owner or the demise charterer. Time charterers and voyage charterers are not considered ‘reders’.”] in relation to the maritime code, the ship working law and the ship safety law” (Prop. 32 L (2019‑2020) p. 7).

3.4.2 The length of the agreement

The registration is for the length of the charter, but initially for not more than ten years. The period may, however, be extended by the registrar for periods of up to five years upon request of the charterer submitted at the earliest six months before the expiration of the ongoing period. There is one restriction connected with the necessary consent from the primary register and third parties – see 3.4.6 below; such consent may be time limited, and if so, the registration period is correspondingly defined.

3.4.3 The bare boat charterer

The charterer may be either a person or a company, and requirements regarding nationality and domicile follow from the reference to MC Sections 1 and 4. The main rule is that a charterer, being a limited company, must have its head office in Norway, the majority of the directors have to be resident in Norway and 60 percent of the share capital with corresponding voting rights should be in Norwegian hands.

3.4.4 What kind of vessels?

Section 40 limits the type of vessel or construction that is eligible for registration. The vessel must have a length of 15 meters or more, and be a passenger or cargo vessel; e.g., a fishing vessel is excluded from registration.

3.4.5 Primary registration state is in principle irrelevant

A bare boat charter party for an unregistered vessel cannot be registered in Norway. Where the vessel is registered – whether in a state with strict and effective control or in a new “flag of convenience”-state with scant shipping competence – is immaterial.(3) The Danish rules are restrictive on flagging-out. Registration is accepted in all EU-and EØS-states and some named states. There is no similar restriction on flagging-in. However, in order to register in Norway a SOLAS-Confirmation is necessary: A “declaration of safety” issued by one of the approved classification societies must be presented.

Registration in Norway with transfer of jurisdiction must of course be coordinated with the state of the primary register. The solution is that consent is required from the primary register, see paragraph two no. 4 on “documentation from the ship register in the primary state showing that the vessel is temporarily allowed to be bare boat registered and fly the Norwegian flag”. Whether such documentation will be given depends upon the law of the primary state, and the effect of the Norwegian registration will be within the limits set in the permission.

In addition, there has to be written consent from the owner and all holders of rights (paragraph two no. 3), which must be understood as being consent from those who, according to the primary register, are the owner and holders of rights.(4) Prop. 32 L (2019‑2020) p. 28.

3.4.7 Documentation and formal registration

Registration is dependent upon a request in writing being made by the bare boat charterer, together with:

• a copy of the bare boat charter party,

• documentation that the charterer complies with the nationality requirements in MC Section 1 (see 3.4.3),(5) For further details, see the home page of Sjøfartsdirektoratet (Norwegian Maritime Authority).

• excerpt from the primary register showing owner and holders of rights,

• documentation of consent from third parties (see 3.4.6),

• documentation from the primary register that bare boat registration is accepted (see 3.4.6).

If the ship register requirements are satisfied, the vessel will be a special entity in the register, and a certificate of nationality will be issued.(6) Regulation 593/1992 Section7d. See also Section 7c that such certificate shall includes date of the expiry and the charterer’s name and address.

A transcript from the register (headed: “vessel information”- Norwegian: “fartøysinformasjon”) will, in addition to the technical details of the vessel, provide information on the primary register, the owner, the bare boat charterer and the date of the bare boat charter party, as well as on who is now ISM-responsible.(7) The ISM-code – International Safety Management Code – is based on IMO Resolution A.741 (18) of 4 November 1993 with an Annex, which provides the content of the actual code. The code implements a system of “internal control” for the shipowner.

The decisive moment for transference to Norwegian jurisdiction is the actual registration.

3.4.8 De-registration

Seven de-registration reasons are listed in MC 40a letters a-f.

Letter a prescribes de-registration when “the bare boat charter party ceases”. This may happen for a number of reasons; some of them are also covered in the following letters. Letter a appears primarily aimed at the basic rules on the time length of the registration, see 3.4.2.

Letter b says that de-registration shall take place when “the conditions for registration according to Section 40 paragraph one no longer exist”. This includes the reasons related to letter a, as well as a number of other reasons. An example is where the charterer no longer fulfills the nationality requirements in MC Section 1 – a situation that may exist for a long period without being known to the register.

Letter c concerns a party’s request for de-registration. Originally, the Ministry proposed that a request had to come from the charterer. However, the shipping industry pointed out that one of the greatest challenges regarding bare boat registration is that holders of rights fear that the charterer may prevent de-registration – typically, where the owner cancels the charter party and the charterer resists the cancellation. This was accepted by the Ministry, and the rule is now that de-registration may follow from a request by either the owner or the charterer.

We may have a situation where one of the parties gives notice of cancellation, while the other party denies that there are grounds for cancellation. Here the system appears to be that the notification is accepted, and the dispute has thereafter to be decided according to the rules governing the contract – see 4.3 below. On this point we would refer to what the travaux preparatoires say on disputes regarding flagging-out, and this must, it is submitted, have similar application regarding flagging-in.

Letter d requires de-registration when the vessel “according to the law of the primary state no longer has the temporary right to sail under the Norwegian flag”.

Letters e and f concern notifications to the register. When a vessel is lost or scrapped, there is a duty on the owner to notify the register, no later than 30 days after the event, cf. MC Section 13. Such notice is grounds for de-registration. If notice is not given and the registrar becomes aware of this fact, de-registration will take place, however, not before the owner has had the opportunity to express his views.

A striking fact in Section 40a is that, except in letters c and e, there is no mechanism for activating the de-registration process,(8) In contrast, see MC section 40b imposing a duty on the owner to notify the register that the charter party has ended. and this makes it even more pressing to raise the question of the exact moment for re-establishing Norwegian jurisdiction. Is it when the deletion is made in the register, or when the material grounds for registration are no longer present? The question is discussed in Prop. 32 L (2019‑2020) pp. 26‑27 regarding flagging-out (see 4.3), but not regarding flagging-in. It is, however, reasonably clear that the Ministry was of the opinion that the time of deletion is decisive, as otherwise the 30 days notification-rule will not make sense. If this is accepted, we may have a situation lasting for a long period where Norway has given orders to the vessel and imposed fines, when e.g. the nationality requirements for the charterer have not been present. The guidance or restrictions that may follow from conventions and general international law, are not mentioned in the travaux preparatoires.(9) In, for example, the ordinary land register, the situation is that there are rules on deletion, e.g., deletion occurring at a defined period after registration. If such ground for deletion has been overlooked, no material rule is affected; as from the time that deletion could have been deleted, the encumbrance is considered as not being registered. And when deletion is dependent upon a notification, e,g., from the mortgagee that the mortgage shall be deleted, it is clear that the actual time of deletion is decisive. But as regards the state, e.g. in taxation matters, the question is who is the real owner (and in such assessment, registration is only one fact amongst many), and this is also the case when the creditors try to attach a debtor’s assets.

When de-registration is effected, the travaux preparatoires say that the registrar “ought” to notify the primary register.(10) Prop. 32 L (2019‑2020) p. 31. It is somewhat surprising that such a rule is not obligatory. Without information, the primary register state may believe that questions of seaworthiness etc. still are supervised by Norway.