Case update: Commercial court rules on termination of back-to-back bareboat charters

English Commercial Court determines that in a series of back-to-back bareboat charters entered into to finance the acquisition of two ferries, the termination of the head charters automatically terminates the sub-charters.

The Commercial Court determined that, in the case of a series of back-to-back bareboat charters, when the head bareboat charter is terminated, the rest of the charter chain should also be treated as being automatically terminated as the right to redelivery of the vessel on termination is an essential part of financing arrangements of this kind. The court accepted that it was not a straightforward point but, on balance, and given the particular contractual arrangements in the case, the court dismissed the defendants’ assertion that upon termination of a head charter, a relationship of bailment arose between the owner (as original bailor) and the sub-charterer (as sub-bailee). 

Importance

Whilst the case turned on its facts, lenders and owners will welcome this judgement as the right to redelivery on termination is an essential part of financing arrangements of this kind. 

Further reading

SY Roro 1 Pte Ltd v Onorato Armatori Srl [2024] EWHC 611 (Comm). The full judgment can be found here.