Bareboat Charterparty Regulatory Framework in Saudi Arabia
Transport & Insurance Focus
Bareboat Charter parties play a vital role in the shipping industry, serving as legally binding contracts that establish the terms and conditions for vessel utilization.
Law Update: Issue 366 - Transport & Insurance Focus
Omar N. OmarPartner, Head of Transport & Insurance
Ahmed Hashem Partner, Head of Shipping, KSATransport & Insurance
Amir FathallaAssociate,Transport & Insurance
Bareboat Charter parties play a vital role in the shipping industry, serving as legally binding contracts that establish the terms and conditions for vessel utilization. In Saudi Arabia, the registration and deregistration of charter parties are governed by specific regulations and procedures under the Commercial Maritime Law (Royal Decree No. M/33, dated December 12, 2018) (“Maritime Law”) and the regulations for ship and marine unit registration (Issued by the decision of the Board of Directors of the Public Transport Authority No. 26/4/2019/2, dated 9/1/1441 AH) (“Regulation”).
These regulations offer clarity and legal protection to both carriers and charterers, particularly concerning the registration of bareboat chartered vessels under the Saudi flag. By understanding and complying with these guidelines, all parties involved can ensure a smooth and transparent process.
This article explores the process of registering and deregistering foreign bareboat vessels for Saudi charterers, emphasizing the legal implications and the role of the Transport General Authority (TGA) in this process.
When a foreign bareboat vessel is chartered to a Saudi charterer, certain steps must be taken for its registration. The charterer needs to submit essential documents to the Transport General Authority (TGA). These documents include the charterparty agreement, a registration suspension certificate from the vessel's flag state, detailed vessel information, cargo details, and other relevant data. The registration period should not exceed the duration specified in the charter contract. During this period, the charterer assumes the responsibilities and penalties that would typically fall on the shipowner. Registering a charter party provides legal protection for both the carrier and the charterer, safeguarding against potential disputes or contract breaches.
If the vessel is outside Saudi Arabia when chartered, a temporary registration certificate can be obtained. The charterer can apply for this certificate either from the vessel registration office or the Kingdom's diplomatic mission. The process involves submitting an application to the nearest consulate or the Kingdom's consulate in the country where the vessel was chartered. This temporary registration is valid for up to six months. Once the vessel arrives at the first port in Saudi Arabia with a registration office, the temporary registration becomes invalid. At that point, the vessel must follow the regular registration procedures for foreign bareboats chartered to Saudi charterers.
The TGA plays a critical role in reviewing and verifying the submitted documents to ensure compliance with local maritime regulations. This thorough review includes checking the accuracy of the information provided, examining the contractual terms, and confirming the vessel's and the charterer's eligibility. The review process promotes transparency and accountability in the registration of charter parties, contributing to a well-regulated and efficient shipping industry in Saudi Arabia.
Upon successful review and approval, the TGA issues a registration certificate for the charter party. This certificate serves as legal evidence of the registered agreement, offering crucial protection for both the carrier and the charterer. It becomes vital in case of disputes or breaches of contract, serving as crucial evidence in legal proceedings.
If a charter party needs to be terminated, the charterer must submit an application to the TGA expressing the intention to terminate the agreement, supported by relevant documentation and reasons for the termination. The TGA reviews the application and supporting documents to assess the validity of the termination request. If approved, the TGA proceeds with the deregistration process and issues a deregistration certificate, officially terminating the charter party and removing it from the official records.
Registering and deregistering charter parties in Saudi Arabia have significant legal implications. The registered charter party documentation provides crucial evidence in case of disputes or breaches of contract, ensuring a strong legal foundation for both the carrier and the charterer. By registering a charter party, both parties gain legal protection for their rights and obligations, safeguarding against unfair terms, disputes, or intended breaches of the agreement.
The registration and deregistration of bareboat chartered vessels in Saudi Arabia are essential procedures that ensure transparency, legality, and protection for all stakeholders involved. Adhering to the regulations set by the Transport General Authority is vital for maintaining a well-regulated and efficient shipping industry within the country. Understanding and following these procedures will help charterers and shipowners navigate the chartering process with confidence and avoid potential legal complications. As the maritime industry continues to play a crucial role in Saudi Arabia's economic growth, a transparent and robust chartering system remains fundamental to its success.
For further information,please contact Omar N. Omar, Ahmed Hashem and Amir Fathalla.
Published in March 2024
