The Financing Charter is currently available for vessels sailing under the Marshall Islands and Liberia flags, but it will soon be introduced for Maltese-flagged vessels, potentially reshaping the regulatory framework for shipping sale and leaseback transactions.

In a typical lease structure, the lessor owns the vessel. However, in some jurisdictions—particularly in the United States, but also elsewhere—bankruptcy courts may recharacterize the lease as a loan, which can strip the lessor of its ownership rights.

By registering a financing charter on the vessel in favor of the lessor, the lessor’s rights are secured in a manner similar to those of a mortgagee. Since the introduction of this instrument in the Marshall Islands and Liberia, these flags have gained popularity among lessors seeking stronger protections.

However, EU-based shipping companies must operate under an EU flag to benefit from tonnage tax regimes. As a result, the use of Marshall Islands and Liberian flags in bareboat financing structures has become less attractive for EU operators.

To address this, the Maltese Parliament has recently amended the Merchant Shipping Act to incorporate the concept of the Financing Charter into Maltese law. This amendment, coming into effect in April 2025, could provide a viable alternative for EU shipping companies by ensuring tonnage tax compliance while offering adequate protection to shipping lessors, similar to the existing regimes in the Marshall Islands and Liberia.