Bareboat Registration Changes Proposed for Norwegian Registries

In a consultation paper dated December 5, 2017, the Norwegian Government is proposing to open up the bareboat registration of vessels in and out of the two Norwegian ship registries. The proposal is particularly driven by the increasing need for Norwegian flagged vessels to change flag in order to meet cabotage rules of other states, or to temporarily satisfy flag requirements under a charter party.

There are two Norwegian ship registries: the Norwegian International Ship Register (NIS) and the Norwegian Ordinary Ship Register (NOR). NOR is a national registry with relatively strict nationality requirements, and the vessels are subject to Norwegian pay and working regulations. NIS was established in 1987 in an attempt to stop the increasing reflagging of Norwegian vessels to the open registries such as Liberia, Marshall Islands and the Bahamas, as NIS vessels are entitled to employ foreign crew in accordance with the wage and employment rules of their domicile.

The latest proposal is aimed at further increasing the attractiveness of the Norwegian flag and make it more in line with other ship registries, such as the Danish registry which opened up for bareboat registration more than 20 years ago. The Norwegian proposal is also very much in line with the Danish system for bareboat registration of vessels.

Bareboat registering out of NIS/NOR

The purpose for allowing bareboat registration of vessels out of NIS/NOR is to facilitate for the owners’ temporary need for a new flag without having to permanently delete the NIS or NOR registration. This is particularly relevant for offshore vessels that normally operate in the Norwegian sector of the North Sea but are temporarily relocated to other jurisdictions such as Brazil or West-Africa. By allowing to bareboat register the vessels out of Norway, the owners avoid the costly procedure of discharging and reattaching mortgages just to change the vessel’s flag. It also increases the likelihood that the vessel will be reflagged to Norway at the expiry of the bareboat charter period. 

It is proposed that there is no restriction as to which flag a vessel can be bareboat registered to. However, it is proposed to limit the duration of such a bareboat registration to a maximum of five years, with the possibility of applying for additional extensions.
 
With respect to title and mortgages, it is proposed that NIS/NOR as primary register shall be the valid place of registration and that Norwegian law shall apply to these. Hence, any remarks, notes or recordings of title or encumbrances in the bareboat registry shall be disregarded. 

Bareboat registering into NIS/NOR 

The primary purpose for allowing bareboat registration of vessels into NIS/NOR is to strengthen the maritime industry in Norway. It will also facilitate the retention of the Norwegian flag following a sale leaseback transaction.

It is suggested that the procedure for bareboat registration follows a similar system as ordinary registration of vessels into NIS/NOR. However, it will of course be the bareboat charterers and not the owners that make the registration. A fundamental requirement for the bareboat registration is that the vessel’s primary registry allows such secondary bareboat registration. This will have to be evidenced by a permission for change of flag or similar document from the primary registry. The consent of the registered owner and any mortgagees will also be required. 

It is also here proposed to limit the duration of such a bareboat registration to a maximum five years, with the possibility for applying for additional extensions. This is on the condition that the primary registry has accepted bareboat registration for such a period, and that the bareboat charter period is for five years or more. 

In line with the proposal related to bareboat registration of vessels out of NIS/NOR, the Government is suggesting that it shall not be possible to register any encumbrances when the vessel is bareboat registered in NIS or NOR.

Endnote 

The deadline for providing comment to the proposal set out in the consultation paper is March 6, 2018. As several key players in the Norwegian maritime industry, such as the Norwegian Seafarers' Union, the Norwegian Shipowners’ Association and certain Norwegian shipping banks, have already been involved and consulted, we do not expect that the proposal will meet too much opposition or be obstructed. However, it is not possible to indicate when it may be enacted.

 Oddbjørn Slinning is a Partner at SANDS (Advokatfirmaet Steenstrup Stordrange DA).