Page 392 - Invited Paper Session (IPS) - Volume 1

IPS173 Athanasios Petralias et al.
Figure 1: Standard Ship Management Agreement and BOP transactions

Typically, there is a ship management company (not depicted in the graph)
which is legally registered abroad, with a branch/office whose main activities
take place in country X. The activity is attributed to the branch by aligning with
the indication of country of domicile as it appears in the commercial
databases. The local branch of the ship management company performs acts
of operation of the vessel (there are cases where the operator is different to
the ship management company, but these are relatively few). Thus, in Figure
1 the local branch of the ship management company is denoted as the
operator and the manager of the vessel.
Also there is a fully legitimate ship owning company (SPC/SPV), which is
the legal owner of the vessel, most often registered abroad. Note that the ship
management company may manage numerous vessels, each one belonging
to a different legal owner (each SPC/SPV typically owns a single vessel for risk-
exposure and liability purposes). Note that in case the legal owner is
incorporated under the laws of country X, the above diagram and the
respective transactions are modified by moving the box of SPC/SPV inside
country X.
Typical examples of Standard Ship Management Agreements are the
BIMCO “SHIPMAN 98” and “SHIPMAN 2009” agreements. According to the
standard ship management agreement terms, the freight revenues are
received by the ship management company/operator, on behalf of the ship
owner. The ship management company uses these freight revenues to pay the
operating expenses of the vessel (i.e. crew costs, insurance costs, bunker costs,
port expenses and other operational and non¬operational costs). The rest of
the freight earnings are directed to the legal owner (SPC/SPV), under the form
of imports of sea transport services. The ship owning company (SPC/SPV) pays
management fees to the ship management company, purchases or sells the

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