Maritime law expert Bruce King recently visited the International Maritime Law Institute (IMLI) at the University of Malta to deliver two lectures on the topic: Bareboat Charters and Registration of and Mortgages on Ships under Construction: A US Perspective.
Dr King was impressed by the energy of the IMLI students and faculty
Dr King’s first lecture focused on a review of bareboat charters under Anglo-American law. After distinguishing bareboat, time and voyage charters, Dr King discussed the essential legal nature of a bareboat charter as a bailment for hire at common law, and how that fundamental relationship affects the rights and obligations of the parties as the source of the implied terms of a charter relationship that apply unless a written agreement alters them.
This was followed by a discussion of the allocation of risks between the owner and bareboat charterer and any liabilities to third parties, such as responsibility for latent and patent defects at the inception of the charter, unsafe conditions on delivery due to negligence, incidents giving rise to strict liability, and in rem obligations.
The second lecture concerned ship construction financing, both from a comparative law and from a commercial perspective. The Canadian and German systems of permitting vessels under construction to be registered and to become subject to ship mortgages were contrasted with the alternative system used in the US and elsewhere, whereby a vessel under construction is financed as a common non-maritime chattel until the vessel is completed, delivered and registered in a flag state.
Dr King discussed the physical process of construction from a collateral point of view: a ‘vessel under construction’ consists of the incomplete hull, raw material (such as steel plate to be added), raw material that is first formed into sub-assemblies (such as bulbous bows), and purchased equipment (such as engines, deck winches, and wheelhouse electronics) that may be furnished by either the builder or the buyer.
Also, while under construction, the vessel may be owned by the builder or title to the project may be continually passed on to the buyer. In addition, purchased items often become property of the builder or buyer upon shipment from a manufacturer, so the collateral is not necessarily located at the shipyard.
Lastly, the builder or the buyer may be the borrower from the lender. The construction lender always would want an enforceable security interest in all of this property under all permutations of the location and ownership of the property, and whether the builder or the buyer is the borrower, the lender would want in case of default to enforce the construction contract and to step in to the borrower’s position under the contract.
There was also a general review, from the construction lender’s point of view, of builder’s risk insurance, construction bonds, completion guarantees and letters of credit.
This was Dr King’s first experience at IMLI. He found the students to be alert and engaged. Based on the students’ questions during the lectures and afterwards, he found that their level of comprehension was high, and that the students were very interested in the practical or applied elements of the business transactions that were being discussed.
Dr King was impressed by the energy of the IMLI students and faculty, and the comprehensiveness of its library.
Dr King is the ship finance and fisheries editor of Benedict’s Maritime Bulletin and serves on the US National Advisory Board of the Maritime Arbitration Association.
He recently retired from his maritime law practice at Garvey Schubert Barer in Seattle, where he practised vessel financing and maritime regulation and business law. Dr King is the immediate past chairman of the Marine Financing Committee of the US Maritime Law Association and is a past member of the association’s board of directors.
He was formerly chairman of the sub-committee on Maritime Financing within the section of Business Law of the American Bar Association (ABA). He testified for the section of Business Law at the US congressional hearing on the 1988 recodification of the Ship Mortgage Act, and was the author of the ABA draft of that legislation.
He has lectured on the American legal system and on international business transactions at the University of the Netherlands Antilles and as a Fulbright Senior Specialist at Comenius University in the Slovakia.
Before practising law, Dr King earned a mate’s licence in the US Merchant Marine after service on a coastal ferry and in the tug and tow sector.