13.1 Introduction: setting the scene

Building and purchasing a vessel is a multi-million-dollar investment on the part of shipowners. As such, it requires careful planning in terms of negotiation and drafting of both the shipbuilding contract and the related financing arrangements, to be effected through either ship mortgages2 or capital leases, such as finance-based bareboat charterparties.3 In particular, financing bareboat charterparties of new-builds, on which this chapter focuses, constitute rather complex commercial transactions, involving the negotiation of at least three types of contract between different players in the shipping and financing industry, namely the shipbuilding contract,4 the bareboat charterparty and the conditional sale agreement.5 There may also be other contractual agreements involved, such as a contract between the shipbuilders and their bank for the shipbuilders’ financing of the project or the shipbuilders’ risk insurance contract6 but their discussion falls outside the scope of this chapter, which centres on the buyers’ financing deal of the vessel.