The Finnish Maritime Act to be amended in respect to bareboat charter

Background on bareboat charter under the Finnish Maritime Act

According to the Finnish Maritime Act (674/1994) (“FMA”), a double registration of a vessel is in practise not currently possible. The purpose of the proposed amendment is to enable the double registration (bareboat charter registration) of a vessel in those cases where a foreign vessel, which is registered in the ship register of another state in terms of ownership, is chartered to Finland under a bareboat charter agreement (so-called bareboat-in cases).

Furthermore, the aim of the proposed amendment is to enable a foreign-owned vessel chartered to Finland under a bareboat charter agreement to be accepted as Finnish and entered in the Finnish register, even if it remains in the ship register of another state in terms of ownership.

However, the FMA already enables a bareboat-funded vessel to be accepted as a Finnish and entered in the register in Finland with certain conditions. The FMA always requires in such case that the vessel has been removed from the ship register of another state for the period when the vessel is entered in the Finnish register under a bareboat charter agreement. Therefore, it is not always possible to de-register a vessel from the ship register of another state for reasons of corporate taxation, for example. In this case, the vessel cannot be carrying the Finnish flag under the current FMA conditions.

The proposed laws are scheduled to enter into force in spring 2021 according to the Governmental Decree (HE 9/2021 vp).

Current rules regarding bareboat charter

In Finland, the registration of a vessel and the nationality of the vessel are regulated by the FMA. However, the Ship Register Act (512/1993) contains more detailed provisions regarding registration. According to Chapter 1, Section 1 of the FMA, a vessel is Finnish and entitled to use the Finnish flag if a Finnish citizen or a Finnish legal entity owns more than sixty per cent of the vessel. A vessel owned by a citizen or legal person of a state belonging to the European Economic Area (EEA) must also be accepted as Finnish if the conditions provided for in Chapter 1, Section 1, Subsection 2 of the FMA are met.

The conditions include the fact that the person or legal entity in question:

  1. Owns more than 60% of the vessel;
  2. The vessel is operated and operated from Finland; and
  3. The owner of the vessel, if he is not responsible for the vessel in accordance with paragraph 2, appoints a representative with a permanent domicile and residence in Finland to perform this task.

In addition, the Finnish Transport and Communications Agency may approve a vessel owned by a non-EEA state citizen or legal person as a Finnish if certain conditions provided for in Chapter 1, Section 1, Subsection 4 of the FMA are met.

A vessel may be approved as a Finnish in case below conditions are met;

  1. As regards the ownership, administration, lending or chartering of the vessel, it can be reliably stated that the use of the vessel for navigation is decisively determined by a Finn;
  2. The vessel complies with the requirements set for a new vessel in the provisions concerning vessel safety; and
  3. The registration of the vessel is estimated to promote the Finnish maritime industry and its employment.

In addition to the above, it is required that the vessel has been removed from the ship register of another state for the period when it is registered in Finland. A vessel registered in Finland pursuant to Chapter 1, Section 1, Subsection 2 or 4 of the FMA is considered to be a Finnish vessel and Finnish law applies to it.

Thus, the regulation of the FMA does not allow the registration of a Finnish or foreign vessel in Finland in such a way that the ownership and right of use of the vessel would be registered in different states.

Main content of the proposed amendments to the Finnish Maritime Act | Double registration to become possible

According to the amendment proposal, provisions would be added to the FMA to approve a foreign vessel chartered to Finland without a crew to be registered as a Finnish vessel for a limited period. Such vessel could be registered to the traffic register or in the ship register maintained by the Åland Government.

The vessel would then have been entered in the ship register of another state for ownership and in the Finnish register for use. The vessel would use the Finnish flag as long as it has been approved as Finnish. The Finnish Transport and Communications Agency would decide on the approval of the vessel as a Finn.

The precondition for approval would be, among other things, that the vessel is managed and operated from Finland and the owner of the vessel and the mortgage and pledge holders have given their written consent to the registration of the vessel in Finland. The charterer of the vessel should be a Finnish citizen or a Finnish legal entity or a citizen or legal entity of a state belonging to the European Economic Area with its registered office, central administration or head office in the European Economic Area.

Furthermore, acceptance of a vessel as a Finnish would also require the written permission of the registration authority of the state in which the vessel is registered in respect of ownership to register the vessel in Finland. As a result of the amendments to the Maritime Act, the Ship Register Act must also be amended.

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Our legal experts will be happy to tell you more about the possibilities that the new proposed amendment will offer regarding registration of a bareboat chartered vessel to Finnish register (double registration). Our contact person for the topic is Oscari Seppälä.

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