The Personal Property Securities Act 2009 (Cth)
(PPSA), which effectively commenced on 30 January
2012, has changed the rules for the registration of mortgages and
other security interests over Australian-flagged vessels and, may
in some circumstances, impact foreign vessels demise chartered in
to Australian operators with the demise charter registered on the
Australian Shipping Register (ASR).
Migration of mortgage registrations from ASR to PPSR
The Act has been updated to implement the Maritime Labour
Convention compliance including certification of seafarers and
minimum requirements for manning agreements on Australian Vessels
where for example the Fair Work Act will apply. Provisions with
regard to health, accommodation and welfare are applied with regard
to all vessels calling at Australian ports and for the purposes of
the Act a vessel will only be "seaworthy" if
"the living and working conditions on board the vessel do not
pose a threat to the health, safety or welfare of the vessels
seafarers". In this regard AMSA have published Marine
Order 11 (living and working conditions on vessels) 2013 which
should be reviewed before calling at an Australian Port.
A ship mortgage that was registered on the ASR prior to the
commencement of the PPSA should have been automatically migrated to
the Personal Property Securities Register
To the extent ship mortgagees have not already done so, we
check that their ASR registrations did migrate to the PPSR, by
undertaking PPSR grantor searches;
check that their PPSR registrations contain all the information
required for the registration to be effective, and all the
information which it is prudent to include. Migrated registrations
are temporarily protected, by a combination of a determination by
the PPS Registrar and transitional provisions in the PPSA, until 31
January 2017. Action must be taken by mortgagees by that date to
amend registrations which would otherwise be ineffective. Absent
such action, a mortgagee may lose its priority over other competing
security interests and lose its security interest on the insolvency
of the mortgagor ship owner; and
"find and claim" their PPSR registrations. Such
registrations cannot be amended or discharged without first being
"found and claimed". It is necessary for a mortgagee to
"find and claim" all their PPSR registrations at the same
New rules for Australian ship mortgages
For Australian-flagged vessels the subject of a mortgage or
other security interest (such as where a charter of a vessel
constitutes a "PPS lease"), and for vessels for which the
laws of Australia are expressed to govern the security document,
the PPSA will apply to determine a priority dispute between
competing security interests in the vessel.
A perfected security interest will prevail over an unperfected
security interest. Generally, a prior-registered perfected security
interest will prevail over a later-registered perfected security
interest. As a practical matter, perfection of the security
interest arising under a ship mortgage will generally be achieved
by making an effective registration on the PPSR.
Australian registered demise charters of foreign-flagged
Offshore and shore based marine energy project work continues to
be a significant feature of Western Australian and Queensland
commerce. A significant number of vessels working in these projects
are temporarily registered with the ASR and flying the Australian
flag as vessels subject to demise chartering arrangements for the
duration of Australian coastal operations.
Australian law permits the grant of registration and rights to
fly the Australian flag to a vessel demise chartered in without any
requirement to close the registration in the original state of
Generally there is no need to register a foreign ship's
mortgage in Australia. The law of the flag will be recognised as
determining any issues of competing priority between security
interests and the mortgagee's rights in rem and priority of
claim will generally be recognised by the Australian Admiralty
jurisdiction without registration of a security interest in the
vessel on the Australian PPSR.
Where there is a demise charter of a foreign-flagged vessel in
Australia which is registered on the ASR (a situation of dual
registration), consideration needs to be given to whether or not
the security interest arising under a foreign mortgage of the
vessel needs to registered on the PPSR for the duration of the
charter in order to appropriately protect the mortgagee's
HWL Ebsworth can help
With specialist shipping and PPSA experts, HWL Ebsworth is well
placed to provide assistance if any of your clients need help with
any of the matters mentioned above.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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