Bottomry

Bottomry is a maritime loan that allows a shipowner to borrow money using a ship as collateral. If the ship is lost, the borrower is not required to repay the debt, making it a high-risk, high-reward loan structure.

The concept of bottomry traces back to ancient maritime practices, particularly among traders in the Mediterranean. It was formalized in Roman and later English law, recognizing the unique risks associated with sea voyages.

Today, bottomry is less common due to the advent of marine insurance; however, it still exists in legal contracts related to shipping and logistics. Maritime lenders may still use bottomry to finance ships, especially in high-risk endeavors.

• A shipowner takes out a bottomry loan to finance repairs, agreeing that if the ship is lost at sea, the lender will absorb the loss.
• During a long voyage, a captain secures a bottomry loan to purchase supplies, committing that the debt will be voided if the ship is sunk.

• The E. M. H. Dieppe (1904)