Introduction

Imagine leasing a vessel under a long-term arrangement, hiring the crew, paying for maintenance and insurance, and operating it commercially, only to face a claim from a third party alleging that the lessor was never the lawful owner. Such a dispute raises difficult questions about who is entitled to possession of the vessel and how the operator can protect its interests. This article explores the key legal principles governing these issues.

What is a demise charter?

A demise charter, also known as a bareboat charter, is much more than a simple hire arrangement. The charterer assumes full operational control of the vessel, including appointing the master and crew, obtaining insurance, arranging maintenance and repairs, and meeting all operating expenses. For the duration of the charter, the law treats the charterer as owner pro hac vice—the owner for the time being—a principle long recognised in maritime law and affirmed by the House of Lords in Baumwoll Manufactur von Carl Scheibler v Furness [1893] AC 8.

This is significant because a demise charterer’s rights extend beyond the terms of the contract. By virtue of its possession and operational control of the vessel, the charterer acquires a legally protected interest in the vessel itself, distinct from the interests of parties who hold legal title alone.

Standing in court proceedings

Under section 21(4) of the United Kingdom’s Senior Courts Act 1981, a demise charterer is recognised as having sufficient interest in a vessel to participate in Admiralty proceedings. In Kenya, where the High Court exercises admiralty jurisdiction in the same manner as the English courts by virtue of section 4 of the Judicature Act, the Court of Appeal in Shipmarc Agency & Logistics Limited v The Owners of the Motor Vessel “Tanya” [2024] KECA 1165 confirmed that issues concerning demise charter status are substantive matters that ought to be determined at trial rather than summarily dismissed.

Accordingly, a demise charterer is entitled to appear in proceedings, defend its possession of the vessel, and be heard on applications that may affect the vessel, including its release, sale, or transfer of custody.

Relying on the ship’s registration

A demise charterer that leases a vessel from its registered owner is generally entitled to rely on the registration as evidence that the lessor had authority to grant the charter. Maritime registration is strong prima facie evidence of ownership, and a party that contracts with a registered owner in good faith, without notice of any competing claim, is well placed to argue that its possession was lawfully obtained and should not be disturbed without compelling justification.

When a Demise Charterer Operates Through an Agent

In some cases, a demise charterer operates the vessel through an authorised agent. Where that authority is accepted, the agent’s acts are treated in law as those of the charterer, confirming the charterer’s operational control of the vessel. It is a settled principle that an agent acting within the scope of authority binds the principal as though the principal had acted personally. As a result, the court need not examine the agent’s conduct separately, since it is attributed directly to the charterer.

Claiming compensation from co-defendants

If the court ultimately finds that the party who granted the lease lacked valid title, the demise charterer may lose possession despite having acted in good faith. In such circumstances, the charterer will often have a claim for indemnity or contribution against the party whose defective title caused the loss. That claim may arise under express warranties in the charterparty, such as assurances of authority to lease the vessel, or under statute. The United Kingdom’s Civil Liability (Contribution) Act 1978 allows a party held liable to recover a fair contribution from another party responsible for the same loss. In Gard Marine & Energy Ltd v China National Chartering Co Ltd (The Ocean Victory) [2017] UKSC 35, the UK Supreme Court emphasised that the allocation of risk between owner and charterer depends primarily on the express and implied terms of the charter party.

Practical protective steps

The demise charterer should act promptly. Key steps include filing a caution against release to ensure the vessel is not released or sold without notice, notifying its insurers, preserving operational records, and issuing a written reservation of rights under the charterparty to avoid any implication of waiver. Where the vessel is under arrest, custody passes to the Admiralty Marshal, but existing possessory rights are not extinguished. Accordingly, the charterer’s operational interest survives the arrest, provided it does not interfere with the court’s control of the vessel.

Conclusion

A demise charterer is more than a mere tenant of a vessel. Its possession, operational control, and recognition under Admiralty law give it a legally protected interest that must be considered in any ownership dispute. By acting promptly, preserving evidence, and relying on its charter party rights and Admiralty procedures, a charterer can effectively protect its position even when faced with competing claims to the vessel’s title.

For further inquiries regarding this article, please contact k.kinuthia@adra-advocates.com.