Резюме. A basic principle in Law is the freedom of contract. Particularly, in Private Shipping Law, contractual parties may agree on all lawful terms and conditions which are most appropriate for the performance of the carriage. During the years of maritime trade practice, different types of contracts has been created, as well as systems of Chain Charter Parities have been adopted, through all of which the relations between maritime traders were settled. All this has contributed to maritime commercial practices for the carriage to be carried out not only by the shipowners, but also by other maritime traders with the appropriate authority and competence.
Ключови думи: maritime transport; charter party; liner bill of larding; voyage charter; time charter; bareboat charte; shipowners; disponent owners; carriers; charterers; commercial management; risks
Introduction
Nowadays, one of the most used contracts in the maritime scenario is the socalled charter party contract. (Zárate 2009) More than half of the world’s shipping fleet is under a charter in one form or another. (Chen et al. 2021) Therefore, the interpretation of these obligations, rights, duties, liabilities, risks, earnings, costs, and profits between the contracted parties, namely, the shipowner and the charterer, as well as the understanding of charterparty terms, is considered of critical importance in chartering practice. (Plomaritou 2014)
Freight rate negotiations are a major factor in the maritime industry. In addition, the economic environment in which the shipping industry operates is characterized by high cyclicality, volatility, and unpredictability. The market has a high-risk profile. (Plomaritou et al. 2016) As an example, a ship can be chartered for $ 20,000 a day on Monday, and on Friday the same type can be chartered for $ 30,000 a day. If we set ourselves the task not to determine the values of the variables, but why they change, we can see that the model is dynamic, because supply and demand are determined separately, and the connecting link is the freight rate negotiations. The main task of the functioning market mechanism is not to determine freight rates, but to monitor the demand and supply of maritime services in a complex world in which shipping exists. In this article, we will look at how market participants can control the supply process.
Contracts of carriage
The most important documents governing the commercial and legal relationships between the parties in international sea transport are the bill of lading and the charter party. (Voudouris et al. 2020) The charter party is a legal contract of employing a vessel between the shipowner and the charterer. In shipping matters, charter parties and bills of lading are highly important documents since they allocate risks, obligations, rights, earnings, costs, and profits between the contracted parties, namely the shipowner (or carrier) and the charterer (or shipper). (Plomaritou et al. 2019)
Generally, the contracts for carriage of goods by sea are between carriers and shippers for the transportation of the contracted cargo by chartered vessel. There are two types of trip/voyage charters used in liners shipping and tramp shipping.
– Liner Bills of Lading are used in liner shipping for carriage of finished industrial goods.
– Voyage charter parties are used in tramp shipping for carriage of bulk and general cargoes, also for transportation of wet cargoes like all kind of oil, petroleum products, chemicals, and liquefied natural and petroleum gas, etc.
The contractual parties are:
– Contractor – the executor of the contract of carriage by sea or river vessel may be a shipowner (registered owner) or a sea carrier (disponent owner in private English Law) or a river carrier (carrier in EU Law).
– Contracting Authority – the contracting authority for the contract of carriage is the shipper in liner trade or tramp shipping - charterer or the end-charterer as per English law, if there is a chain of tenants (for example, registered owner - bareboat charterer - time charterer – voyage charterer).
The Contracts for hire of a vessel for a certain period of time are two types:
– Time-Charter Party – The Shipowners charter out the vessels with the crew for a certain period.
– Bareboat Charter Party – The Shipowners charter out the vessels without crew for a certain period.
The lessor is the registered shipowner who leases the ship on bareboat charter or time-charter. A lessor can also be a bareboat charterer, who subcontracts the vessel on time-charter. A lessor may be a time-charterer who subcontracts the ship or part of it on a time-charter to another sub time-charterer.
A tenant under a lease agreement can be a bareboat charterer, time-charterer, and sub time-charterer.
According to the conditions of transport, there are two types of contracts:
– Contracts for carriage by sea in tramp shipping sector - voyage charter (voyage charter party) for the carriage of cargo between two or more ports, also for the transport of large quantities of goods on consecutive trips or several ships (Contract of affreightment).
Usual conditions of transport in the tramp shipping sector: Free In Out Stowed and/or Trimmed - the ship is loaded and unloaded free of charge for the carrier.
– Liner Shipping Contracts – Liner Bill of Lading – with incorporated terms and conditions in the Liner Bill of Lading, preceded by the relevant Booking Note, which is a reservation of space and place for a specific cargo.
Usual conditions of transport in Liner Shipping Sector: Liner In / Liner Out loading and unloading of the ship is on account of the carrier.
Figure 1. Structure of contracts for shipping services.
For each data situation, several approaches can be applied, each with its own assumptions and shortcomings. With the present analysis of the charter parties and liner trade contracts (Tables 1 to 17), however, we expect to shed some light on the mechanics that articulate this particular form of contract as a genre and on the interactions that take place between the dramatis personae that integrate it (Llopis 2014).
Table 1. Type of contract
Table 2. Subject of the contract
Table 3. Application of the contract
Table 4. Lessor under the contract
Table 5. Lessee (tenant) under the contract
Table 6. Contract Carrier
Table 7. Carrier according to the transport documents (Bill of Lading)
Table 8. Capital costs of the ship at the expense of:
Table 9. Technical operation and fixed costs at the expense of:
Table 10. Commercial operation and voyages at the expense of:
Table 11. Loading and unloading of the ship and costs at the expense of:
Table 12. Insurance of the ship H&M at the expense of:
Table 13. P & I Club at the expense of:
Table 14. Adverse meteorological conditions at the expense of:
Table 15. Delay of the ship due to technical accidents and overconsumption of fuel at the expense of:
Table 16. Market risk for:
Table 17. Special notes
Table 18. Structure and distribution of costs
Distribution of ship costs for different types of contracts for the carriage of goods by sea and charter of ships with or without crew (with and without the option to purchase the ship) are shown in Table 18. As can be seen from Table 18, the cost of the transport service, which is negotiated in the different types of contracts used in merchant shipping, is different. In this regard, the prices of different contracts for the carriage of cargo and the hire of ships are different.
The commercial activity in water transport has a long history, complex character, and many traditions that have been created over the centuries. In principle, for the implementation of a transport service (transport), cargo and a ship are needed, as well as an assignor (a user of the transport service who pays the freight) and a contractor (carrier) who undertakes the obligation to transport the goods. For greater convenience and flexibility in trade, the practice has expanded the concepts of carrier and user of the transport service, also called the charterer, who is not always identified with the shipowner and shipper. The practice has required, where necessary, the obligations of shipowners regarding the operation of their ships to be transferred by contract to other persons, who are normally specialized maritime trading companies and merchants of goods traded by sea. In this regard, commercial activity in water transport is regulated by two categories of contracts – contracts for the hire of ships and contracts for the carriage of goods, also called charters. In the transport of one product, there can be only one active charter or more charters, forming the so-called Charter Party Chain. In cases where there is a chain of charters, then the shipowner concludes a charter with a tenant (so-called head charterer), who in turn concludes another charter with another tenant (sub-charterer).
Theoretically, there is no limit to the number of charters in the chain, i.e. there may be more than one sub-charterer. The last tenant (end-charterer) is the one who is the actual shipper and pays the freight for the transport.
Conclusions
A charterparty is a legal contract of chartering (employing) a vessel. It is a crucial shipping document since it allocates obligations, rights, duties, liabilities, earnings, risks, costs, and profits between the shipowner and the charterer. (Plomaritou 2014)
As the maritime industry embraces the digital age, computer science engineers are enabling important new capabilities, such as improved modeling, simulation, optimization, and automation, including machine learning. (Chen et al. 2021) The improvement and wider application of new technologies in every aspect of life have a significant impact on the development of maritime transport. The shipping industry has not yet adopted blockchain technology, but it should be borne in mind that it could be very useful in terms of organizing, tracking, and coordinating business transactions involving many parties.
One of the possibilities that can be fulfilled by blockchain technology is “smart contracts” – contracts in the form of a computer program, executed independently in a blockchain and automatically implementing the rules and conditions of each agreement between the parties, turning them into a standard part of the software without the possibility of change by the parties.
It is now possible to draw a conclusion that shortly many industries and businesses will face the reality of applying modern IT-based new management mechanisms that radically change the existing business models. (Molodchik, Dimitrakiev 2018; Molodchik et al. 2018) For this to happen, however, the most important aspects arising from charters in the main types of the charter must be mastered.
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