For those who are unfamiliar with the concept, demise charter registration is a process which allows a demise charterer to register a ship under a flag that is different from where the ship was originally registered by the owner. Matters relating to title, mortgage and other proprietary interests continue to be subject to the law of the owner’s country of registration. Matters relating to the ship’s operation are regulated by the jurisdiction in which the demise charter is registered. The nationality of the ship is that of the flag state where the charterer registers it.
Vessels of 24m and over in registered length qualify for demise charter registration, both into and out from the Cayman Islands. The minimum demise period is two years or such lesser period as the Director may allow. There is also provision for sub-demise charter in and out, subject to approval of the owner, mortgagee and charterer. A demise charterer on the Cayman Register may transfer his rights and obligations to another charterer. He may also sub-demise charter on the same flag. Any such transferee or sub-demise charterer will have to qualify and be recorded on the Register.
Demise charter registration is open both to commercial ships and to yachts, both private and commercial. It requires mutual compatibility to be established between the maritime administrations and this process can take a month or so for a new arrangement. Therefore, it is best to determine the position well in advance and allow plenty of time should the two administrations involved not have had any previous arrangement for demise charter registration.
Typical advantages of demise chartering into the Cayman Islands are:
- Mortgages can be raised and registered in the chartering out country, thus allowing any fiscal advantages available in that country to be tapped.
- Mortgage protection remains in that country.
- A profit centre for the ship’s commercial operation could be established in the Cayman Islands.
- Access to any bi-lateral or multi-lateral treaties or trade concessions to which the UK/Cayman Islands is Party.
- Flexibility of the operational register such as in employment of crew etc.
Demise chartering out might be used for a vessel operating in a coastal state’s waters where another flag offers cabotage, treaty or other benefits whilst securing the proprietary interests [ownership, loan agreement, mortgage etc.] in the Cayman Islands.
Demise charter registration is also a route through which a person can acquire a ship without purchasing, (i.e. by demise chartering it) and then have it registered, say, in the Cayman Islands.
For more information on any specific aspect of demise charter registration, please Contact Us.
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