Charterparty

A charterparty is the contract under which a shipowner makes a vessel available to a charterer, either for a defined voyage, a period of time, or (less commonly) on a bareboat basis where the charterer takes over operation of the ship entirely. HMRC's own internal guidance on shipping contracts distinguishes the main forms: under a bareboat charter the charterer takes 'control and possession of a specifically named ship' and operates it as if it were the owner, including crewing and maintenance; under a time charter the charterer hires the vessel 'for agreed commercial purposes either for a period of time...or for the duration of a given trip'; and under a voyage charter the charterer contracts for the ship for a single voyage or a series of consecutive voyages.

The key legal distinction between a time charter and a bareboat charter is who controls the vessel. In a time charterparty the shipowner continues to run the ship: the master and crew remain the shipowner's employees throughout, and the charterer simply directs where the vessel goes and what cargo it carries. HMRC's guidance puts this plainly: 'the time charterer has no possession or control of the ship. The master and crew remain in the employment of the shipowner and at all times are his servants in law.' Payment to the owner under a time charter is called 'hire', usually expressed as a daily or monthly rate.

A fourth arrangement, the contract of affreightment, is 'effectively a contract for a series of voyage charters' committing an owner to carry specified volumes of cargo over a set period without tying the contract to any single named ship. In practice, most charterparties are not drafted from scratch: they are concluded on standard industry forms, commonly maintained under the auspices of the Baltic and International Maritime Conference (BIMCO), which the parties then amend by agreed rider clauses to fit the particular fixture.