A Call For Clarification In Bareboat Chartering Law

International law governing the registration of ship mortgages under bareboat chartering arrangements is badly in need of clarification, said Clay Maitland, executive vice president of International Registries Inc. (IRI), in an address to an UNCTAD/BIMCO colloquium on chartering and ship finance. (UNCTAD = United Nations Committee for Trade & Development; BIMCO = Baltic and International Maritime Conference).

Mr. Maitland, speaking to the group in Santiago, Chile on October 19, is a maritime lawyer specializing in vessel finance, and has attended IMO's legal committee since 1980. Mr. Maitland suggested t h a t UNCTAD sponsor amendments to the 1986 Convention on conditions for Registration of Ships, which was the first convention governing the recording of mortgages. "It is in the interests of mortgages, charterers and shipowners to ensure that there is uniformity and certainty in this area of international law. It should be made clear t h a t mortgages are subject only to the law of the underlying state of registry, which is the one to which the ship reverts at the end of its bareboat charter, and not to that of the bareboat charter registry. Unfortunately, the 1986 Convention does not confront this crucial question." He called for the bareboat charter registries to be required to furnish notice to third parties of any mortgages, charges or liens registered against a vessel in its underlying registry. Review is all the more important, he stressed, as courts seeking to enforce mortgages are increasingly applying the law of the state of the underlying registry. Clarity between the responsibilities of the two registries is vital because of the close link between bareboat chartering and ship finance, he said. "Clarification of the law is particularly important for developing countries such as Chile, Argentina, Brazil and Peru. Banks and lenders in the U.K. and U.S., and their legal advisers, will not record ship mortgages in those countries. It is necessary for S. American owners to place their ships in bareboat charter registries which lenders approve."