UK Ship Register permits Bareboat Charter Out - Too little, too late?

Editor
Dr Johanna Hjalmarsson
Informa Associate Professor of Maritime and
Commercial Law, Institute of Maritime Law,
University of Southampton
Editorial Board
Professor Jason Chuah
City University
Jeremy Davies
Partner, Holman Fenwick Willan
Professor Filippo Lorenzon
Chair in Maritime and Commercial Law,
Dalian Maritime University
David Martin-Clark
Shipping and Insurance Consultant, Maritime Arbitrator
and Commercial Disputes Mediator
Professor Baris Soyer
Director of the Institute of International Shipping
and Trade Law, University of Swansea
Professor D Rhidian Thomas
Emeritus Professor of Maritime Law,
University of Swansea
Professor Richard Williams
Consultant, Ince Co, Institute of
International Shipping and Trade Law
Haris Zografakis
Partner, Stephenson Harwood
April 2019
(2019) 19 STL 3 1
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Lloyd’s Shipping
Trade Law
Lloyd’s Shipping
Trade Law
UK register permits
“bareboat charter out” –
too little, too late?
On 29 March 2019 bareboat chartering registration rules in the UK changed. This
article discusses the changes.
Existing provisions
Ship registration in the British context is governed by the Merchant Shipping Act
19951
(the “Act”). Part II of the Act deals with registration of ships. Sections 8 to
16 deal with general issues, section 17 deals with bareboat chartered-in ships
and sections 19 to 23 are supplemental provisions in the Act.
Section 8 of the Act requires that a “Registrar General of Shipping and
Seamen” shall maintain the register of ships, which may be in separate parts
as directed. Section 9 deals with basic provisions, and section 10 deals with
provisions for and in connection to the registration of British ships by way of
“registration regulations”. It specifies that the registration regulations may
make further provisions,2
inter alia, about persons who may be permitted
to register ships as British ships. It also permits different (registration)
provisions for different circumstances3
including transitional, incidental or
supplementary provisions.4
Skipping ahead, the next relevant section is
section 17 which deals with registration of bareboat chartered-in ships by
persons or entities qualified to own British ships.
The registration provisions promulgated under the Act are the Merchant
Shipping (Registration of Ships) Regulations 19935
(the “Regulations”) which
provide the details for vessel registration as a British ship.
Part II of the said Regulations6
deals with the Register of British ships in
the UK (the “Register”). The Register so established is divided into four parts.
Part II covers fishing vessels, Part III covers small ships and Part IV covers
ships that are bareboat-chartered into the Register. Part I of the Register is
negatively defined for those ships that do not fall under either Part II or Part
III of the Register.
Under the delegation provision contained in Part II section 8 of the Act, the
registration of ships under Parts I, II and IV of the Register is carried out by
the Registry of Shipping and Seamen (“RSS”) on behalf of the Department of
Transport and the registration of small ships under Part III is administered by the
Driver and Vehicle Licensing Agency (DVLA).7
Most of the commercial, seagoing
1
1995 c 21, available at www.legislation.gov.uk/ukpga/1995/21
2
1995 Act, section 10(2).
3
1995 Act, section 10(3)(a).
4
1995 Act, section 10(3)(c).
5
SI 1993 No 3138, available at www.legislation.gov.uk/uksi/1993/3138/made
6
SI 1993 No 3138, section 2(1).
7
Merchant Shipping Notice 1675 (M+F) issued under Merchant Shipping (Registration, etc) Act 1993.
1. UK register permits “bareboat
charter out” – too little, too
late?
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and internationally trading British tonnage falls under Part I or
Part IV of the Register which is managed by RSS from Cardiff.
Commercial shortcomings
The above sets out the provisions as they applied until 29
March 2019. These provisions did have some shortcomings.
Eligibility
The eligibility of persons qualified to be owners is defined in
PartIII,sections7and8oftheRegulations.Section7provides
a list of qualifying criteria for persons as owners, requiring
them to have a “connection” to the UK; either as a citizen, or
a link via British Dependency or as a citizen of an EU member
state or as a body incorporated in the UK or an EU member
state. Section 8 permitted persons not falling under section
7 of the Regulations to be registered as an owner of a British
ship with the added requirement that at least 33 shares out
of the 64 shares in every British ship, as listed on the back
of the Certificate of British Registry, are held by person(s) or
entities qualifying under section 7 of the Regulations and
that the ship is registered in Part I of the Register.
One effect of the Regulations was that citizens of and
companies from non-EEA countries, many of whom may
have “friendly” or traditional relations with the UK, could not
register their ship as a British ship under Part I or “Bareboat
Charter In” their ship to the British Register under Part IV
unless they had the necessary “connection” under section
7 or 8 of the said Regulations. The same applied to non-UK
citizens settled in the UK.
Bareboat charter out
Bareboat chartering out (“BBC-Out”) is not mentioned in the
Act, and therefore not covered under the said Regulations.
Only bareboat chartering in (“BBC-In”) is explicitly permitted
under section 17 of the Act; provision for this was made in
Part IV of the Register when the Regulations were drafted
and approved.
Since neither the Act, nor the Regulations or the Register
contained any provisions for BBC-Out in the RSS procedures,
owners of British ships were at a commercial disadvantage
in so far as bareboat chartering out was concerned. This
becomes critical when the owner wishes to bareboat charter
tonnage out for commercial opportunities or compliance
with charterparty requirements. Such an owner was left with
no recourse but to terminate the ship’s registration under
the UK flag and transfer the ship to another flag that would
permit BBC-Out. This procedure in turn imposed additional
costs on the shipowner for registration and associated costs
as a result of changing the flag twice – initially flagging out to
an acceptable register, and later flagging back in to the UK at
the end of the charterparty. Examples of costs are verification
of marking and carving, re-issuing of all statutory certificates
and re-approval of all existing approved plans by the new flag.
Sanctioned vessels
The existing provisions of the Act, its associated Regulations
and the procedures for day-to-day maintenance of
the Register were drafted back in the early 1990s. Since
then, a few countries and entities have become subject
to international sanctions, which the UK is duty-bound
to implement as part of her obligations towards the
international community.
These sanctions were easily implemented in the financial
sector. However, in the shipping sector, the Registrar General
was powerless to enforce them immediately against ships
on the Register due to lack of suitable provisions in the
Regulations. The Registrar General could not refuse to register
a ship; nor could a ship be removed from the Register if the
registration of that ship was prohibited by the sanction
regulations, even if the sanction regulations were part of
UK’s domestic law. Re-registration could possibly be denied
at the end of the five-year validity of the Ship’s Certificate
of Registry, but a ship could not be immediately stripped of
her British colours due to sanctions during the validity of the
Certificate of Registry.
Recent changes
On 29 March 2019 the Merchant Shipping (Registration of
Ships) (Amendment) (EU Exit) Regulations 20198
came into
force. These Amendment Regulations addressed all the above-
mentioned shortcomings in the British registration process in
one fell swoop.
The Amendment Regulations introduce some new
definitions; add new types of persons or entities into the list
of persons eligible for registering a British ship; set out the
requirement for a declaration that the ship is not a sanctioned
ship; a new Part 10A is introduced in the Regulations which
covers BBC-Out of British ships to approved registers; as is a
concept of “Certificate of Permission”, in addition to various
other associated amendments. Approved registers for the
purpose of BBC-Out are the registers of an EEA country, a
Commonwealth country, or a country listed in Schedule 6 to
the Regulations. This schedule, titled “Approved Countries”,
names 20 countries: Argentina, Aruba, Bahrain, Brazil, the
Canary Islands, China, the Faroe Islands, Haiti, Israel, Japan,
Liberia, Madeira, the Marshall Islands, Monaco, Panama, South
Korea, Switzerland, Suriname, the United Arab Emirates, and
the United States of America.
To practically effect these changes to the Regulations, three
forms – MSF 4247,9
MSF 473510
and MSF 475611
– apply with
effect from 29March 2019.
Form MSF 4727 (Rev 0319), the revised Declaration of
Eligibility for registering Merchant and Pleasure Vessels on
Part I of the Register, now contains reference to the revised
list of eligible persons and legal entities with domicile either in
the UK, an EEA state, a Commonwealth country or a Schedule
6 country.
8
SI 2019 No 509; www.legislation.gov.uk/uksi/2019/509/contents/made, accessed 29 March 2019.
9
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/
file/790792/MSF_4727_Rev_0319_Dec_of_Eligibility_to_register_a_vessel_on_Pt_1.pdf, accessed 29
March 2019.
10
file/790799/MSF_4735_Rev_0319_Declaration_of_Eligibility_tho_Register_a_Bareboat_Charter_
Ship.pdf, accessed 29 March 2019.
11
file/790814/MSF_4756_Rev_0319_Application_for_Bareboat_Out.pdf, accessed 29 March 2019.
Lloyd’s Shipping Trade Law • April 2019 • (2019) 19 STL 3 1

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(2019) 19 STL 3 1 • April 2019 • Lloyd’s Shipping Trade Law
Form MSF 4735 (Rev 0319), the revised Declaration of
Eligibility to register a Bareboat Charter Vessel under Part IV
of the Register, contains similar provisions to those effected
for MSF 4727.
Form MSF 4756 (Rev 0319), the Application for Bareboat-
Out, is a new form introduced for the shipowner to provide
the relevant details, including the charterparty details, to the
Registrar General for them to issue a Certificate of Permission
for the shipowner. This will have the effect of suspending the
British registration of the concerned ship from Part I of the
Register during the validity of the Certificate of Permission.
Comments
At first glance, these amendments appear to have removed
the commercially constraining and restrictive provisions of
the British Register by widening the scope of entities that can
register their ship as a British ship. This now permits persons
who have a right to live in the UK, and are settled in the UK,
to become registered owners of a ship under the British
Register in addition to citizens of and bodies incorporated in
Commonwealth countries or a Schedule 6 country.
In addition, the flag seems to have woken up to the
commercialrealityandrequirementsofthemaritimeindustry
by permitting BBC-Out to an “approved register”12
currently
restricted to an EEA state, a Commonwealth state, or one of
the 20 approved Schedule 6 countries. This makes BBC-Out to
these approved registers a very simple paper exercise.
On closer inspection, any tonnage flagging out, whether
permanently or under BBC-Out, would still not be counted
as British tonnage during the relevant period. All the
above-mentioned provision does is that it “suspends” the
registry of ships under Part I of the Register by issuing a
“certificate of permission” upon application prior to the
suspension, thereby maintaining a paper link between the
register and the ship. The permission is valid for five years
and renewable upon application. This might have the effect
of momentarily stemming the flagging out of UK tonnage
to the approved registers due to BBC-Out, but would
not prevent flagging out to other attractive flags. The
explanatory memorandum to the Amendments states that
these Amendments will enable a ship to return to the UK
register at the end of the charterparty – which is anyhow
covered under current flag-in provisions.
Secondly, there is no legal assurance that the BBC-Out
tonnage will return to the UK register upon the conclusion
or termination of the charterparty. The flagging of a ship
depends solely upon the owner’s commercial requirements.
If the national provisions on this issue change during the
period when the ship was chartered out, then the UK flag
may no longer be attractive to return to. MSF 4756, the
application to BBC-Out, does not contain a legal declaration
from the owner of any intention to return to the UK flag
– for the simple reason that such assurances cannot be
asked for; first, as the Regulations do not contain such a
12
Regulation 23 of SI 2019 No 509 – Regulation 87D(4) of the new Part 10A introduced in the Merchant
Shipping (Registration of Ships) Regulations 1993.
provision; and secondly, and more importantly, a business-
savvy owner will balk at giving such a guarantee. It would
be prudent for them to flag out now and flag back in later,
rather than give such a legal guarantee which may have its
own commercial and statutory repercussions.
Thirdly, the fees for chartering out, now included in
amendments13
to the 2018 Fees Regulations,14
require
payment of fees for issuance of certificate of permission,
payment of fees for renewal of certificate of permission, if so
desired,andpaymentoffeesforanyamendmenttochanges
to details in addition to various other fees listed covering all
services envisaged. All of these listed services have provision
for a premium service by payment of additional “premium
fees”. In 75 per cent of listed amendments, the premium
fee listed is more than the regular fee for that service; and in
one case more than double.15
Interestingly, the premium fees provisions in the 2018
Fee Regulations are listed only for those Parts (Part 8 and 9)
of the Fee Regulations which deal with Registration, Transfer
and Mortgage of Vessels and associated matters for all
ships under the British Register. The amounts involved may
appear to be petty when compared to the overall operating
budget of a ship, but it is surprising to note that a leading
maritime country is itself charging a premium for quick
delivery of what, in the first instance, was a service it is
anyhow expected to deliver promptly to satisfy the client’s
and market’s business requirements.
The decision to bareboat charter out a ship is usually
a long-term decision for the shipowner. The revised
UK procedure involves maintaining the validity of the
“certificate of permission” during the currency of BBC-Out.
A renewal is envisaged every five years until the bareboat
charterparty runs out. Every change of detail is also required
to be reported to the UK. All of this will entail associated
paperwork and maintenance of records by the shipowner.
It may turn out to be simpler to flag out and flag back in at
the end of the chartering period.
On the topic of flags, a scrutiny of the currently approved
registers raises some interesting questions. Out of the top
20 flags of registration by deadweight tonnage listed in
the “Review of Maritime Transport 2018” by the United
Nations Conference on Trade and Development,16
six are EU
registers, one is an EEA register, two are Commonwealth
countries and another seven are approved registers under
Schedule 6. The status of bareboat chartering out to any
of the remaining four countries appears to be prohibited
– Bahamas, Isle of Man (a Category 1 member of the Red
Ensign Group), Indonesia and Republic of Korea. A study
of reciprocal permission from the “approved registers” and
these 20 top flags by registration for bareboat chartering
out to the UK would be an interesting academic study.
13
Regulation 33 of SI 2019 No 509.
14
The Merchant Shipping (Fees) Regulations 2018, SI 2018 No 1104, as amended.
15
Regulation 33 of SI 2019 No 509 – New entry 3D in Part 8 of Schedule 1 to the Merchant Shipping
(Fees) Regulations 2018 – Basic fees £46; Premium fees £100.
16
UNCTAD, Review of Maritime Transport 2018, table 2.8 on page 35 – Panama, Marshall Islands,
Liberia, Hong Kong (China), Singapore, Malta, China, Bahamas, Greece, Japan, Cyprus, Isle of Man,
Indonesia, Madeira, Danish International Ship Register, Norwegian International Ship Register, UK,
Italy and Republic of Korea; available at https://unctad.org/en/PublicationsLibrary/rmt2018_en.pdf,
accessed 29 March 2019.

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Lloyd’s Shipping Trade Law • April 2019 • (2019) 19 STL 3 1
Itisunclearfrom theexplanatorymemorandumof the said
Amendment Regulations, or from any other document in the
public domain, as to how this list of approved countries was
arrived at. There was no formal consultation with the industry
for these Amendment Regulations, ergo industry concerns
and commercial requirements do not appear to have been
taken into consideration when the said list was drafted.
The latest amendments solely amend the Registration
Regulations without touching upon the Act. Section 17 in Part
II of the Act, dealing with “Ships on bareboat charter”, deals
with BBC-In only. The BBC-Out provision is still not explicitly
permitted under the Act but has been brought about under
Registration Regulations which were promulgated under
Part II section 10 of the Act. The penalties for offences
under Registration, including those under section 10 of the
Act, are mentioned in section 14 of the Act which applies to
any matter arising in relation to a “registered ship”. BBC-Out
has the provision of suspending the ship’s registration, the
Certificate of Permission being the objective evidence for this.
A cursory check in legal databases reveals no case law which
cites section 17 of the Act. Therefore, the first judicial action,
whenever brought by the Crown against the duly authorised
entity signing the MSF 4756 declaration, for offences under
BBC-Out provisions, would be an enthralling legal scrimmage.
Interestingly, the provisions of BBC-Out apply exclusively
to ships registered under Part I of the Register. Fishing vessels,
registered under Part III of the Register, are not covered. Some
fishing fleets regularly re-flag based on the season, reflecting
commercialrequirements.Forexample,afishingfleetswitches
between the UK and Spanish flags at regular intervals, to
legally fish near Falklands and Argentina without hindrance in
the respective fishing seasons. The reasons for omitting Part III
of the Register under these Amendments is unclear.
The Explanatory Memorandum to the Amendments
further states that these amendments were not made
under the European Union (Withdrawal) Act 2018 despite
the thought-provoking date of entry into force – 29 March
2019. The said memo also states that the Amendments
were made in response to the Maritime Growth Study 201517
which recommended providing, among other things, a more
commercial and responsive UK maritime administration.
If these amendments were really in response to the 2015
study, then they are four years late in arriving. Some
prominent cross-channel ferries and a complete fleet of
large boxships have already sailed out from the UK to other
EU registers. Albeit a welcome breeze for British shipping,
these Amendments may be too little, too late.
Captain Amarinder Singh Brar, LLM (Soton), AFNI, Master Mariner
Providing consultancy services to legal firms and PI Clubs as
part of the Shipping and Litigation team of London Offshore
Consultants based out of London. The views expressed in the
article are the author’s personal views and do not necessarily
reflect those of his employer
17
Explanatory Memorandum to the Merchant Shipping (Registration of Ships) (Amendment) (EU Exit)
Regulations 2019; www.legislation.gov.uk/uksi/2019/509/pdfs/uksiem_20190509_en.pdf, accessed
29 March 2019, referencing www.gov.uk/government/collections/maritime-growth-study
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UK Ship Register permits Bareboat Charter Out - Too little, too late?

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